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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
TIMBER RESOURCES INTERNATIONAL, INC.
(Exact name of Small Business Issuer in Its Charter)
DELAWARE 13-4008378
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
570 LEXINGTON AVENUE, 45TH FLOOR, NEW YORK, NY 10022
(Address of principal executive offices) (Zip Code)
(212) 751-1511
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which
To be so Registered Each Class is to be Registered
- ------------------- ------------------------------
n/a n/a
Securities registered under Section 12(g) of the Exchange Act:
COMMON EQUITY, PAR VALUE $.001
(Title of Class)
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TABLE OF CONTENTS
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS............................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS.........................................................8
ITEM 3. DESCRIPTION OF PROPERTY...........................................13
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT........................................................13
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS...........................................................14
ITEM 6. EXECUTIVE COMPENSATION............................................16
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................17
ITEM 8. DESCRIPTION OF SECURITIES.........................................18
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON REGISTRANT'S COMMON
Equity AND OTHER STOCKHOLDER MATTERS..............................20
ITEM 2. LEGAL PROCEEDINGS.................................................21
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.....................21
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES...........................21
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.........................24
PART F/S
FINANCIAL STATEMENTS........................................................24
PART III
ITEM 1. INDEX TO EXHIBITS.................................................25
ITEM 2. DESCRIPTION OF EXHIBITS...........................................25
SIGNATURES..................................................................27
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Timber Resources International, Inc. (the "Registrant") was
incorporated on May 28, 1998, under the laws of the State of Delaware. The
Registrant is in the business of manufacture and sale of forest products. The
Registrant also plans to be engaged in the acquisition and management of
commercial timberlands globally. The Registrant is considered to be in the
development stage.
The principal executive offices of the Registrant are located at
570 Lexington Avenue, 45th Floor, New York, NY 10022.
Since the inception, the Registrant has primarily directed its
efforts towards raising capital for its operation. During the fiscal year ended
on June 30, 1999, the Registrant raised $200,000 in capital through Regulation
D, Rule 504 Offerings and $680,000 though Convertible Notes.
In April 1999, the Registrant purchased 1,000,000 shares of common
stock of Jupiter Industries International, Inc. ("JII" and d.b.a.
"Forestworld.com"), a private company incorporated under the laws of Nevada and
operating out of Burlington, Vermont for a cash consideration of $91,000.
JII's (d.b.a. Forestworld.com) mission was to create the Internet
portal for the forest products industry focusing on e-commerce supporting
transactions that provide for the efficient and cost-effective movement of
conventional and certified wood products between suppliers and end-users.
Forestworld.com internet site also features expansive searchable
forestry and forest products directories and databases that are designed to
build an online community in the forest products industry. Through
Forestworld.com, the Registrant received access to a rapidly developing
infrastructure for timber buying and selling over the Internet, with the
potential link to an extended customers and suppliers base worldwide.
Forestworld.com also provided several high-visibility links from its Web site to
the Registrant.
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In April 1999, the Registrant provided a twelve-month loan to Jupiter
Industries International totaling $209,000 to finance considerable upgrading of
the Forestworld.com Web site.
In July 1999, the management of JII made a decision to sell the assets
of Forestworld.com to a newly formed Delaware corporation, Forestworld.com, Inc.
The Board of Directors of the Registrant as a shareholder of JII approved this
decision, since it became apparent that JII was unable to carry out
Forestworld's business plan due to its increasing financing requirements to fund
large scale Internet marketing campaign and e-commerce. This transaction was
completed on July 17, 1999. The Registrant maintains a ten percent (10%) stock
ownership in JII.
The Registrant's Chairman was granted a seat on the Board of Directors
of Forestworld.com (Delaware). The strategic partnership with Forestworld.com
gives the Registrant certain advantages in the market place over its
competitors. It gives the Registrant free unlimited usage of all services of the
Forestworld's Internet portal site including e-commerce transactions, and use of
commercial databases.
In May 1999, the Registrant purchased 100% of the issued and
outstanding shares of Southern Hardwoods, Inc., a Florida corporation for a
total of $500,000 worth of the Registrant's common stock. Southern Hardwoods was
incorporated in the State of Florida on May 5, 1998. Southern Hardwoods operates
a sawmill in the port of Pensacola. The $200,000 worth of common stock was paid
at the time of the transfer (June 1999) at the then publicly traded price of
$2.00, $100,000 worth (at the then currently traded prices) will be payable (at
the then currently publicly traded prices) on each of the following dates: May
15, 2000, May 15, 2001, and May 15, 2002.
In addition, the Registrant acknowledged and accepted the secured debt
of $200,000 of principal plus accrued interest since the date of the Promissory
Notes (September 8, 1998) between Southern Hardwoods and Theodore S. Williams,
J. Barry Cook, Michael White and Roger A. Carlson. These Promissory Notes mature
on September 1, 2003. The eight percent (8%) per annum interest is payable on
each year anniversary date of these Promissory Notes.
As of April 28, 2000, the Registrant was in compliance with its debt
obligations. To date, the Registrant has paid $16,640 towards the interest on
the notes. This acquisition was accounted by utilizing the "purchase
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method" whereby any excess of cost over the fair market value of the assets
received has been capitalized as goodwill.
After the completion of this acquisition, Southern Hardwoods operated
as a wholly owned subsidiary of the Registrant with its own management
organization.
This subsidiary specializes in the processing of tropical hardwoods
for various applications. Southern Hardwoods has a permit from the US Department
of Agriculture for the export of exotic tropical hardwood logs and lumber from
Guyana. Southern Hardwoods markets predominantly the following hardwoods:
greenheart, locust, mahogany, purpleheart, teak, and mora.
At the time of the acquisition, Southern Hardwoods operated out of a
15,000 square foot production facility at the Port of Pensacola, which was under
the lease through the year 2010. In December 1999, Southern Hardwoods signed a
ten-year lease with the Port of Pensacola for two warehouses and office space,
totaling 40,000 sq. ft. The current total operational space at the Port of
Pensacola is 55,000 sq. ft. The Lease was unanimously approved by the City
Council. The new expanded facility will allow for installation of additional
equipment to produce high-end finished flooring, molding and furniture
components.
The raw lumber delivered from the suppliers is processed at the sawmill
in Pensacola. The raw timber is processed for sale as dimensional lumber,
flooring and other wood products primarily for use in new residential home
construction, home remodeling and repair, specialized industrial application,
and furniture manufacturing. The current production capacity of the Pensacola
mill is 10,000 board feet of sawn lumber per shift, with the target to increase
the production to 30,000 board feet in the second quarter of 2000.
As of April 28, 2000, the Registrant has six (6) employees. The
subsidiary currently employs fourteen (14) employees. The Registrant expects the
total number of employees to reach twenty (20) or more within six months. The
employees of Southern Hardwoods are not unionized. The Registrant believes that
the employee relationships are good. The Registrant's wage scale is generally
competitive with other forest products companies.
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The product line includes the following products: hardwood dimensional
lumber, finished hardwood flooring, architectural moldings, outdoor furniture,
various unassembled furniture components, and crane mats. The markets are
predominantly in the United States market and the Caribbean.
Primarily, the Registrant purchases its raw materials in Guyana (South
America) and West Africa in order to obtain favorable pricing. The Registrant is
establishing its presence in these countries to gain uninterrupted access to
high quality timber species at a significantly lower costs that its competitors.
The Registrant gets supply from several local timber companies in Guyana. The
raw timber is shipped in the form of logs, cants, and sawn lumber. The supply
from Guyana is shipped to the Registrant's facility in Pensacola via the ports
of New Orleans and Pensacola. The Registrant expects to be primarily dependent
upon two (2) suppliers namely Exocitic African Hardwoods, Ltd. of Nigeria and
Timber Traders (S.A.) Inc. of Guyana South America.
In December 1999, the Registrant signed an exclusive agreement with
Exotic African Hardwoods, Ltd., a corporation registered in Nigeria, West Africa
for the supply of selected species of hardwoods from Africa. The species include
mahogany, teak, iroko, red and yellow apa, ofun, and oomo. The first shipment of
teak was delivered to the Registrant's subsidiary in Pensacola in December 1999.
Teak will be processed at the sawmill in Pensacola. Teak lumber will be used for
the manufacturing of flooring and furniture components.
There are numerous competitors, and the major markets, both Domestic
and International, in which the Registrant sells its principal products are very
competitive. The Registrant's products are in competition with similar products
produced by others, and in some instances, with products produced by other
industries from other materials. Many of the Registrant's competitors have
substantially greater financial and operating resources than the Registrant.
Many factors influence the Registrant's competitive position, including prices,
costs, product quality, types of wood species.
The Registrant is aggressively building its customer base throughout
the world using the extensive past business relationships its management team
brings to the company and relying on the initial good market acceptance of its
products. Management believes that the Registrant will be
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able to establish trade names that will be well recognized in the industry and
associated with a high level of quality and value.
By strategic collaborating with local timber producers and wholesale
distributors in the targeted regions of operations, the Registrant achieves
quick market penetration and gains strong advantage over its competitors.
The Registrant currently derives a significant portion of its revenues
from sales of forest products to certain key customers.
In December 1999, the Registrant signed an exclusive agreement with
Timber Products S.A., a company headquartered in Santo Domingo, the Dominican
Republic. This Agreement underlines the terms of distribution of the
Registrant's products throughout the Dominican Republic, Puerto Rico, Haiti and
the Central American Commonwealth countries of Guatemala, Honduras, El Salvador,
Costa Rica, and Panama. The Dominican Republic is one of the fastest growing
markets in the region that can potentially absorb large volumes of wood
products. The lumber will be used mainly for construction industry. The first
shipment under this Agreement, valued at US $191,500, was executed at the end of
December 1999. The second order under this Agreement was received in January
2000. The order, valued at US $150,000 was delivered in March 2000.
In January 2000, the Registrant received an initial order for hardwood
crane mats from Marino Crane of Middletown, Connecticut. Crane mats are flat
wooden platforms approximately 20 feet long, 4 feet wide and 10 inches thick.
The mats are used to stabilize cranes on the job site. The crane mats will be
manufactured by Southern Hardwoods, Inc., a Subsidiary of the Registrant. This
order valued at US $135,000 was delivered in April 2000.
The Registrant's management believes that the Registrant complies in
all material respects with all-applicable federal, state, and local provisions
relating to the protection of the environment. Compliance with these laws,
regulations, and demands usually involves capital expenditures, as well as
operating costs. The Registrant cannot easily quantify future amounts of capital
expenditures required to comply with these laws, regulations, and demands, or
the effects on operating costs, because in some instances and in certain
countries where the Registrant operates, compliance standards have not been
developed or have not become final or definitive. The Registrant is not aware of
any pending legislative, administrative or judicial action relating to the
protection of the environment that could materially and adversely affect the
Registrant.
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The Registrant plans to market its products both directly and
indirectly. A direct sales force is being developed to market the Registrant's
products.
When the Registrant becomes subject to the reporting requirements of
Section 12(g) the Registrant will be required to file annual and quarterly
reports in accordance with the Securities Act of 1934.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
During the fiscal year ended June 30, 1998 and the fiscal year ended
June 30, 1999, the Registrant was engaged primarily in fund raising activities.
The Registrant had only external sources of capital.
During the fiscal year ended on June 30, 1999, the Registrant raised
$200,000 in capital through Regulation D, Rule 504 Offerings and $680,000 though
Convertible Notes.
In May 1999, the Registrant acquired Southern Hardwoods, Inc. via a
share exchange agreement. The Registrant purchased 100% of the issued and
outstanding shares of Southern Hardwoods, Inc. for a total of $500,000 worth of
the Registrant's common stock. In addition, the Registrant acknowledged and
accepted the secured debt of $200,000 in principal, plus eight percent (8%)
annual interest. At the close of the acquisition, the Registrant issued $200,000
worth of common shares at the then tradeing price of $2.00 per share. The
remaining balance is payable in installments of $100,000 worth of common stock
on the annual anniversary of the acquisition for the next three (3) years.
During the fiscal year ended June 30, 1999, the only operating facility
of the Registrant was Southern Hardwoods.
The Registrant has undergone significant material changes in its
financial conditions and results of operations since the fiscal year ending June
30, 1999.
During the quarter ended September 30, 1999, the Registrant raised
$395,000 through Convertible Notes at ten percent (10%) interest.
In December 1999, the Registrant received $15,000 through the sale of
common stock pursuant to a Private Placement Offering.
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In March 2000, the Registrant received a total of $400,000 through the
sale of common stock pursuant to a Regulation D, Rule 504 Offering.
In January 2000, the Registrant received $100,000 through debt
financing at eight percent (8%) interest rate and $24,800 through the sale of
common stock pursuant to a Private Placement Offering. These funds were used for
the expansion of the Registrant's operations.
Also in March 2000, the Registrant received $40,000 through the sale of
common stock pursuant to a Private Placement Offering.
In December 1999, the Registrant entered into an exclusive agreement
with Timber Products S.A., a company headquartered in Santo Domingo, the
Dominican Republic. The first order valued at $191,500 was shipped to the
Dominican Republic in December 1999. A second order valued at $150,000 was
delivered in March 2000.
In the quarter ended March 31, 1999, the Registrant had both internal
and external sources of capital.
During November 1999 and December 1999, the Registrant introduced a new
line of products, hardwood crane mats. After the successful testing of the
prototype in December 1999, the Registrant received its first order from Marino
Crane of Middletown, Connecticut. The Registrant anticipates receiving regular
orders for hardwood crane mats from this same customer. The first order valued
at $135,000 was delivered in April 2000. The Registrant plans to establish
itself as a large supplier of this type of specialized products.
The Registrant is dependent upon two (2) major customers. These
agreements provide assurance that the Registrant will have continuing orders.
The customers dictate their product requirements through purchase orders, which
cover period of a one month's supply to a one year contract. In most cases,
standard sale terms are net 30 days from date of shipment. Sales are recorded at
time of shipment from the Registrant's facilities to customers.
The key objectives of the Registrant's plan of operations for the next
(12) twelve months are to position the company to become a vertically integrated
forests products company. The Registrant intends to sustain
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continuous growth by acquiring operating timber companies that fit within the
vertical integrated model.
The Registrant's business plan is to gain brand name recognition as a
large supplier of specialized wood products. The Registrant will pursue product
development and market research specializing in the following market segments:
hardwood sawn lumber, finished hardwood flooring, outdoor furniture, and crane
mats.
The Registrant is aggressively building its customer base utilizing the
extensive past business relationships that its management team brings to the
company and relying on the initial positive market acceptance of its products.
Management believes that the Registrant will be able to establish trade names
that will be well recognized in the industry and associated with a high level of
quality and value.
The Registrant plans to sell its products to customers in both the
United States and overseas.
The Registrant anticipates a significant change in the number of
employees during the next twelve months. The Registrant plans to increase the
number of employees at its operating facility in Pensacola from fourteen (14) to
twenty (20) employees.
In the next twelve months, the Registrant has planned a significant
upgrade of the equipment at its Subsidiary's mill in Pensacola. The Registrant
will be upgrading the electrical system at the plant to increase the power
supply to accommodate the increased production.
The Registrant plans to install additional re-sawing equipment that
will allow for the increase in its production capacity from the current capacity
of 10,000 board feet a day, to 30,000 board feet a day.
The Registrant also plans to install molders, planers, and dry kiln
equipment. This new equipment will facilitate a specialized line of products,
such as outdoor hardwood furniture, moldings, and hardwood flooring as well as
increase the quality of the currently produced dimensional lumber. The
installation of this dry kiln equipment will bring about a decrease in the costs
of the finished products and eliminate the dependence of the subsidiary upon the
outside dry kilning facilities. The installation of this dry kiln equipment will
also decrease the length of the production cycle by
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eliminating the dependence on transportation of green lumber to outside dry
kilns, and the transportation of dried lumber to the subsidiary's warehouse.
For the next (12) twelve months, the Registrant will finance its
operations though both internal and external sources of capital.
The implementation and expansion of the Registrant's business,
including acquisitions, will require a commitment of substantial funds. Issuing
additional shares of common stock will result in dilution to the existing
shareholders. If adequate funds are not available, the Registrant's business
could be adversely affected since internally generated funds are not expected to
be sufficient to fund the Registrant's expansion needs in the next twelve (12)
months.
The Registrant intends to pursue additional funding through the sale of
additional shares of common stock. The Registrant is anticipating that revenues
from operations will allow it to expand its business. The Registrant plans to
develop more value-added products with higher profit margins that will increase
the revenue stream.
The Registrant intends to expand its operations overseas. It plans to
gain substantial market share in the timber export in countries such as Guyana
(South America) and Dominican Republic. The success of the Registrant's
operations in these regions is subject to the political and economic
uncertainties of those regions. These unknowns and risk factors characterized by
unexpected changes in rules and regulations, policy changes regarding foreign
trade and foreign investments, changes in tax laws for foreign companies, local
government policies, and competition of local companies. These and other factors
could have an adverse impact on the Registrant's business and financial results
in the future or require the Registrant to modify its current business
practices.
The Registrant continues to negotiate for the acquisition of commercial
timberlands in Guyana, South America. These negotiations are part of long-term
program to establish strong presence in Guyana that has extensive
under-developed resources of high quality hardwoods. Currently, the Registrant
receives regular supplies of hardwoods from Guyana for the Subsidiary's facility
in Pensacola. In the next twelve (12) months, the Registrant plans to initiate
harvesting and sawmilling operations in Guyana.
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In December 1999, the Registrant entered into an exclusive agreement
with Exotic African Hardwoods, Ltd., of Nigeria, West Africa. As of January
2000, the Subsidiary receives regular shipments of West African teak. The teak
lumber is then processed at the Subsidiary's facility in Pensacola.
In January 2000, the Registrant entered into a strategic partnership
agreement with Timber Traders (S.A.) Inc., of Guyana, South America to
exclusively supply the Registrant with hardwood lumber from South America and
the Caribbean. The agreement insures uninterrupted supply of raw materials for
the subsidiary's facility in Pensacola.
The Registrant's business is not subject to seasonal effects.
There are uncertainties and risks attributed to the immature and
emerging nature of the markets in the Caribbean, and the Central American
Commonwealth countries. These markets are still in their development stage. The
Registrant and its Subsidiary mainly have to rely on the experiences of its
local partners and of its own management team to make strategic decisions with
respect to its operations.
The executive management team of the Registrant consists of Mr. Aziz
Hirji, President and Chief Executive Officer, Dr. Anna Petinova, Interim Vice
President of Administration and Finance, Mr. Peter Maharaj, Vice President
of Marketing and Mr. Hank Midden, Vice President of Operations.
The executive management team of the subsidiary consists of Mr.
Peter Maharaj, President.
In November 1998, the Registrant signed a five-year agreement (the
"Financial Advisory Agreement") with Villiers Capital Partners, LLC ("VCP").
Pursuant to this Financial Advisory Agreement, VCP provides corporate finance,
investor and financial relations, strategic and capital planning, and other
financial and management advice to the Registrant. This Financial Advisory
Agreement expires in October 2003, however, it provides for automatic one-year
renewals unless cancelled by either party in writing.
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ITEM 3. DESCRIPTION OF PROPERTY
The Registrant's principal office is located at 570 Lexington Avenue,
45th Floor, New York, NY 10022. This office is approximately 3,500 square feet
and is shared with Villiers Capital Corporation.
The Registrant's subsidiary initially had a lease for 15,000 square
foot operating facility on the territory of the Port of Pensacola. The
subsidiary leased this space for $2,075 a month plus Florida State sales tax of
7.5%.
In December 1999, Southern Hardwoods signed a new lease with the Port
of Pensacola adding 40,000 sq. ft. of warehouse and office space to its
operating facilities of 15,000 sq. ft. The current lease is for the period of
ten (10) years beginning January 5, 2000, and ending January 4, 2010. The
subsidiary has the right to extend the lease for another 10-year period. The
lease payment for the first year is $5,000 a month ($60,000 a year) plus the
Florida State Sales tax of 7.5%. The lease payments will escalate by $5,000 a
year each year during the 10-year lease, equaling $110,000 in the year 10.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the information as to the shares of
common stock owned as of April 28, 2000:
(I) Each person who beneficially owns so far as the Registrant has
been able to ascertain, more than 5% of the outstanding
3,453,274 shares of the Registrant.
(II) Each Director.
(III) Each of the officers named in the summary compensation table.
(IV) All the directors and officers as a group unless otherwise
indicated in the footnotes below on the table is subject to
community property laws where applicable, the persons as to
whom the information is given has sole investment power over
the shares of common stock.
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NAME NUMBER PERCENT
1. Oyster Bay Trust* 333,334 9.65%
2. Anna Petinova 66,668 1.93%
3. James W. Mahan 1,133,334 32.82%
4. Peter R. N. Maharaj -0- 0%
5. Hank Midden -0- 0%
*Aziz Hirji, the President of the Registrant is the trustee and beneficiary of
Oyster Bay Trust.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS:
NAME AGE POSITION TERM SERVED
SINCE
1. Aziz Hirji 48 Chairman, Director, 1 year 6/98
CEO and President
2. Anna Petinova 36 Director, Secretary, 1 year 6/98
Treasurer, Interim
Vice President of
Administration and
Finance
3. Peter R. N. Maharaj 34 Vice President N/A 8/99
Marketing and
President of
The Subsidiary
4. Hank Midden 58 Vice President N/A 6/99
Operations
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AZIZ HIRJI
Mr. Hirji has over 25 years of international business management and
investment experience. He is the founder, Chairman, President and CEO of Timber
Resources International, Inc., where he directs the strategic and business
development of the company. Prior to founding Timber Resources International, he
held senior executive and directors positions in a number of private companies
in North America and Europe, covering a wide range of industries with a
particular emphasis on construction and timber. He has headed several
timber-related projects, involving financing, restructuring and strategic
planning. Mr. Hirji also has extensive experience in public and private capital
raising transactions. Mr. Hirji is a graduate of the International Institute of
Management in Glion-Sur-Montreux, Switzerland.
ANNA PETINOVA
Dr. Petinova is a member of the Board of Directors, Secretary,
Treasurer, and Interim Vice President of Administration and Finance. She has a
strong background in business development and extensive experience in the
corporate environment. Her duties include overseeing corporate finance, and
management of administration and investor relations. During the last four years,
she co-led several investment projects assisting companies in raising financing
and going public. Prior to joining Villiers Capital Corporation in 1996, Dr.
Petinova held senior management positions in several U.S. companies where she
was extensively involved in financing privately held middle market companies
serving the forestry and construction sectors.
PETER R. N. MAHARAJ
Peter Maharaj brings more than a decade of experience in marketing,
strategic planing and management to Timber Resources International. During the
last few years, he has directed the export marketing programs of large timber
and forest product companies in Guyana, Suriname, Chile and Argentina,
developing marketing strategies targeted at niche markets in the U.S.A., Europe
and the Caribbean. Mr. Maharaj is the former president of Timber Traders S.A.
Inc., a timber brokerage firm based in Guyana. His past experience also includes
contract negotiation, project management, and business administration in real
estate and construction. His family has been in the forestry business for over
40 years with commercial teak and mahogany properties in Trinidad. Mr. Maharaj
received his MBA from the University of West Indies.
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HANK MIDDEN
Mr. Midden brings to Timber Resources International, Inc., nearly four
decades of experience in business ownership and management, operations and
national sales, including 28 years in timber-related enterprises. In 1971, Mr.
Midden founded Bartley Lumber and Material Company, a sawmill and logging
operation in Florida, which he built into the largest mill in the area,
averaging approximately $1.5 million in sales per year. From 1981 to 1983, Mr.
Midden was a factory representative for the top sawmill and logging equipment
manufacturer in the U.S., Morbark Industries, where he designed and supervised
the installation of turnkey sawmills. In 1983, he founded Midden Lumber and
Equipment Company, also in Florida, which specializes in wholesale lumber and
equipment sales and the design and installation of sawmill equipment.
ITEM 6. EXECUTIVE COMPENSATION
The Registrant has entered into employment agreements with each of its
officer and directors and each of its other executive officers.
Aziz Hirji, the Registrant's Chairman, President and Chief Executive
Officer has a five year employment agreement with the Registrant. Salaries for
the five years are $150,000, $180,000, $240,000, $240,000 and $300,000. No
salaries were paid during the years ended June 30 1998 and June 30, 1999.
Bonuses for the five years of up to $80,000, $120,000, $120,000, $120,000,
$120,000 may be granted based upon the Registrant's performance against
financial targets as defined by the Board of Directors. No bonuses were granted
for the years ended June 30, 1998 and June 30, 1999. Ten-year warrants for
common stocks priced at $0.05 are granted for the five years as follows:
1,000,000, 1,500,000, 1,500,000, 1,500,000, and 2,000,000.
Dr. Anna Petinova, Director, Secretary, Treasurer, and Interim Vice
President of Administration and Finance is employed with the Registrant for
twenty (20) hours a week. The Registrant's Interim Vice President of
Administration and Finance has a six-month renewable employment agreement with
the Registrant. Monthly salaries for the first three six-month terms are $3,500,
$5,000, and $5,000, and $7,500 for any subsequent six-month term. Dr. Petinova
is not in receipt of any salary at this time. Ten-year warrants for common
stock priced at $0.05 shall be granted at the rate of 100,000 warrants per
month.
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Mr. Midden, Vice President of Operations has a four-year employment
agreement with the Registrant effective as of May, 1999. This employment
agreement provides for an annual salary of $90,000.
Mr. Maharaj, Vice President of Marketing, has a five-year employment
agreement with the Registrant effective as of September, 1999. This
employment agreement provides for an annual salary of $60,000.. Mr.
Maharaj is not in receipt of any salary at this time.
SUMMARY COMPENSATION TABLE
There was no executive or director who received any cash or non-cash
compensation in excess of $100,000 in the years of 1998 or 1999.
OFFICERS SALARY OTHER ANNUAL COMPENSATION
-------- ------ -------------------------
1. Aziz Hirji -0- -0-
2. Anna Petinova -0- -0-
3. Peter R.N. Maharaj -0- -0-
4. Hank Midden 90,000 -0-
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 28, 1998 the Registrant entered into an agreement with Villiers
Capital Corporation, a New York corporation ("Villiers") whereby Villiers has
agreed to provide office space and other support facilities including furniture,
computer and office equipment, secretarial, receptionist, and bookkeeping
services, conference room facilities, telephone and telefax equipment, local and
long distance access and other amenities to the Registrant for a monthly fee of
$15,000. The agreement had an initial one-year term that expired on May 28,
1999, and provides for automatic one-year renewals unless canceled by either
party in writing. The Registrant and Villiers have certain common shareholders,
officers, and directors. Aziz Hirji, the Registrant's President is co-founder,
director and major shareholder of Villiers. Anna Petinova, the Registrant's
Secretary, Treasurer, Interim Vice President of Administration and Finance is a
stockholder and officer in Villiers.
In November 1998, the Registrant entered into a five-year agreement
(the "Financial Advisory Agreement") with Villiers Capital Partners, LLC, a New
York limited liability company ("VCP"). Pursuant to the Financial Advisory
Agreement, VCP provides corporate finance, investor and financial
17
<PAGE>
relations, strategic and capital planning, and other financial and management
advice to the Registrant. The base compensation is $3,500 a month. The initial
five-year term expires on October 31, 2003. The Financial Advisory Agreement
provides for automatic one-year renewals unless cancelled by either party in
writing. In addition to the base monthly compensation, VCP is entitled to
receive a commission for any funds raised for the Registrant in accordance with
the "Lehman" formula which ranges from one to five percent of the funds raised.
The Registrant's Interim Vice President of Administration and Finance is an
officer in VCP.
ITEM 8. DESCRIPTION OF SECURITIES
(a) COMMON STOCK: On April 28, 2000, the Registrant had 3,453,274 shares of the
common stock issued and outstanding. The Registrant's Articles of Incorporation
authorized the issuance of up to 100,000,000 of the Registrant's common equity
shares with a par value of $0.001.
Holders of shares of the common stock are entitled to one vote for each
share on all matters to be voted on by the shareholders. Holders of common stock
have no cumulative voting rights. Holders of shares of common stock are entitled
to share proratably in dividends, if any, as may be declared from time to time
by the Board of Directors in its discretion, from funds legally available
therefore.
In the event of a liquidation, dissolution or winding up of the
Registrant, the holders of shares of common stock are entitled to share pro rata
all assets remaining after payments in full of all liabilities. Holders of
common stock have no preemptive rights to purchase the Registrant's common
stock. All of the outstanding shares of common stock are fully paid and
non-assessable.
(b) PREFERRED STOCK: The Registrant is also authorized to issue 6,000,000 shares
of preferred stock with a par value of $5.00. The Registrant's Board of
Directors may fix and determine the designations, rights, preferences or other
rights, preferences or other variations of each class or series of the preferred
stock. At this time the Registrant's has not issued any preferred stock.
(c) POSSIBLE CLASSIFICATION OF REGISTRANT'S SECURITIES AS A "PENNY STOCK": By
virtue of Rule 3a51-1 of the Securities Act of 1934 (the "Act"), if the
Registrant's common stock has a price of less than $5.00 per share it will be
considered a "penny stock". The perquisites required of broker-dealers
18
<PAGE>
engaging in transactions involving "penny stocks" have discouraged, or even
barred, many brokerage firms from soliciting orders for certain low priced
stocks.
Still further, with respect to the trading of penny stocks,
broker-dealers have an obligation to satisfy certain special sales practice
requirements pursuant to Rule 15g-9 of the Act, including a requirement that
they make an individualized written suitability determination for the purchase
and receive the purchaser's written consent prior to the transaction.
Still even further, such broker-dealers have additional disclosure
requirements as set forth in the Securities Enforcement Act Remedies and Penny
Stock Reform Act of 1990. These disclosure requirements include the requirement
for a broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks of the penny stock market.
Still even further, a broker-dealer must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customers
account.
Accordingly, the above penny stock regulations and the associated
broker-dealer requirements will have an adverse effect on the market liquidity
of the Registrant's common stock and the ability of any present and prospective
shareholder investors to sell their securities in the secondary market.
However, regardless of the price of the Registrant's stock, in the
event the Registrant has net tangible assets in excess of $2,000,000 and if the
Registrant has been in continuous operation for at least three (3) years, or
$5,000,000, if the Registrant has been in continuous operation for less than
three (3) years, Rule 3a51-1(g) of the Act will preclude the Registrant's common
stock from being classified as a "penny stock".
19
<PAGE>
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS
(a) MARKET INFORMATION: The Registrant's common stock trades on the OTC Bulletin
Board under the symbol TMBE. The Registrant's common stock price as of the close
of business as of April 28, 2000 was $1.00 per share.
(b) PRICE RANGE: The Registrants commenced trading on February 19, 1999. The
following is the range of the high and low bids for the Registrant's common
stock for each quarter of 1999 and the first quarter of 2000, as determined by
the over-the-counter market quotations reflect inter-dealer prices, without
retail market, mark-down or commission and may not represent actual
transactions.
1999
----
QUARTER HIGH BID LOW BID
March $1.00 $.31
June $1.63 $1.03
Sept.* $5.84 $.88
Dec. $1.50 $.44
2000
----
QUARTER HIGH BID LOW BID
March $5.00 $2.33
* Effective September 28, 1999 the Registrant's shares were reverse split with
one (1) new share for each thirty (30) old shares.
Effective March 15, 2000, the Registrant's shares were forward split with one
(1) additional share being issued for each one (1) share held by a shareholder
of the Registrant.
20
<PAGE>
(a) HOLDERS: The Registrant has approximately 86 common stock shareholders.
(b) DIVIDENDS: The Registrant has not declared nor paid any cash dividends on
its Common Stock, does not anticipate that any dividends will be declared nor
paid in the foreseeable future, and intends to retain earnings to finance the
development and expansion of the Company's operations.
ITEM 2. LEGAL PROCEEDINGS
The Registrant is not involved in any legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The accountant has no resigned, declined to stand for re-election, nor
were they dismissed. The principal accountant's report on the financial
statements for the last two fiscal years contains no adverse opinion or
disclaimer of opinion, nor were they modified as to uncertainty, audit scope, or
accounting principles. There have been no disagreements with any former
accountants or any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
(a) RECENT SALES: The Registrant had the following stock issuances as described
below. All such shares were sold by the officers and directors of the Registrant
and no underwriters were utilized.
1. On June 26, 1998, 10,000,000 shares of common stock at $.01
per share pursuant to a Regulation D, Rule 504 Offering for a
total offering of $100,000.
2. On February 23, 1999, 100,000 shares of common stock at $1.00
per share pursuant to a Regulation D, Rule 504 Offering for a
total offering of $100,000.
3. On March 31, 1999, 100,000 shares of common stock at $1.00 per
share pursuant to a Regulation D, Rule 504 Offering for a
total offering of $100,000.
21
<PAGE>
4. On May 17, 1999, an initial 100,000 shares of common stock
were issued in exchange for all of the issued and outstanding
shares of Southern Hardwoods, Inc.
5. On September 28, 1999, the Registrant's shares wee reverse
split with one (1) new share for each thirty (3) old shares.
6. On September 28, 1999, 335,340 post reverse split shares of
common stock were issued pursuant to the conversion of the
Convertible Notes which totaled $1,006,010.10 of unpaid
principal and accrued interest.
7. On December 27, 1999, 55,000 shares of common stock at $.30
per share for a total offering of $15,000.
8. On January 10, 2000, 9,800 shares of common stock at $1.00 per
share for a total offering of $9,800.
9. On January 12, 2000, 15,000 shares of common stock at $1.00
per share for a total offering of $15,000.
10. On January 31, 2000, 104,378 shares of common stock were
issued pursuant to the conversion of the Convertible Notes
with totaled $104,278 of unpaid principal and accrued
interest.
11. On February 14, 2000, 7,655 shares of common stock at $3.92
per share for a total offering of $30,000.
12. On February 24, 2000, 1,556 shares of common stock at $4.50
per share for a total offering of $7,000.
13. On March 10, 2000, 5,334 shares of common stock at $3.75 per
share for a total offering of $20,000.
14. Effective March 16, 2000, the Registrant's shares were forward
split with one (1) additional share being issued for each one
(1) share held by a shareholder of the Registrant.
15. On March 16, 2000, 1,133,334 post forward split shares of
common stock at $.35 per share for a total offering of
$400,000.00.
22
<PAGE>
16. On March 23, 2000, 20,000 post forward split shares of common
stock at $1.00 per share for a total offering of $20,000.
(b) EXEMPTIONS FROM REGISTRATION:
With respect to the issuance of the 10,000,000 common shares listed at
item 4(a)1, the 100,000 shares listed at item 4(a)2, the 100,000 shares listed
at item 4(a)3, and the 1,133,334 shares listed at item 4(a)15, such issuances
were made in reliance on the private placement exemptions provided by Section
4(2) of the Securities Act of 1933 as amended, (the "Act"), SEC Regulation D,
Rule 504 of the Act and Delaware Securities Commission Regulations Rule
9(b)(9)(1) (the "Delaware Statute").
With respect to the issuance of 100,000 shares listed at 4(a)4, the
335,340 shares listed at 4(a)5, the 15,000 common shares listed at 4(a)6, the
9,800 shares listed at 4(a)7, the 15,000 shares listed at 4(a)8, the 104,278
shares listed at item 4(a)10, the 7,655 shares listed at item 4(a)11, the 1,556
shares listed at item 4(a)12, the 5,334 shares listed at item 4(a)13, and the
20,000 shares listed at item 4(a)16, such issuances were made in reliance upon
the private placement exemptions provided by Section 4(2) of the Act and the
Delaware Statute.
In each instance, each of the share purchasers had access to sufficient
information regarding the Registrant so as to make an informed investment
decision. More specifically, each purchaser signed either a written Subscription
Agreement, a Share Exchange Agreement, or a Convertible Note, with respect to
their financial status and investment sophistication wherein they warranted and
represented, among other things, the following:
1. That they had the ability to bear the economic risks of
investing in the shares of the Registrant.
2. That they had sufficient knowledge in financial, business, or
investment matters to evaluate the merits and risks of the
investment.
3. That they had a certain net worth sufficient to meet the
suitability standards of the Registrant.
23
<PAGE>
4. That the Registrant has made available to them, his counsel
and his advisors, the opportunity to ask questions and that
they have been given access to any information, documents,
financial statements, books and records relative to the
Registrant and investment in the shares of the Registrant.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and By-laws of the Registrant provide for
indemnification of the Registrant's officers and directors for liabilities
arising due to certain acts performed on behalf of the Registrant that are not a
result of any act of omission by any such director or officers: provided,
however, that the foregoing provision shall not eliminate or limit the liability
of directors or officers (i) for acts of omissions which involve intentional
misconduct, fraud or a knowing violation of the law, or (ii) the payment of
dividends in violation of Section 145 of the Delaware General Corporation Law.
Although the state statutes allow for indemnification of officers and directors,
the SEC rules prohibit indemnification of officers and directors of publicly
held companies.
PART F/S
The following financial statements are submitted pursuant to the
information required by Item 310 of Regulation S-B:
FINANCIAL STATEMENTS
NO. DESCRIPTION
FS-1 Timber Resources International, Inc. and Subsidiary
(A Developmental Stage Company) Consolidated
Financial Statements June 30, 1999 and June 30, 1998
FS-2 Timber Resources International, Inc. and Subsidiary
(A Developmental Stage Company) Consolidated
Financial Statements (Unaudited, Prepared By The
Management) September 30, 1999
24
<PAGE>
FS-3 Timber Resources International, Inc. and Subsidiary
(A Developmental Stage Company) Consolidated
Financial Statements (Unaudited, Prepared By The
Management) December 31, 1999
FS-4 Timber Resources International, Inc. and Subsidiary
(A Development Storage Company Consolidated Financial
Statement (Unaudited) Prepared By the Management)
March 31, 2000.
PART III
ITEM 1. INDEX TO EXHIBITS
The exhibits listed and described below in Item 2 are filed herein as
the part of this Registration Statement.
ITEM 2. DESCRIPTION OF EXHIBITS
The following documents are filed herein as Exhibit Numbers 2, 3, 5, 6
and 7 as required by Part III of Form 1-A:
EXHIBIT NO. DESCRIPTION
2 CHARTER AND BY-LAWS
2.1 Certificate of Incorporation of Timber
Resources International, Inc.
2.2 By Laws of Timber Resources International,
Inc.
2.3 Articles of Incorporation of Southern
Hardwoods, Inc.
3 NONE INSTRUMENTS REFINING THE RIGHTS OF THE SECURITY
HOLDERS
5 NONE VOTING TRUST AGREEMENTS
25
<PAGE>
6 MATERIAL CONTRACTS
6.1 Binding Letter of Intent - Acquisition of
Southern Hardwoods, Inc.
6.2 U.S. Department of Agriculture Import Period
for Plants and Plant Products - Southern
Hardwoods, Inc.
6.3 Exclusive Purchasing Agreement with
Hardwoods Limited dated November 1, 1999.
6.4 Agreement for Exclusive Distribution with
Timber Products, S.A. and Timber Traders,
S.A., Inc. dated December 2, 1999
6.5 Exclusive Purchasing Agreement with Timber
Traders, S.A., Inc. dated January 4, 2000
6.6 Lease between Southern Hardwoods, Inc. and
City of Pensacola, Florida dated November 18,
1999
6.7 Agreement for certain services and amenities
with Villiers Capital Corporation dated May 28,
1998.
6.8 Financial Advisory Agreement with Villiers
Capital Partners, LLC dated November 1, 1998
6.9 Employment Agreement with Aziz Hirji dated
June 1, 1998
6.10 Employment Agreement with Anna Petinova
dated June 1, 1998
6.11 Employment Agreement with Henry Midden
dated May 1, 1999
6.12 Employment Agreement with Peter Maharaj
dated September 1, 1999
26
<PAGE>
7 NONE MATERIAL FOREIGN PATENTS
27 FINANCIAL DATA SCHEDULE
SIGNATURES
In accordance with Section 12 the Securities and Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
TIMBER RESOURCES
INTERNATIONAL, INC.
DATED: May 2, 2000 BY: /s/ Aziz Hirji
----------------------------------
AZIZ HIRJI
President
27
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NO. DESCRIPTION
<S> <C>
FS-1 TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS JUNE 30,
1999 AND JUNE 30, 1998
FS-2 TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED,
PREPARED BY THE MANAGEMENT) SEPTEMBER 30,
1999
FS-3 TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED,
PREPARED BY THE MANAGEMENT) DECEMBER 31,
1999
FS-4 TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STORAGE COMPANY CONSOLIDATED
FINANCIAL STATEMENT (UNAUDITED) PREPARED BY THE
MANAGEMENT) MARCH 31, 2000.
</TABLE>
<PAGE>
EXHIBIT FS-1
TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999
AND JUNE 30, 1998
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
* * * * *
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
INDEPENDENT AUDITORS' REPORT dated December 8, 1999
CONSOLIDATED FINANCIAL STATEMENTS PAGE NO.
<S> <C>
Consolidated Balance Sheets as of June 30, 1999 and 1998 1
Consolidated Statements of Operations for the year ended June 30, 1999
and for the period from May 28, 1998 (date of inception) to June 30, 1998 2
Consolidated Statements of Stockholders' Equity (Deficit) for the year ended
June 30, 1999 and for the period from May 28, 1998 (date of inception)
to June 30, 1998 3
Consolidated Statements of Cash Flows for the year ended June 30, 1999 and for
the period from May 28, 1998 (date of inception) to June 30, 1998 4
Notes to Consolidated Financial Statements 5-12
</TABLE>
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Timber Resources International, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of Timber
Resources International, Inc. and Subsidiary (a developmental stage company) as
of June 30, 1999 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the year ended June 30, 1999
and for the period from May 28, 1998 (date of inception) to June 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit 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. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Timber Resources International, Inc. and Subsidiary (a developmental stage
company) as of June 30, 1999 and 1998, and the results of its operations and its
cash flows for the periods then ended, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
15 to the financial statements, the Company is dependent upon external sources
for working capital to finance its expansion since internally generated funds
are not expected to be sufficient to fund the Company's needs for one year.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters also are described in
Note 15. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Janover Rubinroit, LLC
December 8, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash $ 63,377 $ 870
Loan receivable - Jupiter Industries International, Inc.
net of reserve for impairment 1,000 -
Prepaid expenses 72,979 60,000
Debt issuance costs, net of accumulated amortization of
$3,010 and $-0- 30,990 -
----------- --------
Total current assets 168,346 60,870
Fixed assets, at cost 86,120 -
Less accumulated depreciation 718 -
----------- --------
85,402 -
Other assets:
Cost in excess of net assets acquired, net of
accumulated amortization of $2,498 597,035 -
Investment - Jupiter Industries International, Inc.
net of reserve for impairment 1,000 -
Other assets 642 -
----------- --------
598,677 -
----------- --------
$ 852,425 $ 60,870
============ ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 295,894 $ 21,000
Notes payable - convertible debt 680,000 -
Current portion of long-term debt 100,000 -
Due to stockholder - 20,000
----------- --------
Total current liabilities 1,075,894 41,000
Long-term debt 400,000 -
Stockholders' equity (deficit):
Preferred stock, $5.00 par value; 6,000,000 shares
authorized; none issued - -
Common stock, $.001 par value; authorized 100,000,000 shares,
issued and outstanding 550,000 and 500,000 shares,
respectively - Note 8 16,500 15,000
Capital in excess of par value 478,500 85,000
Deficit accumulated during the developmental stage (1,118,469) (80,130)
----------- --------
(623,469) 19,870
----------- --------
$ 852,425 $ 60,870
============ ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-1-
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
MAY 28, 1998 (DATE OF INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
MAY 1998
(INCEPTION)
THROUGH
1999 1998 JUNE 30, 1999
------------ --------- -------------
<S> <C> <C> <C>
Expenses:
Financial advisory fees - related party - Note 10 $ 28,000 $ - $ 28,000
Rent and services fees - related party - Note 10 180,000 - 180,000
Selling, general and administrative expenses - Note 12 493,165 80,130 573,295
Depreciation and amortization 6,226 - 6,626
------------ --------- -------------
Total expenses 707,391 80,130 787,521
------------ --------- -------------
Operating loss (707,391) (80,130) (787,521)
Loss from asset impairment - Note 3 (323,225) - (323,225)
Interest income 5,225 - 5,225
Interest expense (12,948) - (12,948)
------------ --------- -------------
Net loss $ (1,038,339) $ (80,130) $ (1,118,469)
============ ========= =============
Basic and diluted loss per share $(2.04) $(0.16) $(2.20)
============ ========= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
MAY 28, 1998 (DATE OF INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-In Developmental Stockholders'
Shares Amount Capital Stage Equity (Deficit)
------- -------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Balances at May 28, 1998
(date of inception) - $ - $ - $ - $ -
Issuance of common stock
par value $.001
Compensation at $.03 per share
from Founder 166,667 5,000 - - 5,000
Cash at $.30 per share from
private placement 333,333 10,000 90,000 - 100,000
Stock issuance costs (5,000) (5,000)
Net loss - - (80,130) (80,130)
------- -------- ----------- ------------- -----------------
Balance at June 30, 1998 500,000 15,000 85,000 (80,130) 19,870
------- -------- ----------- ------------- -----------------
Compensation at $.03 per share
to director 33,333 1,000 - - 1,000
Cash at $30 per share
from private placement 6,667 200 199,800 - 200,000
Compensation at $.60 per share 6,667 200 3,800 - 4,000
Shares issued at $60 per share
in acquisition of wholly-owned
subsidiary 3,333 100 199,900 - 200,000
Registration costs (10,000) (10,000)
Net loss (1,038,339) (1,037,621)
------- -------- ----------- ------------- -----------------
Balance at June 30, 1999 550,000 $16,500 $478,500 $(1,118,469) $(622,751)
======= ======== =========== ============= =================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
MAY 28, 1998 (DATE OF INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
MAY 1998
(INCEPTION)
THROUGH
1999 1998 JUNE 30, 1999
------------ --------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,038,339) $(80,130) $(1,118,469)
Adjustments to reconcile net loss to net cash used in
operating activities:
Interest accrued on loan receivable (5,225) - (5,225)
Stock issued as compensation 5,000 5,000 10,000
Depreciation 6,226 - 6,226
Reserve for impairment of assets 323,225 - 323,225
Changes in assets and liabilities:
Prepaid expenses 3,135 (60,000) (56,865)
Accounts payable and accrued expenses 264,227 21,000 285,227
------------ --------- -------------
Net cash used in operating activities (441,751) (114,130) (555,881)
------------ --------- -------------
Cash flows from investing activities:
Investment - Jupiter Industries International, Inc. (111,000) - (111,000)
Loan - Jupiter Industries International, Inc. (209,000) - (209,000)
Acquisition of assets, net of cash acquired 8,258 - 8,258
------------ --------- -------------
Net cash used in investing activities (311,742) - (311,742)
------------ --------- -------------
Cash flows from financing activities:
Prepaid debt expense (34,000) - (34,000)
Proceeds from issuance of common stock 200,000 100,000 300,000
Stock issuance costs (10,000) (5,000) (15,000)
Loan from stockholder (20,000) 20,000 -
Proceeds from issuance of convertible debt 680,000 - 680,000
------------ --------- -------------
Net cash provided by financing activities 816,0000 115,000 931,000
------------ --------- -------------
Increase in cash 62,507 870 63,377
Cash - beginning of period 870 - -
------------ --------- -------------
Cash - end of period $ 63,377 $ 870 $ 63,377
============ ========= =============
Supplemental disclosure of cash flows information:
Cash paid during the period for interest $ - $ - $ -
============ ========= =============
Cash paid during the period for income taxes $ - $ - $ -
============ ========= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DEVELOPMENT STAGE OPERATIONS:
Timber Resources International, Inc. (the "Company") was incorporated
on May 28, 1998 under the laws of the State of Delaware and intends to conduct
timber related activities internationally, including management and acquisition
of timberlands globally, manufacturing of sawn lumber, and the sale of
value-added wood products. The Company is considered to be in the development
stage, has not generated any revenues to date, and has directed its efforts
since inception towards raising capital for its proposed operations.
In May 1999, the Company acquired 100% of the outstanding stock of its
wholly-owned subsidiary, Southern Hardwoods, Inc. in exchange for stock in
Timber Resources International, Inc. The acquisition was accounted for using the
purchase method whereby any excess of cost over the fair market value of the
assets received has been capitalized to goodwill.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant intercompany accounts
and transactions have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a straight-line
basis over their estimated useful lives. Repairs and maintenance are charged to
expense as incurred; renewals and betterments, which significantly extend the
useful lives of existing fixed assets, are capitalized.
GOODWILL
Amortization is provided using the straight-line method over the
estimated useful life of 20 years.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". As required under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of assets
and liabilities and the respective tax basis amounts. Deferred tax assets and
liabilities are measured under tax rates that are expected to apply to taxable
income in the years in which these differences are expected to be settled. The
effect of a change in tax rates on deferred tax assets and liabilities is
recognized in the period of the tax change.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
-5-
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share". Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Under the new requirements for calculating earnings
per share, the dilutive effect of stock options will be excluded from basic
earnings per share but included in the computation of diluted earnings per
share. All earnings per share amounts have been restated so as to comply with
Statement No. 128.
FAIR VALUE DISCLOSURES
The carrying amounts of cash, other current assets, accounts payable
and accrued expenses, and other current liabilities approximate fair value
because of the short-term maturity of these instruments. The stated value of
long-term debt, including current maturities, approximates fair value.
NOTE 3 - INVESTMENT IN AND LOAN TO JUPITER INDUSTRIES INTERNATIONAL, INC.:
In April 1999, the Company purchased 1,000,000 shares of common stock
of Jupiter Industries International, Inc. ("Jupiter") for $111,000 which
represents a 4.02% interest in Jupiter whose main assets were the assets
of Forestworld.com. In exchange for this investment, the Company received
various strategic benefits including links to the Company's website from
Forestworld.com. The value of these benefits cannot be determined by management
at this time. As of the day of acquisition of the assets of Forestworld.com in
March 1999, no directors or officers of the Company have been involved in the
operations of Jupiter.
In addition, the Company loaned $209,000 to Jupiter to be repaid in
April 2000 with interest at 10% per annum.
To secure additional financing for Forestworld.com, Jupiter's
management decided to reverse the Asset Purchase Agreement and form a new
corporation. On the completion of this transaction, Jupiter received 5,000,000
shares of Forestworld.com, Inc., a Delaware corporation, which represents a 25%
interest. The Company remains a shareholder of Jupiter. The Company's Chief
Executive Officer/President/Director is a member of the board of directors of
Forestworld.com, Inc. No fees for director services have been received to date
and any future fees shall be remitted to the Company.
Jupiter has a financial advisory services agreement with Villiers
Capital Partners, LLC ("VCP") which is similar to the agreement the Company has
with VCP (see Note 10). No material fees have been paid through June 30, 1999.
Due to the inability to ascertain the true value of the investment and
to ascertain the collectibility of the loan, both the investment and the loan
have been reserved against for possible impairment as follows:
<TABLE>
<CAPTION>
Investment in Loan to
Jupiter Industries Jupiter Industries
International, Inc. International, Inc.
------------------- -------------------
<S> <C> <C>
Original basis $111,000 $209,000
Accrued interest - 5,225
Less: Reserve for impairment 110,000 213,225
-------- --------
$ 1,000 $ 1,000
======== ========
</TABLE>
-6-
<PAGE>
NOTE 4 - ACQUISITION OF SUBSIDIARY:
On May 13, 1999, Timber Resources International, Inc. purchased all of
the outstanding stock of Southern Hardwoods, Inc. for shares of common stock of
Timber Resources International, Inc. valued at $500,000 payable as follows:
<TABLE>
<S> <C>
Upon acquisition at $60 per share $ 200,000
Three $100,000 notes payable in common shares at the then-
current price per share on May 15, 2000, 2001 and 2002 300,000
--------
$ 500,000
=========
</TABLE>
The acquisition was recorded under the purchase method of accounting;
therefore, the purchase price has been allocated to assets acquired and
liabilities assumed based on estimated fair values. The excess of the purchase
price over the fair value of net assets has been recorded as goodwill of
approximately $600,000 which is being amortized over twenty years.
<TABLE>
<S> <C>
Supplemental cash flow information:
Fair value of assets acquired $ 99,533
Liabilities assumed (207,791)
Common stock issued (200,000)
Notes payable in common stock 300,000
--------
Net cash (received) in acquisition (8,258)
Cash acquired in acquisition 8,258
--------
Cash paid for acquisition $ -
========
</TABLE>
NOTE 5 - FIXED ASSETS:
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Equipment $ 86,120 $ -
Less accumulated depreciation 718 -
-------- --------
$ 85,402 $ -
======== ========
</TABLE>
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Interest $ 23,614 $ -
Officers' salaries 221,000 16,000
Professional fees 36,280 -
Debt and equity issuance costs 15,000 5,000
-------- --------
$295,894 $ 21,000
======== ========
</TABLE>
-7-
<PAGE>
NOTE 7 - LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Amounts due to shareholders of the subsidiary,
payable in stock of the parent, at the
then-current publicly traded price, due in
$100,000 installments on
May 15, 2000, 2001, and 2002 $300,000 $ -
Promissory notes, payable with accrued interest at 8%
per annum, due on September 1, 2008 200,000 -
-------- --------
500,000 -
Less current maturities 100,000 -
-------- --------
$400,000 $ -
======== ========
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
<S> <C>
2000 $100,000
2001 100,000
2002 100,000
2003 -
2004 -
Thereafter 200,000
--------
$500,000
========
</TABLE>
NOTE 8 - STOCKHOLDERS' EQUITY:
PRIVATE PLACEMENTS
In June 1998, the Company completed a private placement of 333,333
shares of its Common Stock for $.30 per share, or $100,000.
In February 1999, 3,333 shares of common stock were issued in a private
placement for $30 per share, or $100,000.
In May 1999, 3,333 shares of common stock were issued in a private
placement for $30 per share, or $100,000.
FOUNDER'S SHARES
In June 1998, the Company issued 166,667 shares to its President as
compensation for services rendered to the Company valued at $.03 per share, or
$5,000. The shares were assigned to an affiliated trust.
-8-
<PAGE>
NOTE 8 - STOCKHOLDERS' EQUITY: (CONTINUED)
COMPENSATORY SHARES
In May 1999, 33,333 shares of common stock were issued to the Company's
Interim Vice President of Finance and Administration/Director as compensation
for services rendered to the Company valued at $.03 per share, or $1,000.
In June 1999, 6,667 shares of common stock were issued as compensation
to Destler Services, Inc. for $.60 per share, or $4,000.
In July 1999, 1,667 shares of common stock were issued at $30 per
share, or $50,000, as compensation to Highlander Capital Management.
In November 1999, 30,000 shares of common stock were issued at $1 per
share, or $30,000, as compensation to Adam Barnett.
REVERSE STOCK SPLIT
On September 29, 1999, the Board of Directors approved a one-for-thirty
reverse stock split of the common stock. All quantities of common stock in these
financial statements reflect the reverse split.
PREFERRED STOCK
The Company is authorized to issue up to 6,000,000 shares of $5.00 par
value convertible preferred stock. The rights and privileges of the shares will
be determined by the Company's board of directors at the time of issuance. None
of the shares have been issued.
NOTE 9 - EARNINGS PER SHARE:
The following table sets forth the computation of basic and diluted
loss per share:
<TABLE>
<CAPTION>
Years ended
------------------------------
June 30, June 30,
1999 1998
------------ ------------
<S> <C> <C>
Numerator:
Net loss - numerator for basic and diluted loss per share $ (1,038,339) $ (80,130)
============ ============
Denominator:
Denominator for basic loss per share - weighted average shares 508,333 500,000
Effect of dilutive securities - warrants 73,333 -
------------ ------------
Denominator for diluted loss per share - weighted average shares
and dilutive potential common shares 581,666 500,000
============ ============
Loss per share:
Basic $ (2.04) $ (.16)
======== =======
Diluted $ (2.04) $ (.16)
======== =======
</TABLE>
In accordance with SFAS No. 128, as a result of net losses, the
inclusion of warrants were antidilutive and, therefore, were not utilized in the
computation of diluted loss per share.
-9-
<PAGE>
NOTE 10 - COMMITMENTS:
RENT AND SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Corporation ("Villiers") whereby Villiers has agreed to provide office space and
various business services to the Company for a monthly fee of $15,000. The
agreement had an initial one-year term that expired on May 28, 1999, and
provides for automatic one-year renewals unless canceled by either party in
writing. The Company's Chief Executive Officer/President/Director/Stockholder is
a stockholder and director and the Interim Vice President of Finance and
Administration/Director/Stockholder is a stockholder and officer, respectively,
in Villiers. Expenses under this agreement totaled $180,000 and $15,000 in the
year ended June 30, 1999 and from inception to June 30, 1998, respectively.
FINANCIAL ADVISORY SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Partners, LLC ("VCP"), a wholly owned subsidiary of Villiers Capital
Corporation, whereby VCP has agreed to provide corporate finance, investor
relations, strategic and capital planning and other financial and management
advice for a monthly fee of $3,500. The Agreement has an initial five-year term
expiring October 31, 2003 and provides for automatic one-year renewals unless
cancelled by either party in writing. In addition to the monthly fee, VCP will
receive a commission for any funds they raise for the Company in accordance with
the "Lehman" formula which ranges from one to five percent of funds raised.
Expenses under this agreement were $28,000 and $-0- for the year ended June 30,
1999 and from inception to June 30, 1998, respectively.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with the Chief Executive
Officer/President/Director commencing on June 1, 1998 for five years ending
on May 31, 2003. The agreement may be renewed for another five-year term at
mutually agreed upon terms and conditions. Salaries for the five years are
$150,000, $180,000, $240,000, $240,000 and $300,000. No salaries were paid
during the years ended June 30, 1999 and 1998 (see Note 6). Bonuses for the
five years of up to $80,000, $120,000, $120,000, $120,000 and $120,000 may be
granted based upon the Company's performance against financial targets as
determined by the board of directors. No bonuses were granted for the years
ended June 30, 1999 and 1998. Ten year warrants for common stock priced at
$.05 are granted for the five years as follows: 1,000,000 warrants,
1,500,000, 1,500,000, 1,500,000 and 2,000,000. All warrants are issued as of
the last day of the fiscal year beginning June 30, 1999. The number of
warrants shall be adjusted for any splits or reverse splits of the Company's
common stock.
The Company has an employment agreement with the Interim Vice
President of Finance and Administration/Director commencing on June 1, 1998
for an initial six-month term. The agreement shall automatically renew for
successive six-month terms unless cancelled by either party. Monthly salaries
for the first three six-month terms are $3,500, $5,000 and $5,000. No
salaries were paid during the years ended June 30, 1999 and 1998 (see Note
6). Subsequent six-month terms shall be at a monthly salary of $7,500.
Bonuses may be granted based upon the Company's performance against financial
targets as determined by the board of directors. No bonuses were granted for
the years ended June 30, 1999 and 1998. Ten-year warrants for common stock
priced at $.05 shall be granted at the rate of 100,000 warrants per month
issued on the first of each month beginning July 1, 1998. The number of
warrants shall be adjusted for any splits or reverse splits of the Company's
common stock.
-10-
<PAGE>
NOTE 10 - COMMITMENTS: (CONTINUED)
The Company has an employment agreement with its Vice President of
Operations commencing on May 1, 1999 for four years at a salary of $7,500 per
month.
WAREHOUSE LEASE
The Company, through its subsidiary, leases warehouse space from the
Port of Pensacola, Florida for approximately $24,900 per year plus applicable
sales tax expiring October 31, 1999. The Company has renewed this lease
subsequent to year end for a ten-year term expiring January 4, 2010. Rent
expense for the year ended June 30, 1999 was $2,230.
Minimum annual commitments under a non-cancelable lease in effect at
June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
<S> <C>
2000 $ 42,450
2001 $ 62,500
2002 $ 67,500
2003 $ 72,500
2004 $ 80,000
Thereafter $542,500
</TABLE>
NOTE 11 - INCOME TAXES:
At June 30, 1999, the Company had federal net operating loss
carryforwards of approximately $625,000. The net operating losses will expire in
the various years through June 30, 2014. The Company also had state net
operating loss carryforwards in the state in which it operates.
A reconciliation of income tax computed at the federal statutory
corporate tax rate to income tax expense on the net loss from continuing and
discontinued operations is:
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998
------------------------------ ---------------------------
Amount Percent Amount Percent
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Income tax benefit at
federal statutory rate $(212,500) (34.0)% $(20,400) (34.0)%
Valuation allowance 212.500 34.0 20.400 34.0
--------- ----- -------- -----
$ - - % $ - - %
========= ===== ======== =====
</TABLE>
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The Company has a net deferred tax asset at June 30, 1999 and 1998 of
approximately $212,500 and $20,400, respectively. This amount consists primarily
of net operating losses. A valuation allowance has been established to reduce
this net deferred asset to zero based upon the uncertainty regarding realization
of such tax benefits given the Company's development stage status.
-11-
<PAGE>
NOTE 12 - RELATED PARTY TRANSACTIONS:
A material portion of the Company's selling, general and administrative
expenses were paid to Villiers Capital Corporation ("VCC") as reimbursements for
amounts advanced for various expenses including travel, entertainment, telephone
and other office expenses.
NOTE 13 - INDUSTRY SEGMENTS:
The Company operates substantially in one industry segment as described
in Note 1.
NOTE 14 - SUBSEQUENT EVENTS:
On September 20, 1999, the Company issued six Convertible Notes for a
combined value of $975,000. The notes are for one year and bear interest at a
rate of 10% per annum. The holders of the notes have the option to convert only
the entire amount and not any portion thereof, of the unpaid principal and
interest into shares of common stock of the Company at a share price equal to
fifty percent of the share price of the last trade on the NASD OTC Bulletin
Board on the date of conversion. The conversion may take place anytime while the
note is outstanding. The Company has the right to prepay unpaid principal of
this note without penalty. In the event the Company elects to prepay the Notes,
the holders have ten days to exercise their conversion rights.
In addition, the holder shall be issued warrants equal to five percent
of the converted principal exercisable at a share price equal to the share price
for the holder on the date of conversion. These warrants expire after five years
on September 20, 2004. Cash in the amount of $680,000 was received during the
year ended June 30, 1999. On September 28, 1999, the notes and accrued interest
were converted into 335,337 shares of common stock.
See Note 8 for issuances of common stock subsequent to year end and a
one-for-thirty reverse stock split.
NOTE 15 - GOING CONCERN MATTERS:
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. From its date of inception (May
12, 1998) through June 30, 1999, the Company has been building its customer base
and preparing for production primarily through external sources of liquidity.
Any further business activities are based upon the successful raising of capital
via external sources. Failure to do so may indicate that the Company will be
unable to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability of assets that might be necessary should the Company be unable to
continue as a going concern. The Company intends to pursue additional funding in
the form of direct equity. The Company also expects revenues from operations to
allow it to expand its business.
12
<PAGE>
EXHIBIT FS-2
------------
TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, PREPARED
BY THE MANAGEMENT) SEPTEMBER 30, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
*********************
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, PREPARED BY THE MANAGEMENT)
SEPTEMBER 30, 1999
<PAGE>
[LOGO] [LETTERHEAD]
To the Stockholders of
Timber Resources International, Inc. and Subsidiary:
Management is responsible for the integrity and objectivity of the data
included in this report. The financial statements have been prepared in
accordance with generally accepted accounting principles. Where necessary,
they reflect estimates based on management judgement.
Established accounting procedures and related systems of internal
control provide reasonable assurance that assets are safeguarded, that the
books and records properly reflect all transactions, and that policies and
procedures are implemented by qualified personnel.
/s/ Aziz Hirji
Aziz Hirji
Chairman and CEO
December 15, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
TABLE OF CONTENTS
MANAGEMENT'S REPORT dated December 15, 1999
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet as of September 30, 1999 1
Consolidated Statements of Operations for the quarter
Ended September 30, 1999 2
Consolidated Statements of Stockholders' Equity (Deficit)
For the quarter ended September 30, 1999 3
Consolidated Statements of Cash Flows for the quarter
Ended September 30, 1999 4
Notes to Consolidated Financial Statements 5
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
A S S E T S September 30, 1999
------------------
<S> <C>
Current assets:
Cash $ 19,242
Loan receivable - net of reserve for impairment 1,000
Prepaid expenses 88,761
Inventories 98,516
Other Current Assets 78,135
-----------
Total current assets 285,654
Fixed assets, at cost: 86,120
Less accumulated depreciation 2,872
-----------
83,248
Other assets:
Investment in subsidiary 25,700
Investment - net of reserve for impairment 1,000
Goodwill and other intangibles, net of accumulated
amortization of $9,992 589,541
Other assets 642
-----------
616,883
-----------
$ 985,785
===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 553,383
Notes payable - convertible debt 100,000
Current portion of long-term debt 100,000
-----------
Total current liabilities 753,383
Long-term debt 400,000
Shareholders' and members' equity:
Preferreds tock, $5.00 par value,
6,000,000 shares authorized, non issued
Common stock, $0.001 par value;
authorized 100,000,000 shares, issued
and outstanding 885,337 shares 16,836
Additional paid-in capital 1,453,164
Deficit (1,637,598)
-----------
(167,598)
$ 985,785
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Three months ended May 1998 through
September 30, 1999 September 30, 1999
<S> <C> <C>
Costs and expenses:
Financial advisory and investment banking fees $ 33,250 $ 61,250
Rent and services fees 116,314 296,314
Selling, general, research and
administrative expenses 275,913 1,241,654
Depreciation and amortization 2,166 8,792
-------------------- --------------------
Total expenses 427,643 1,608,010
-------------------- --------------------
Operating loss (427,643) (1,608,010)
Interest income 5,284
Interest expense (16,640) (29,588)
-------------------- --------------------
Net loss $ (438,999) $ (1,637,598)
==================== ====================
Basic and diluted loss per share $ (0.49) $ (2.69)
==================== ====================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 1999 AND
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-In Developmental Stockholders'
Shares Amount Capital Stage Equity (Deficit)
------ ------ ------- ----- ----------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 500,000 $ 15,000 $ 85,000 $ (80,130) $ 19,870
------- -------- ------------ ------------- -----------
Compensation at $.03 per share
to director 33,333 1,000 1,000
Cash at $.30 per share
from private placement 6,667 200 199,800 200,000
Compensation at $.60 per share 6,667 200 3,800 4,000
Shares issued at $60 per share
in acquisition of wholly-owned
subsidiary 3,333 100 199,900 200,000
Registration costs (10,000) (10,000)
Net loss (1,038,339) (1,037,621)
------------- -----------
Balance at June 30, 1999 550,000 $ 16,500 $ 478,500 $ (1,118,469) $ (622,751)
------- -------- ----------- ------------- -----------
Shares issued at $3 per share
at conversion of six debt Notes 335,337 336 974,664 975,000
Net loss $ (438,999) $ (438,999)
------------- ------------
Balance at September 30, 1999 885,337 $ 16,836 $ 1,453,164 $ (1,637,598) $ (86,750)
======= ======== =========== ============== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Three months ended
September 30, 1999
---------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (438,999)
Adjustments to reconcile net loss to net cash
used in operating activities:
Interest accrued on loan receivable (5,284)
Stock issued as compensation
Depreciation 2,154
Changes in assets and liabilities:
Inventories (95,504)
Accounts payable and accrued expenses 257,489
---------------------------
Net cash used in operating activities (280,144)
---------------------------
Cash flows from investing activities:
Cash expenditures-net
Other net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock 150,748
Stock issuance costs (14,739)
Proceeds from issuance of convertible debt 100,000
---------------------------
Net cash provided by financing activities 236,009
---------------------------
Increase in cash (44,135)
Cash - beginning of period 63,377
---------------------------
Cash - end of period $ 19,242
===========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DEVELOPMENT STAGE OPERATIONS:
Timber Resources International, Inc. (the "Company") was incorporated
on May, 28, 1998 under the laws of the State of Delaware and intends to conduct
timber related activities internationally, including management and acquisition
of timberlands globally, manufacturing of sawn lumber, and the sale of
value-added wood products. The Company is considered to be in the development
stage, has not generated any revenues to date, and has directed its efforts
since inception towards raising capital for its proposed operations.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant accounts and
transactions have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a straight-line
basis over their estimated useful lives. Repairs and maintenance are charged to
expense as incurred; renewals and betterments, which significantly extend the
useful lives existing fixed assets, are capitalized.
GOODWILL
Amortization is provided using the straight-line method over the
estimated useful life of 20 years.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No 109, "Accounting for
Income Taxes". As required under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of assets
and liabilities and the respective tax basis amounts.
5
<PAGE>
Deferred tax assets and liabilities are measured under tax rates that are
expected to apply to taxable income in the years in which these differences are
expected to be settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the period of the tax change.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting standards Board
issued Statement No. 128, "Earnings per Share". Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Under the new requirements for calculating earnings
per share, the dilutive effect of stock options will be excluded from basic
earnings per share but included in the computation of diluted earnings per
share. All earnings per share amounts have been restated so as to comply with
Statement No. 128.
FAIR VALUE DISCLOSURES
The carrying amounts of cash, other current assets, accounts payable
and accrued expenses, and other current liabilities approximate fair value
because of the short-term maturity of these instruments. The stated value of
long-term debt, including current maturities, approximates fair value.
NOTE 3 - FIXED ASSETS
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
Equipment $86,120
Less accumulated depreciation 2,872
-------------
$83,248
</TABLE>
6
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
Interest
Officers' Salaries $ 63,500
Professional Fees 92,696
Equipment Rental 96,744
Other Saw Mill Supplies 288,393
Debt and equity issuance costs 12,000
--------
$553,383
--------
--------
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
Amounts due to shareholders of the subsidiary,
Payable in stock of the parent, at the then-current
Publicly traded, price, due in $100,000 installments
on May 15, 2000, 2001, and 2002 $300,000
Promissory notes, payable with accrued interest at
8% per annum, due on September 1, 2008. 200,000
--------
500,000
Less current maturities 100,000
--------
$400,000
--------
--------
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, 1999
<S> <C>
2000 $100,000
2001 100,000
2002 100,000
2003 -
2004 -
Thereafter 200,000
--------
$500,000
--------
--------
</TABLE>
7
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY
CONVERSION OF DEBT NOTES
On September 28, 1999, 335,340 post reverse split shares of common
stock were issued pursuant to the conversion of the Convertible Notes which
totals $1,006,010.10 unpaid principal and accrued interest.
COMPENSATORY SHARES
In November 1999, 30,000 shares of common stock were issued at $1 per
share, or $30,000, as compensation to Adam Barnett.
In December 1999, 75,500 shares of common stock were issued at $.10 per
share, or $7,500, as compensation to Trevor Alfred.
REVERSE STOCK SPLIT
On September 29, 1999, the Board of Directors approved a one-for-thirty
reverse stock split of the common stock. All quantities of common stock in these
financial statements reflect the reverse split.
PREFERRED STOCK
The Company is authorized to issue up to 6,000,000 shares of $5.00 par
value convertible preferred stock. The rights and privileges of the shares will
be determined by the Company's Board of Directors at the time of issuance. None
of the shares have been issued.
NOTE 7 - COMMITMENTS
RENT AND SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Corporation ("Villiers") whereby Villiers has agreed to provide office space and
various business services to the Company for a monthly fee of $15,000. The
agreement had an initial one-year term that expired on May 28, 1999, and
provides for automatic one-year renewals unless canceled by either party in
writing. The Company's Chief Executive Officer, President, Director, Stockholder
is a stockholder and director and the Interim Vice President of Finance and
Administration/Director/Stockholder is a stockholder and officer, respectively,
in Villiers.
8
<PAGE>
FINANCIAL ADVISORY SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Partners, LLC ("VCP"), a wholly owned subsidiary of Villiers Capital
Corporation, whereby VCP has agreed to provide corporate finance, investor
relations, strategic and capital planning and other financial and management
advice for a monthly fee of $3,500. The Agreement has an initial five-year term
expiring October 31, 2003 and provides for automatic one-year renewals unless
cancelled by either party in writing. In addition to the monthly fee, VCP will
receive a commission for any funds they raise for the Company in accordance with
the "Lehman" formula, which ranges from one to five percent of funds raised.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with the Chief Executive
Officer/President/Director commencing on June 1, 1998 for five years ending on
May 31, 2003. The agreement may be renewed for another five-year term at
mutually agreed upon terms and conditions. Salaries for the five years are
$150,000, $180,000, $240,000 $240,000 and $300,000. No salaries were paid during
the years ended June 30, 1999 and 1998 (see Note 6). Bonuses for the five years
of up to $80,000, $120,000, $120,000, $120,000 and $120,000 may be granted based
upon the Company's performance against financial targets as determined by the
board of directors. No bonuses were granted for the years ended June 30, 1999
and 1998. Ten year warrants for common stock priced at $.05 are granted for the
five years as follows: 1,000,000 warrants, 1,500,000, 1,500,000, 1,500,000 and
2,000,000. All warrants are issued as of the last day of the fiscal year
beginning June 30, 1999. The number of warrants shall be adjusted for any splits
or reverse splits of the Company's common stock.
The Company has an employment agreement with the Interim Vice President
of Finance and Administration/Director commencing on June 30, 1998 for an
initial six-month term. The agreement shall automatically renew for successive
six-month terms unless cancelled by either party. Monthly salaries for the first
three six-month terms are $3,500, $5,000 and $5,000. No salaries were paid
during the years ended June 30, 1999 and 1998 (see Note 6). Subsequent six-month
terms shall be at a monthly salary of $7,500. Bonuses may be granted based upon
the Company's performance against financial targets as determined by the board
of directors. No bonuses were granted for the years ended June 30, 1999 and
1998. Ten-year warrants for common stock priced at $.05 shall be granted at the
rate of 100,000 warrants per month issued on the first of each month beginning
July 1, 1998. The number of warrants shall be adjusted for any splits or reverse
splits of the Company's common stock.
The Company has an employment agreement with its Vice President of
Operations commencing on May 1, 1999 for four years at a salary of $7,500 per
month.
The Company has an employment agreement with its Vice President of
Marketing commencing on September 1, 1999 for five years at a salary of $60,000
per annum, payable at the rate of $5,000 a month.
9
<PAGE>
WAREHOUSE LEASE
The Company, through its subsidiary, leases 55,000 square feet of
warehouse space from the Port of Pensacola, Florida. The Company has renewed
this lease for a ten-year term expiring January 4, 2010.
Minimum annual commitments under a non-cancelable lease in effect are
as follows:
<TABLE>
<CAPTION>
Year Ended January 4
--------------------
<S> <C>
2001 $60,000
2002 $65,000
2003 $70,000
2004 $75,000
2005 $85,000
2006 $90,000
2007 $95,000
2008 $100,000
2009 $105,000
2010 $110,000
</TABLE>
This guaranteed annual minimum would consist of the following fees -
wharfage, dockage, handling, and stevedore - that would generate as the result
of Southern Hardwoods having a presence at the Port. The wharfage rates in
effect during the initial term of this lease shall be as follows: $1.40 for
annual short tons from 1 to 30,000; $1.20 for annual short tons from 30,001 to
60,000; and $1.00 for annual short tons from 60,001 and greater.
NOTE 8 - INDUSTRY SEGMENTS
The Company operates substantially in one industry segment as described
in Note 1.
10
<PAGE>
EXHIBIT FS-3
------------
TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, PREPARED
BY THE MANAGEMENT) DECEMBER 31, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
*********************
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, PREPARED BY THE MANAGEMENT)
DECEMBER 31, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
TABLE OF CONTENTS
MANAGEMENT'S REPORT dated January 20, 2000
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
Consolidated Balance Sheet as of December 31, 1999 1
Consolidated Statements of Operations for the quarter
Ended December 31, 1999 2
Consolidated Statements of Stockholders' Equity (Deficit)
For the quarter ended December 31, 1999 3
Consolidated Statements of Cash Flows for the quarter
Ended December 31, 1999 4
Notes to Consolidated Financial Statements 5
</TABLE>
<PAGE>
[LOGO] [LETTERHEAD]
MANAGEMENT'S REPORT
To the Stockholders of
Timber Resources International, Inc. and Subsidiary:
Management is responsible for the integrity and objectivity of the data
included in this report. The financial statements have been prepared in
accordance with generally accepted accounting principles. Where necessary,
they reflect estimates based on management judgement.
Established accounting procedures and related systems of internal
control provide reasonable assurance that assets are safeguarded, that the
books and records properly reflect all transactions, and that policies and
procedures are implemented by qualified personnel.
Aziz Hirji
Chairman and CEO
January 20, 2000
[FOOTER]
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
A S S E T S December 31,1999
----------------
<S> <C>
CURRENT ASSETS:
Cash $ 7,406
Receivables 191,500
Loan receivable - net of reserve for impairment 1,000
Prepaid expenses 70,967
Inventories 177,000
----------------------
Total current assets 447,873
Fixed assets, at cost: 86,120
Less accumulated depreciation 5,026
----------------------
81,094
Other assets:
Investment - net of reserve for impairment 1,000
Goodwill and other intangibles, net of accumulated 582,047
----------------------
amortization of $17,486 583,047
----------------------
$ 1,112,014
======================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 823,193
Notes payable - convertible debt 100,000
Current portion of long-term debt 100,000
----------------------
Total current liabilities 1,023,193
Long-term debt 400,000
Shareholders' and members' equity:
Preferreds tock, $5.00 par value,
6,000,000 shares authorized, non issued
Common stock, $0.001 par value;
authorized 100,000,000 shares, issued
and outstanding 1,045,837 shares 16,851
Additional paid-in capital 1,468,149
Deficit (1,796,179)
----------------------
(311,179)
$ 1,112,014
======================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Three months ended Three months ended May 1998 through
December 31, 1999 September 30, 1999 September 30, 1999
------------------ ------------------ ------------------
<S> <C> <C> <C>
Costs and expenses:
Financial advisory and investment banking fees $ 3,500 $ 33,250 $ 64,750
Rent and services fees 15,000 116,314 311,314
Selling, general, research and
administrative expenses 126,922 270,629 1,368,576
Depreciation and amortization 3,226 2,166 12,018
------------------ ------------------ ------------------
Total expenses 148,648 422,359 1,756,658
------------------ ------------------ ------------------
Operating loss (148,648) (422,359) (1,756,658)
Interest income 862
Interest expense (10,795) (16,640) (40,383)
------------------ ------------------ ------------------
Net loss $ (158,581) $ (438,999) $ (1,796,179)
================== ================== ==================
Basic and diluted loss per share $ (0.17) $ (0.49) $ (2.69)
================== ================== ==================
</TABLE>
2
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE QUARTER ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-In Developmental Stockholders'
Shares Amount Capital Stage Equity (Deficit)
------ ------ ------- ----- ---------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 500,000 $ 15,000 $ 85,000 $ (80,130) $ 19,870
------- -------- -------- ------------- ---------------
Compensation at $.03 per share
to director 33,333 1,000 1,000
Cash at $.30 per share
from private placement 6,667 200 199,800 200,000
Compensation at $.60 per share 6,667 200 3,800 4,000
Shares issued at $60 per share
in acquisition of wholly-owned
subsidiary 3,333 100 199,900 200,000
Registration costs (10,000) (10,000)
Net loss (1,038,339) (1,037,621)
------------- ---------------
Balance at June 30, 1999 550,000 $ 16,500 $ 478,500 $ (1,118,469) $ (622,751)
-------- -------- ---------- ------------- ---------------
Shares issued at $3 per share
at conversion of six debt Notes 335,337 336 974,664 975,000
Net loss $ (438,999) $ (438,999)
-------------- ---------------
Balance at September 30, 1999 885,337 $ 16,836 $ 1,453,164 $ (1,637,598) $ (86,750)
-------- -------- ------------ ------------- ----------
Shares issued at $.30 per share 55,000 15 14,985 15,000
Compensation at $1.00 per share 30,000 30,000 30,000
Compensation at $.10 per share 75,500 7,500 7,500
Net loss $ (158,581) $ (158,581)
------------- -----------
Balance at December 31, 1999 1,045,837 $ 16,851 $ 1,468,149 $ (1,796,179) $ (200,331)
========= ======== =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Three months ended
December 31, 1999
---------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (158,581)
Adjustments to reconcile net loss to net cash
used in operating activities:
Interest accrued on loan receivable (862)
Stock issued as compensation 37,500
Depreciation 2,154
Changes in assets and liabilities:
Accounts and other receivables (113,365)
Inventories (78,484)
Prepaid expenses 17,794
Accounts payable and accrued expenses 267,758
---------------------------
Net cash used in operating activities (26,086)
---------------------------
Cash flows from investing activities:
Cash expenditures-net
Other net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock 15,000
Stock issuance costs (750)
---------------------------
Net cash provided by financing activities 14,250
---------------------------
Increase in cash (11,836)
Cash - beginning of period 19,242
---------------------------
Cash - end of period $ 7,406
===========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DEVELOPMENT STAGE OPERATIONS:
Timber Resources International, Inc. (the "Company") was incorporated
on May, 28, 1998 under the laws of the State of Delaware and intends to conduct
timber related activities internationally, including management and acquisition
of timberlands globally, manufacturing of sawn lumber, and the sale of
value-added wood products. The Company is considered to be in the development
stage, has not generated any revenues to date, and has directed its efforts
since inception towards raising capital for its proposed operations.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant accounts and
transactions have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a straight-line
basis over their estimated useful lives. Repairs and maintenance are charged to
expense as incurred; renewals and betterments, which significantly extend the
useful lives existing fixed assets, are capitalized.
GOODWILL
Amortization is provided using the straight-line method over the
estimated useful life of 20 years.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No 109, "Accounting for
Income Taxes". As required under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of assets
and liabilities and the respective tax basis amounts.
5
<PAGE>
Deferred tax assets and liabilities are measured under tax rates that are
expected to apply to taxable income in the years in which these differences are
expected to be settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the period of the tax change.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting standards Board
issued Statement No. 128, "Earnings per Share". Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Under the new requirements for calculating earnings
per share, the dilutive effect of stock options will be excluded from basic
earnings per share but included in the computation of diluted earnings per
share. All earnings per share amounts have been restated so as to comply with
Statement No. 128.
FAIR VALUE DISCLOSURES
The carrying amounts of cash, other current assets, accounts payable
and accrued expenses, and other current liabilities approximate fair value
because of the short-term maturity of these instruments. The stated value of
long-term debt, including current maturities, approximates fair value.
NOTE 3 -FIXED ASSETS
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Equipment $86,120
Less accumulated depreciation 5,026
------------
$81,094
</TABLE>
6
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Interest
Officers' Salaries $108,500
Professional Fees 100,325
Equipment Rental 186,774
Other Saw Mill Supplies 426,844
Debt and equity issuance costs 750
-------
$823,193
-------
-------
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Amounts due to shareholders of the subsidiary,
Payable in stock of the parent, at the then-current
Publicly traded, price, due in $100,000 installments
on May 15, 2000, 2001, and 2002. $300,000
Promissory notes, payable with accrued interest at
8% per annum, due on September 1, 2008. 200,000
-------
500,000
Less current maturities 100,000
-------
$400,000
-------
-------
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31, 1999
<S> <C>
2000 $100,000
2001 100,000
2002 100,000
2003 -
2004 -
Thereafter 200,000
-------
$500,000
-------
-------
</TABLE>
7
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY
PRIVATE PLACEMENTS
In December 1999, the Company completed a private placement of 55,000
shares of its Common Stock for $.30 per share, or $15,000.
COMPENSATORY SHARES
In November 1999, 30,000 shares of common stock were issued at $1 per
share, or $30,000, as compensation to Adam Barnett.
In December 1999, 75,500 shares of common stock were issued at $.10 per
share, or $7,500, as compensation to Trevor Alfred.
PREFERRED STOCK
The Company is authorized to issue up to 6,000,000 shares of $5.00 par
value convertible preferred stock. The rights and privileges of the shares will
be determined by the Company's Board of Directors at the time of issuance. None
of the shares have been issued.
NOTE 7 - COMMITMENTS
RENT AND SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Corporation ("Villiers") whereby Villiers has agreed to provide office space and
various business services to the Company for a monthly fee of $15,000. The
agreement had an initial one-year term that expired on May 28, 1999, and
provides for automatic one-year renewals unless canceled by either party in
writing. The Company's Chief Executive Officer/President/Director/Stockholder is
a stockholder and director and the Interim Vice President of Finance and
Administration/Director/Stockholder is a stockholder and officer, respectively,
in Villiers.
FINANCIAL ADVISORY SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Partners, LLC ("VCP"), a wholly owned subsidiary of Villiers Capital
Corporation, whereby VCP has agreed to provide corporate finance, investor
relations, strategic and capital planning and other financial and management
advice for a monthly fee of $3,500. The Agreement has an initial five-year term
expiring October 31, 2003 and provides for automatic one-year renewals unless
cancelled by either party in writing. In addition to the monthly fee, VCP
8
<PAGE>
will receive a commission for any funds they raise for the Company in
accordance with the "Lehman" formula, which ranges from one to five percent of
funds raised.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with the Chief Executive
Officer/President/Director commencing on June 1, 1998 for five years ending on
May 31, 2003. The agreement may be renewed for another five-year term at
mutually agreed upon terms and conditions. Salaries for the five years are
$150,000, $180,000, $240,000 $240,000 and $300,000. No salaries were paid during
the years ended June 30, 1999 and 1998 (see Note 6). Bonuses for the five years
of up to $80,000, $120,000, $120,000, $120,000 and $120,000 may be granted based
upon the Company's performance against financial targets as determined by the
board of directors. No bonuses were granted for the years ended June 30, 1999
and 1998. Ten year warrants for common stock priced at $.05 are granted for the
five years as follows: 1,000,000 warrants, 1,500,000, 1,500,000, 1,500,000 and
2,000,000. All warrants are issued as of the last day of the fiscal year
beginning June 30, 1999. The number of warrants shall be adjusted for any splits
or reverse splits of the Company's common stock.
The Company has an employment agreement with the Interim Vice President
of Finance and Administration/Director commencing on June 30, 1998 for an
initial six-month term. The agreement shall automatically renew for successive
six-month terms unless cancelled by either party. Monthly salaries for the first
three six-month terms are $3,500, $5,000 and $5,000. No salaries were paid
during the years ended June 30, 1999 and 1998 (see Note 6). Subsequent six-month
terms shall be at a monthly salary of $7,500. Bonuses may be granted based upon
the Company's performance against financial targets as determined by the board
of directors. No bonuses were granted for the years ended June 30, 1999 and
1998. Ten-year warrants for common stock priced at $.05 shall be granted at the
rate of 100,000 warrants per month issued on the first of each month beginning
July 1, 1998. The number of warrants shall be adjusted for any splits or reverse
splits of the Company's common stock.
The Company has an employment agreement with its Vice President of
Operations commencing on May 1, 1999 for four years at a salary of $7,500 per
month.
The Company has an employment agreement with its Vice President of
Marketing commencing on September 1, 1999 for five years at a salary of $60,000
per annum, payable at the rate of $5,000 a month.
WAREHOUSE LEASE
The Company, through its subsidiary, leases 55,000 square feet of
warehouse space from the Port of Pensacola, Florida. The Company has renewed
this lease for a ten-year term expiring January 4, 2010.
9
<PAGE>
Minimum annual commitments under a non-cancelable lease in effect are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 4
<S> <C>
2001 $60,000
2002 $65,000
2003 $70,000
2004 $75,000
2005 $85,000
2006 $90,000
2007 $95,000
2008 $100,000
2009 $105,000
2010 $110,000
</TABLE>
This guaranteed annual minimum would consist of the following fees -
wharfage, dockage, handling, and stevedore - that would generate as the result
of Southern Hardwoods having a presence at the Port. The wharfage rates in
effect during the initial term of this lease shall be as follows: $1.40 for
annual short tons from 1 to 30,000; $1.20 for annual short tons from 30,001 to
60,000; and $1.00 for annual short tons from 60,001 and greater.
NOTE 8 - INDUSTRY SEGMENTS
The Company operates substantially in one industry segment as described
in Note 1.
10
<PAGE>
EXHIBIT FS-4
------------
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STORAGE COMPANY CONSOLIDATED FINANCIAL
STATEMENT (UNAUDITED) PREPARED BY THE
MANAGEMENT) MARCH 31, 2000.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
*********************
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, PREPARED BY THE MANAGEMENT)
MARCH 31, 2000
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
-------------------------------
TABLE OF CONTENTS
-----------------
MANAGEMENT'S REPORT dated April 11, 2000
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheet as of March 31, 2000 1
Consolidated Statements of Operations for the quarter
Ended March 31, 2000 2
Consolidated Statements of Stockholders' Equity (Deficit)
For the quarter ended March 31, 2000 3
Consolidated Statements of Cash Flows for the quarter
Ended March 31, 2000 4
Notes to Consolidated Financial Statements 5
</TABLE>
<PAGE>
[TIMBER RESOURCES INTERNATIONAL, INC. LETTERHEAD]
MANAGEMENT'S REPORT
To the Stockholders of
Timber Resources International, Inc. and Subsidiary:
Management is responsible for the integrity and objectivity of the
data included in this report. The financial statements have been prepared in
accordance with generally accepted accounting principles. Where necessary,
they reflect estimates based on management judgement.
Established accounting procedures and related systems of internal
control provide reasonable assurance that assets are safeguarded, that the
books and records properly reflect all transactions, and that policies and
procedures are implemented by qualified personnel.
Aziz Hirji
Chairman and CEO
April 11, 2000
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
--------------------------
MARCH 31, 2000
<TABLE>
<CAPTION>
A S S E T S March 31, 2000
- ----------- --------------
<S> <C>
CURRENT ASSETS:
Cash $ 185,719
Receivables 281,500
Loan receivable - net of reserve for impairment 1,000
Prepaid expenses 17,000
Inventories 210,112
--------------
Total current assets 695,331
Fixed assets, at cost: 86,120
Less accumulated depreciation 7,180
--------------
78,940
Other assets:
Investment - net of reserve for impairment 1,000
Goodwill and other intangibles, net of accumulated 574,553
--------------
amortization of $24,980 575,553
--------------
$ 1,349,824
==============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 961,544
Notes payable - convertible debt 100,000
Current portion of long-term debt 100,000
--------------
Total current liabilities 1,161,544
Long-term debt 400,000
Shareholders' and members' equity:
Preferred stock, $5.00 par value,
6,000,000 shares authorized, non issued
Common stock, $0.001 par value;
authorized 100,000,000 shares, issued
and outstanding 3,453,274 shares 118,305
Additional paid-in capital 2,039,900
Deficit (2,369,925)
---------------
(211,720)
$ 1,349,824
===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF CASH FLOWS
------------------------
FOR THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Three months ended
March 31, 2000
------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (573,746)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock issued as compensation 100,127
Depreciation 2,648
Changes in assets and liabilities:
Accounts and other receivables (90,000)
Inventories (33,112)
Prepaid expenses 53,967
Accounts payable and accrued expenses 138,351
------------------
Net cash used in operating activities (401,765)
------------------
Cash flows from investing activities:
Cash expenditures-net
Other net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock 606,078
Stock issuance costs (26,000)
------------------
Net cash provided by financing activities 580,078
------------------
Increase in cash 178,313
Cash - beginning of period 7,406
------------------
Cash - end of period $ 185,719
==================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------
FOR THE QUARTER ENDED MARCH 31, 2000
------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-In Developmental Stockholders'
Shares Amount Capital Stage Equity (Deficit)
------ ------ ------- ----- ----------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 1,000,000 $ 15,000 $ 85,000 $ (80,130) $ 19,870
---------- --------- ------------ ------------- -----------
Compensation at $.0150 per share
to director 66,666 1,000 1,000
Cash at $.15 per share
from private placement 13,334 200 199,800 200,000
Compensation at $.30 per share 13,334 200 3,800 4,000
Shares issued at $30 per share
in acquisition of wholly-owned
subsidiary 6,666 100 199,900 200,000
Registration costs (10,000) (10,000)
Net loss (1,038,339) (1,037,621)
------------- -----------
Balance at June 30, 1999 1,100,000 $ 16,500 $ 478,500 $ (1,118,469) $ (622,751)
---------- --------- ------------ ------------- -----------
Shares issued at $1.50 per share
at conversion of six debt Notes 670,674 975 974,025 975,000
Net loss $ (438,999) $ (438,999)
------------- -----------
Balance at September 30, 1999 1,770,674 $ 17,475 $ 1,452,525 $ (1,637,598) $ (86,750)
---------- --------- ------------ ------------- -----------
Shares issued at $.15 per share 110,000 15 14,985 15,000
Compensation at $.50 per share 60,000 30,000 30,000
Compensation at $.05 per share 151,000 7,500 7,500
Net loss $ (158,581) $ (158,581)
------------- -----------
Balance at December 31, 1999 1,880,674 $ 17,490 $ 1,467,510 $ (1,796,179) $ (200,331)
---------- --------- ------------ ------------- -----------
Shares issued at $.50 per share
from private placement 19,600 98 9,702 9,800
Compensation at $.50 per share 80,000 40,000 40,000
Shares issued at $.50 per share
from private placement 30,000 15 14,985 15,000
Compensation at $.50 per share 16,654 8,327 8,327
Shares issued at $.50 per share
at conversion of the Debt Note 208,556 105 104,173 104,278
Compensation at $ 1.00 per share 20,000 20,000 20,000
Shares issued at $ 1.96 per share
from private placement 10,206 20 19,980 20,000
Shares issued at $ 1.96 per share
from private placement 5,104 10 9,990 10,000
Compensation at $1.50 per share 700 1,050 1,050
Shares issued at $2.25 per share
from private placement 3,112 7,000
Compensation at $2.25 per share 12,000 27,000 27,000
Compensation at $1.875 per share 2,000 3,750 3,750
Shares issued at $1.875 per share
from private placement 10,668 20 19,980 20,000
Shares issued at $.35 per shares
from private placement 1,134,000 400 399,600 400,000
Shares issued at $1.00 per share
from private placement 20,000 20 19,980 20,000
Registration costs (26,000) (26,000)
Net loss (573,746) (573,746)
------------- -----------
Balance at March 31, 2000 3,453,274 $ 118,305 $ 2,039,900 $ (2,369,925) $ (93,872)
========== ========= ============ ============= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
FOR THE QUARTER ENDED MARCH 31, 2000
------------------------------------
<TABLE>
<CAPTION>
Three months Three months Three months
ended ended ended May 1998 through
March 31, 2000 December 31, 1999 September 30, 1999 September 30, 1999
-------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Costs and expenses:
Financial advisory / investment
banking fees $ 10,500 $ 3,500 $ 33,250 $ 64,750
Rent and services fees 152,000 15,000 116,314 311,314
Selling, general, research and
administrative expenses 397,320 126,922 270,629 1,368,576
Depreciation and amortization 9,648 3,226 2,166 12,018
-------------- ----------------- ------------------ ------------------
Total expenses 569,468 148,648 422,359 1,756,658
-------------- ----------------- ------------------ ------------------
Operating loss (569,468) (148,648) (422,359) (1,756,658)
Interest income 862
Interest expense (4,278) (10,795) (16,640) (40,383)
-------------- ----------------- ------------------ ------------------
Net loss $ (573,746) $ (158,581) $ (438,999) $ (1,796,179)
============== ================= ================== ==================
Basic and diluted loss per share $ (0.17) $ (0.17) $ (0.49) $ (2.69)
============== ================= ================== ==================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - DEVELOPMENT STAGE OPERATIONS:
Timber Resources International, Inc. (the "Company") was
incorporated on May, 28, 1998 under the laws of the State of Delaware and
intends to conduct timber related activities internationally, including
management and acquisition of timberlands globally, manufacturing of sawn
lumber, and the sale of value-added wood products. The Company is considered
to be in the development stage, has not generated any revenues to date, and
has directed its efforts since inception towards raising capital for its
proposed operations.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant accounts and
transactions have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a
straight-line basis over their estimated useful lives. Repairs and
maintenance are charged to expense as incurred; renewals and betterments,
which significantly extend the useful lives existing fixed assets, are
capitalized.
GOODWILL
Amortization is provided using the straight-line method over the
estimated useful life of 20 years.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No 109, "Accounting for
Income Taxes". As required under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of
assets and liabilities and the respective tax basis amounts.
5
<PAGE>
Deferred tax assets and liabilities are measured under tax rates that are
expected to apply to taxable income in the years in which these differences are
expected to be settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the period of the tax change.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting standards Board
issued Statement No. 128, "Earnings per Share". Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Under the new requirements for calculating earnings
per share, the dilutive effect of stock options will be excluded from basic
earnings per share but included in the computation of diluted earnings per
share. All earnings per share amounts have been restated so as to comply with
Statement No. 128.
FAIR VALUE DISCLOSURES
The carrying amounts of cash, other current assets, accounts payable
and accrued expenses, and other current liabilities approximate fair value
because of the short-term maturity of these instruments. The stated value of
long-term debt, including current maturities, approximates fair value.
NOTE 3 -FIXED ASSETS
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Equipment $86,120
Less accumulated depreciation 7,180
-------------
$78,940
</TABLE>
6
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
March 31, 2000
----------------
<S> <C>
Officers' Salaries $176,000
Professional Fees 59,288
Equipment Rental 136,277
Other Saw Mill Supplies 258,233
Shipping and Transportation 147,089
Raw Materials 184,657
$961,544
--------
--------
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, 2000
---------------
<S> <C>
Amounts due to shareholders of the subsidiary,
Payable in stock of the parent, at the then-current
Publicly traded, price, due in $100,000 installments
on May 15, 2000, 2001, and 2002. $300,000
Promissory notes, payable with accrued interest at
8% per annum, due on September 1, 2008. 200,000
--------
500,000
Less current maturities 100,000
--------
$400,000
--------
--------
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Quarter ended March 31, 2000
- ----------------------------
<S> <C>
2000 $100,000
2001 100,000
2002 100,000
2003 -
2004 -
Thereafter 200,000
--------
$500,000
--------
--------
</TABLE>
7
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY
PRIVATE PLACEMENTS
On January 10, 2000 the Company completed a private placement of
19,600 shares of common stock at $.50 per share for a total offering of
$9,800.
On January 12, 2000 the Company completed a private placement of
30,000 shares of common stock at $.50 per share for a total offering of
$15,000.
On January 31, 2000, 208,756 shares of common stock were issued
pursuant to the conversion of the Convertible Notes with total $104,278 of
unpaid principal and accrued interest.
On February 14, 2000 the Company completed a private placement of
15,310 shares of common stock at $1.96 per share for a total offering of
$30,000.
On February 24, 2000 the Company completed a private placement of
3,112 shares of common stock at $2.25 per share for a total offering of
$7,000.
On February 24, 2000 the Company completed a private placement of
3,112 shares of common stock at $2.25 per share for a total offering of
$7,000.
On March 10, 2000 the Company completed a private placement of
10,668 shares of common stock at $1.875 per share for a total offering of
$20,000.
On March 16, 2000 the Company completed a private placement of
1,133,334 shares of common stock at $.35 per share for a total offering of
$400,000.
On March 23, 2000 the Company completed a private placement of
20,000 shares of common stock at $1.00 per share for a total offering of
$20,000.
COMPENSATORY SHARES
On January 10, 2000, 80,000 shares of common stock were issued at $.50
per share, or $40,000, as compensation to Adam Barnett.
On January 12, 2000, 16,654 shares of common stock were issued at $.50
per share, or $8,327, as compensation to Trevor Alfred.
On February 1, 2000, 20,000 shares of common stock were issued at $1.00
per share, or $20,000, as compensation to Jennifer Casciorizzo.
On February 22, 2000, 700 shares of common stock were issued at $1.50
per share, or $1,050, as compensation to Trevor Alfred.
8
<PAGE>
On February 28, 2000, 12,000 shares of common stock were issued at
$2.25 per share, or $27,000, as compensation to IC Services.
On March 10, 2000, 2,000 shares of common stock were issued at $1.875
per share, or $3,750, as compensation to Trevor Alfred.
PREFERRED STOCK
The Company is authorized to issue up to 6,000,000 shares of $5.00 par
value convertible preferred stock. The rights and privileges of the shares will
be determined by the Company's Board of Directors at the time of issuance. None
of the shares have been issued.
NOTE 7 - COMMITMENTS
RENT AND SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Corporation ("Villiers") whereby Villiers has agreed to provide office space
and various business services to the Company for a monthly fee of $15,000.
The agreement had an initial one-year term that expired on May 28, 1999, and
provides for automatic one-year renewals unless canceled by either party in
writing. The Company's Chief Executive Officer/President/Director/Stockholder
is a stockholder and director and the Interim Vice President of Finance and
Administration/Director/Stockholder is a stockholder and officer,
respectively, in Villiers.
FINANCIAL ADVISORY SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Partners, LLC ("VCP"), a wholly owned subsidiary of Villiers Capital
Corporation, whereby VCP has agreed to provide corporate finance, investor
relations, strategic and capital planning and other financial and management
advice for a monthly fee of $3,500. The Agreement has an initial five-year
term expiring October 31, 2003 and provides for automatic one-year renewals
unless cancelled by either party in writing. In addition to the monthly fee,
VCP will receive a commission for any funds they raise for the Company in
accordance with the "Lehman" formula, which ranges from one to five percent
of funds raised.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with the Chief Executive
Officer/President/Director commencing on June 1, 1998 for five years ending on
May 31, 2003. The agreement may be renewed for another five-year term at
mutually agreed upon terms and conditions. Salaries for the five years are
$150,000, $180,000, $240,000 $240,000 and $300,000. No salaries were paid during
the years ended June 30, 1999 and 1998 (see Note 6). Bonuses for the five years
of up to $80,000, $120,000, $120,000, $120,000 and $120,000 may be granted based
upon the Company's performance against financial targets as determined by the
board of directors. No bonuses were granted for the years ended June 30, 1999
and 1998. Ten-year warrants for common stock priced at $.05 are granted for the
five years as follows: 1,000,000 warrants, 1,500,000, 1,500,000, 1,500,000, and
2,000,000. All warrants are issued as of the last day of the fiscal year
beginning June 30, 1999. The number of warrants shall be adjusted for any splits
or reverse splits of the Company's common stock.
The Company has an employment agreement with the Interim Vice President
of Finance and Administration/Director commencing on June 30, 1998 for an
initial six-month term. The agreement shall automatically renew for successive
six-month terms unless cancelled by either party. Monthly salaries for the first
three six-month terms are $3,500, $5,000 and $5,000. No salaries were paid
during the years ended June 30, 1999 and 1998 (see Note 6). Subsequent six-month
terms shall be at a monthly salary of $7,500. Bonuses may be granted based upon
the Company's performance against financial targets as determined by the board
of directors. No bonuses were granted for the years ended June 30, 1999 and
1998. Ten-year warrants for common stock priced at $.05 shall be granted at the
rate of 100,000 warrants per month issued on the first of each month beginning
July 1, 1998. The number of warrants shall be adjusted for any splits or reverse
splits of the Company's common stock.
The Company has an employment agreement with its Vice President of
Operations commencing on May 1, 1999 for four years at a salary of $7,500 per
month.
The Company has an employment agreement with its Vice President of
Marketing commencing on September 1, 1999 for five years at a salary of $60,000
per annum, payable at the rate of $5,000 a month.
WAREHOUSE LEASE
The Company, through its subsidiary, leases 55,000 square feet of
warehouse space from the Port of Pensacola, Florida. The Company has renewed
this lease for a ten-year term expiring January 4, 2010.
Minimum annual commitments under a non-cancelable lease in effect are
as follows:
10
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 4
--------------------
<S> <C>
2001 $60,000
2002 $65,000
2003 $70,000
2004 $75,000
2005 $85,000
2006 $90,000
2007 $95,000
2008 $100,000
2009 $105,000
2010 $110,000
</TABLE>
This guaranteed annual minimum would consist of the following fees -
wharfage, dockage, handling, and stevedore - that would generate as the result
of Southern Hardwoods having a presence at the Port. The wharfage rates in
effect during the initial term of this lease shall be as follows: $1.40 for
annual short tons from 1 to 30,000; $1.20 for annual short tons from 30,001 to
60,000; and $1.00 for annual short tons from 60,001 and greater.
NOTE 8 - INDUSTRY SEGMENTS
The Company operates substantially in one industry segment as described
in Note 1.
11
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 CERTIFICATE OF INCORPORATION OF TIMBER
RESOURCES INTERNATIONAL, INC.
2.2 BY LAWS OF TIMBER RESOURCES INTERNATIONAL,
INC.
2.3 ARTICLES OF INCORPORATION OF SOUTHERN
HARDWOODS, INC.
6.1 BINDING LETTER OF INTENT - ACQUISITION OF
SOUTHERN HARDWOODS, INC.
6.2 U.S. DEPARTMENT OF AGRICULTURE IMPORT
PERIOD FOR PLANTS AND PLANT PRODUCTS -
SOUTHERN HARDWOODS, INC.
6.3 EXCLUSIVE PURCHASING AGREEMENT WITH
HARDWOODS LIMITED DATED NOVEMBER 1,
1999.
6.4 AGREEMENT FOR EXCLUSIVE DISTRIBUTION WITH
TIMBER PRODUCTS, S.A. AND TIMBER TRADERS,
S.A., INC. DATED DECEMBER 2, 1999
6.5 EXCLUSIVE PURCHASING AGREEMENT WITH
TIMBER TRADERS, S.A., INC. DATED JANUARY 4,
2000
6.6 LEASE BETWEEN SOUTHERN HARDWOODS, INC.
AND CITY OF PENSACOLA, FLORIDA DATED
NOVEMBER 18, 1999
</TABLE>
<PAGE>
<TABLE>
<S> <C>
6.7 AGREEMENT FOR CERTAIN SERVICES AND
AMENITIES WITH VILLIERS CAPITAL CORPORATION
DATED MAY 28, 1998.
6.8 FINANCIAL ADVISORY AGREEMENT WITH VILLIERS
CAPITAL PARTNERS, LLC DATED NOVEMBER 1,
1998
6.9 EMPLOYMENT AGREEMENT WITH AZIZ HIRJI
DATED JUNE 1, 1998
6.10 EMPLOYMENT AGREEMENT WITH ANNA PETINOVA
DATED JUNE 1, 1998
6.11 EMPLOYMENT AGREEMENT WITH HENRY MIDDEN
DATED MAY 1, 1999
6.12 EMPLOYMENT AGREEMENT WITH PETER MAHARAJ
DATED SEPTEMBER 1, 1999
27 FINANCIAL DATA SCHEDULE
</TABLE>
<PAGE>
EXHIBIT NO. 2.1
CERTIFICATE OF INCORPORATION OF
TIMBER RESOURCES INTERNATIONAL, INC.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
TIMBER RESOURCES INTERNATIONAL, INC.
FIRST: The name of the Corporation is TIMBER RESOURCES INTERNATIONAL,
INC..
SECOND: The Name and Address of the Corporation's registered office in
the State of Delaware is The Company Corporation, 1013 CENTRE ROAD , Wilmington
Delaware 19801-1151.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue two classes of stock, in whatever series or amounts the
Board of Directors may designate, is 100,000,000 shares of common stock of par
value $0.001; and 6,000,000 shares of convertible preferred stock of par value
$5.00 (convertible to common stock on such terms as the Board of Directors may
provide).
FIFTH: The name and mailing address of the incorporator is William
Stocker, Attorney at Law, 34700 Pacific Coast Highway, Suite 303, Capistrano
Beach CA 92624..
SIXTH: Election of directors need not be by written ballot.
SEVENTH: The Board of Directors is authorized to adopt, amend, or
repeal By-Laws of the Corporation (except as and to the extent provided in the
By-Laws).
EIGHTH: Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation), by reason of the fact that the person is
or was a director, officer, incorporator, employee, or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
incorporator, employee, partner, trustee, or agent of another Corporation,
partnership, joint venture, trust or other enterprise (including an employee
benefit plan), shall be entitled to be indemnified by the Corporation to the
full extent then permitted by law against expenses (including reasonable counsel
fees and disbursements), judgments, fines (including excise taxes assessed on a
person with respect to an employee benefit plan), and amounts paid in settlement
incurred by the person in connection with such action, suit, or proceeding if
the person acted in good faith and in a manner the person reasonable believed to
be in or not opposed to the best interests of the Corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. Such right of indemnification shall inure whether
or not the claim asserted is based on matters which antedate the adoption of the
Article EIGHTH. Such right of indemnification shall continue as to a person who
has ceased to be a director, officer, incorporator, employee, partner, trustee,
or agent and shall inure to the benefit of the heirs and personal
representatives of such a person. The indemnification provided by the Article
EIGHTH shall not be deemed exclusive of any other rights which may be provided
now or in the future under any provision currently in effect or hereafter
adopted of the By-Laws, by any agreement, by vote of stockholders, by resolution
of disinterested directors, by provision of law, or otherwise.
<PAGE>
CERTIFICATE OF INCORPORATION OF
TIMBER RESOURCES INTERNATIONAL, INC.
May 12, 1998 Page 2
NINTH: No director of the Corporation shall be liable to the
Corporation or any of the stockholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision does not eliminate or
limit the liability of the director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any
transaction from which the director derived an improper personal benefit. For
purposes of the prior sentence, the term "damages" shall, to the extent
permitted by law, include without limitation, any judgment, fine, amount paid in
settlement, penalty, punitive damages, excise or other tax assessed with respect
to an employee benefit plan, or expense of any nature (including, without
limitation, reasonable counsel fees and disbursements). Each person who serves
as a director of the Corporation while this Article NINTH is in effect shall be
deemed to be doing so in reliance on the provisions of this Article NINTH, and
neither the amendment or repeal of this article NINTH, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
NINTH, shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for, arising out of, based upon, or in
connection with any acts or omissions of such director occurring prior to such
amendment, repeal, or adoption of an inconsistent provision. The provisions of
the Article NINTH are cumulative and shall be in addition to and independent of
any and all other limitations on or eliminations of the liabilities of directors
of the Corporation, as such, whether such limitations or eliminations arise
under or are created by any law, rule, regulation, by-law, agreement, vote of
shareholders or disinterested directors, or otherwise.
IN WITNESS WHEREOF, the Incorporator hereby signs this Certificate of
Incorporation on May 12, 1998.
/s/ William Stocker
William Stocker
attorney at law
INCORPORATOR
<PAGE>
EXHIBIT NO. 2.2
BY LAWS OF TIMBER RESOURCES INTERNATIONAL, INC.
<PAGE>
BY-LAWS
OF
TIMBER RESOURCES INTERNATIONAL, INC.
A DELAWARE CORPORATION
ARTICLE 1
CORPORATE OFFICES
1.01 PRINCIPAL EXECUTIVE OFFICE
The principal executive office of the Corporation, in the State of New
York, shall be located in the City of New York at 570 Lexington Avenue, 45th
Floor, New York, NY 10022.
1.02 OTHER CORPORATE OFFICES
The Corporation also may have offices at such other places as the Board
of Directors may from time to time designate or as the business of the
Corporation may require.
ARTICLE 2
SHAREHOLDERS' MEETINGS
2.01 PLACE OF MEETINGS
The directors may designate any place, wither within or without the
State unless otherwise prescribed by stature, as the place of meeting for any
annual meeting or for any special meeting called by the directors. A waiver of
notice signed by all stockholders entitled to vote at meeting may designate any
place, either within or without the State unless otherwise prescribed by
stature, as the place of meeting shall be the principal office of the
corporation. Notwithstanding any other provision hereof, the owners, of a
Majority of All Shares entitled to vote at a meeting of shareholders duly and
normally called with notice, may take Majority Shareholder Action, without
meeting or notice, to the extent provided by the laws of the State of Delaware.
2.02 ANNUAL MEETINGS
The annual meeting of the shareholders shall be held on the second
Monday of March in each year, if not a holiday, at ten o'clock a.m., at which
time the shareholders shall elect a Board of Directors and transact any other
proper business. If this date falls on a holiday, then the meeting shall be held
on the following business day at the same hour.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 2 OF 11
2.03 SPECIAL MEETINGS
Special Meetings of the shareholders may be called by the President,
the Board of Directors, by the holders of at least ten percent of all the shares
entitled to a vote at the proposed special meeting, or such other person or
persons as may be authorized in the Articles of Incorporation.
2.04 NOTICES OF MEETINGS
Notices of meetings, annual or special, shall be given in writing to
shareholders of record entitled to vote at the meeting by the Secretary or an
Assistant Secretary or, if there be no such officer or in the case of his or her
neglect or refusal, by any director or shareholder.
Such notices shall be given either personally or by first-class mail,
addressed to the shareholder at the address of such shareholder appearing on the
stock transfer books of the Corporation or given by the shareholder to the
Corporation for the purpose of notice. Notice shall be given not less than ten,
or more than forty (40) days before the date of the meeting.
Such notice shall state the place, date and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which is called.
2.05 WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder under
the provisions of the laws of the State, the Articles of Incorporation of this
Corporation, or these By-Laws, a waiver of notice in writing signed by a
shareholder entitled to such notice, whether before or after the meeting, shall
be equivalent to the giving of such notice. All such written waivers of notice
shall be filed with the corporate records or made part of the minutes of the
meeting.
2.06 SPECIAL NOTICE REQUIREMENTS
Shareholder approval at a meeting of shareholders, whether or not
required by law of the State, if requested with respect to the following
proposals, shall be valid only if the purpose of the meeting was stated in the
notice of the meeting:
(1) Approval of a contract or to other transaction between the
Corporation and one or more of its Directors or between the
Corporation and any Corporation, firm or association in which
one or more of the Directors has a material financial
interest;
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TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 3 OF 11
(2) Amendment of the Article of Incorporation after any shares
have been issued;
(3) Approval of the principal terms of a reorganization pursuant
to the laws of the State of Delaware and, in such cases,
written notice shall be given not less than twenty, nor more
than fifty days before the meeting;
(4) Election to voluntarily wind up and dissolve the Corporation;
(5) Election to revoke voluntary dissolution proceedings;
(6) Reduction of stated capital;
(7) Restatement of the Articles of Incorporation, if an amendment
is contained therein; and
(8) Disposition of all or substantially all of the assets of the
Corporation outside the usual and regular course of its
business.
2.07 ACTION WITHOUT MEETING
Any Action that may be taken at any annual or special meeting of
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the shareholders entitled to vote
on the action. Such consent shall have the same force and effect as a unanimous
vote of shareholders.
Unless otherwise provided by law, any action required to be taken, or
any other action which may be taken, at a meeting of the stockholders, may be
taken without a meeting by Majority Shareholder Action, (a) if such action shall
be signed by a Majority of all of the stockholders entitled to vote with respect
to the subject matter thereof at any regular meeting called on notice, and (b)
if written notice to all shareholders is promptly given of all action so taken.
2.08 QUORUM
The holders of a majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting of the
shareholders duly noticed and called. At all meetings of the stockholders, a
stockholder may vote by proxy executed in writing by the stockholder or by his
duly authorized attorney in fact. Such proxy shall be filed with the secretary
of the corporation before or at the time of the meeting.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 4 OF 11
2.09 VOTING
Only shareholders whose names appear on the stock transfer books of the
Corporation as of the closing date of the stock transfer books or the record
date set by the Board of Directors shall be entitled to vote at a meeting of
shareholders.
If the Board of Directors has not closed the stock transfer books or
set a record date for purposes of determining the shareholders entitled to
notice of or to vote at any meeting of shareholders, then the date on which
notice of the meeting is mailed shall be the record date for such determination
of shareholders.
Each outstanding share shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders except as otherwise provided by
the laws of the State of Delaware or the following provisions of this By-Laws.
If a quorum is present, the vote of the holders of a majority of the
shares entitled to vote and represented at a meeting shall be the act of the
shareholders, unless the vote of a greater number is required by law, the
Articles of Incorporation, or these By-Laws.
At each election of Directors, no shareholder entitled to vote at such
election shall have the right to cumulate his or her votes.
2.10 PROXIES
Every person entitled to vote shares may authorize another person or
persons to act by proxy with respect to such shares by filing a written proxy,
executed by such person or his duly authorized agent, with the Secretary of the
Corporation.
A proxy shall not be valid after the expiration of eleven months from
the date thereof unless otherwise provided in the proxy. A proxy shall be
revocable unless the proxy form conspicuously state that the proxy is
irrevocable and the proxy is coupled with an interest. Proxies coupled with an
interest include the appointment as proxy of:
(1) A pledge;
(2) A person who purchased or agreed to purchase, or owns or holds
an option to purchase, the shares;
(3) A creditor of the Corporation who extended it credit under
terms requiring the appointment;
(4) An employee of the Corporation whose employment contract
requires the appointment; or
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 5 OF 11
(5) A party to a voting agreement created in conformity with the
laws of the State of Delaware.
ARTICLE 3
BOARD OF DIRECTORS
3.01 GENERAL POWERS
The business and affairs of the corporation shall be managed by its
board of directors. The directors shall in all cases act as a board, and they
may adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these By-Laws and the laws of the State of Delaware.
3.02 NUMBER, TENURE AND QUALIFICATIONS
The number of directors of the corporation shall be a minimum of one
(1) and a maximum of nine (9). Each director shall hold office until the next
annual meeting of stockholders and until his successor shall have been elected
and qualified.
3.03 REGULAR MEETINGS
A regular meeting of the directors shall be held without other notice
than this bylaw immediately after, and at the same place as, the annual meeting
of stockholders. The directors may provide, by resolution, the time and place
for holding of additional regular meetings without other notice than such
resolution.
3.04 SPECIAL MEETINGS
Special meetings of the directors may be called by or at the request of
the president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.
3.05 NOTICE
Notice of any special meeting shall be given at least one day
previously thereto by written notice delivered personally, or by telegram or
mailed to each director at his business address. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
<PAGE>
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BY-LAWS
PAGE 6 OF 11
3.06 QUORUM
At any meeting of the directors fifty (50 %) percent shall constitute a
quorum for the transaction of business, but if less than said number is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
3.07 MANNER OF ACTING
The act of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the directors.
3.08 NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Newly created directorships resulting from an increase in the number of
directors an vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of majority of the directors
then in office, although less than a quorum exists. Vacancies occurring by
reason of the removal of directors without cause shall be filled by vote of the
stockholders. A director elected to fill a vacancy caused by resignation, death
or removal shall be elected to hold office for the unexpired term of his
predecessor.
3.09 REMOVAL OF DIRECTORS
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
3.10 RESIGNATION
A director may resign at any time by giving written notice to the
board, the president or the secretary of the corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
3.11 COMPENSATION
No compensation shall be paid to directors, as such, for their
services, but by resolution of the board a fixed sum and expenses for actual
attendance at each regular or special meeting of the board may be authorized.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefore.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 7 OF 11
3.12 EXECUTIVE AND OTHER COMMITTEES
The board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of one (1) or more
directors. Each such committee shall serve at the pleasure of the board.
ARTICLE 4
OFFICERS
4.01 NUMBER
The officers of the corporation shall be the president, a secretary and
a treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the directors.
4.02 ELECTION AND TERM OF OFFICE
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
4.03 REMOVAL
Any officer or agent elected or appointed by the directors may be
removed by the directors whenever in their judgement the best interest of the
corporation would be served thereby, but such removal shall be without prejudice
to contract rights, if any, of the person so removed.
4.04 VACANCIES
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the un-expired
portion of the term.
4.05 PRESIDENT
The president shall be the principal executive officer of the
corporation and, subject to the control of the directors, shall in general
supervise and control all of the business and affairs of the corporation. He
shall, when present, preside at all meetings of the stockholders and of the
directors. He may sign, with the secretary or any other proper officer of the
corporation thereunto authorized by the directors, certificates for shares of
the corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where the
directors or by these
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 8 OF 11
By-Laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
4.06 CHAIRMAN OF THE BOARD
In the absence of the president or in the event of his death, inability
or refusal to act, the chairman of the boards of directors shall perform the
duties of the president, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the president. The chairman of the board
of directors shall perform such other duties as from time to time may be
assigned to him by the directors.
4.07 SECRETARY
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
the duties incident of the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the directors.
4.08 TREASURER
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties,
as the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
4.09 SALARIES
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of fact that he is also a director of the corporation.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 9 OF 11
ARTICLE 5
CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01 CONTRACTS
The directors may authorize any officer or officers, agent or agents to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
5.02 LOANS
No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the directors. Such authority may be general or confined to
specific instances.
5.03 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the
directors.
5.04 DEPOSITS
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies and other depositories as the directors may select.
ARTICLE 6
FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January in each year, or on such other day as the Board of Directors shall
fix.
ARTICLE 7
DIVIDENDS
The directors may from time to time declare, and the corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 10 OF 11
ARTICLE 8
SEAL
The directors may provide a corporate seal, which shall have inscribed
thereon the name of the corporation, the state of incorporation, year of
incorporation and the words, "Corporate Seal".
ARTICLE 9
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these By-Laws or under the provisions of the articles in incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE 10
AMENDMENT OF BY-LAWS
10.01 BY DIRECTORS
The Board of Directors may amend or repeal the By-Laws, unless:
(1) The Articles of Incorporation or the State reserves the power
exclusively to the shareholders in whole or part; or
(2) The shareholders in amending, repealing, or adopting a
particular by-law expressly provide that the Board of
Directors may not amend that by-law
10.02 BY SHAREHOLDERS
Unless the Articles of Incorporation or a by-law adopted by the
shareholders provides otherwise as to all or some portion of the By-Laws, the
shareholders may amend, repeal or adopt the By-Laws even though the By-Laws may
also be amended, repealed, or adopted by the Board of Directors.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
BY-LAWS
PAGE 11 OF 11
CERTIFICATION
THE SECRETARY of the Corporation hereby certifies that the foregoing is
a true and correct copy of the By-Laws of the Corporation named in the title
thereto and that such By-Laws were duly adopted by the Board of Directors of
said Corporation on the date set forth below.
EXECUTED, this day of June 12, 1998.
/s/ Anna Petinova
- ---------------------------------------
ANNA PETINOVA
SECRETARY
<PAGE>
EXHIBIT NO. 2.3
ARTICLES OF INCORPORATION OF SOUTHERN HARDWOODS, INC,
<PAGE>
ARTICLES OF INCORPORATION
OF
SOUTHERN HARDWOODS, INC, [Stamp]
ARTICLE I. NAME
The name of this corporation shall be Southern Hardwoods, Inc.
ARTICLE II. COMMENCEMENT & DURATION
The commencement of this corporation's existence shall be 5th of May,
1998. This corporation's duration shall be perpetual.
ARTICLE III. PURPOSE
This corporation is being organized for the purpose of engaging in the
business of receiving imported timber, producing lumber, wholesale sales of
goods, the provision of diverse services, for transacting any and all other
business and activities, and for engaging in the transaction of any and all
business activities permitted under Chapter 607, Florida Statutes, and laws of
United States Of America.
ARTICLE IV. CAPITAL STOCK
This corporation shall have the authority to issue 1000 shares of no
par value common capital stock.
ARTICLE V. PREEMPTIVE RIGHTS
Every shareholder, upon the sale for cash by this corporation of any
shares of new capital stock of the same kind, class, or series, as that which
the shareholder already holds, shall have the preemptive right to purchase a pro
rata share thereof (as nearly as may be done without the issuance of fractional
shares) at the price at which such shares are offered to others.
ARTICLE VI. TRANSFER RESTRICTIONS
No shareholder shall have the right to sell, assign, pledge, encumber,
transfer, or otherwise dispose of any shares of the capital stock of this
corporation, without first offering such shares for sale to this corporation at
the net asset value thereof. Such offer shall be in writing, signed by the
shareholder, sent by registered or certified mail to this corporation at its
registered office address, and open for acceptance by this corporation for a
period of thirty days from the date of mailing. If this corporation fails or
refuses, within such period, to make satisfactory arrangements for the purchase
of such shares, the shareholder shall have the right to dispose of such shares
without any further restrictions.
On the death of any shareholder, his/her shares held immediately prior
to the shareholder's death shall pass as personal property to the proper
successors and/or heirs, on the terms set forth above.
ARTICLES OF INCORPORATION OF SOUTHERN HARDWOODS, INC.
PAGE 1
<PAGE>
Each stock certificate issued by this corporation shall carry the
following legend: "These Shares Are Held Subject To Certain Transfer
Restrictions Imposed By This Corporation's Articles Of Incorporation, A Copy Of
Which Is On File At This Corporation's Principal Office."
ARTICLE VII. INITIAL BOARD OF DIRECTORS
The number of directors on this corporation's Initial Board Of
Directors shall be six (6). The number of directors may be increased or
decreased from time to time, as provided in this corporation's bylaws, but shall
never be less than three. The directors of the corporation shall be elected at
the annual meeting of the shareholders and directors, as specified in the
By-Laws. The election of directors shall be by majority vote.
Any director may be removed from office at and time with or without
cause by the affirmative vote of at least 90% the outstanding shares.
The names and addresses of the individuals who shall serve as members
of the Initial Board Of Directors are:
Glenn N. Abel Eric D. Abel J. Barry Cook
1183 N. Mediterranean Way 74 W. Chase St. 20 W. Norvell Bryant Hwy.
Inverness, FL 34453 Hernando, FL 34442 Hernando, FL 34442
Kenneth G. Abel John-Henry Williams B. Jeffrey Abel
1183 N. Mediterranean Way 2448 N. Essex Avenue 1183 N. Mediterranean Way
Inverness, FL 34453 Hernando, FL 34442 Inverness, FL 34453
ARTICLE VIII. QUORUM AND MEETINGS
A quorum for the transaction of business at any meeting of the board of
directors shall exist if fifty-one percent (51%) of the total number of
directors shall be present at the meeting, in person or by proxy.
ARTICLE IX. INDEMNIFICATION
This corporation shall indemnify any officer, director, employee, or
agent, and any former officer, director, employee, or agent, to the full extent
permitted by law.
ARTICLE X. PRINCIPAL OFFICE & INITIAL REGISTERED OFFICE & AGENT
The address of this corporation's, principal office shall be: 74 W.
Chase Street, Hernando, Florida 34442.
The name of the individual who shall serve as this corporation's
initial registered agent and the address therefor is: Eric D. Abel, 74 W. Chase
Street, Hernando, Florida 34442.
ARTICLE XI. INCORPORATOR
The name and address of the individual who shall serve as this
corporation's incorporator is: Glenn N. Abel, 1183 N. Mediterranean Way,
Inverness, Florida 34453.
ARTICLES OF INCORPORATION OF SOUTHERN HARDWOODS, INC.
PAGE 2
<PAGE>
ARTICLE XII. AMENDMENT
This corporation reserves the right to amend or repeal any provisions
in these Articles Of Incorporation, or any amendments hereto. This power to
adopt, amend, alter or repeal the Articles of Incorporation of this corporation
shall be vested in the Board of Directors by a unanimous vote. Any rights
conferred upon the shareholders shall be subject to this reservation.
/s/ Glenn N. Abel
- -----------------------------------
Glenn N. Abel, Incorporator
State of Florida
County of Citrus
On May 5, 1998, Glenn N. Abel, designated above as the individual who
shall serve as this corporation's incorporator, and personally known to me,
personally appeared before me and signed and acknowledged signing these Articles
Of Incorporation.
/s/ Lisa M Bazemore [STAMP]
- ---------------------
Notary Public
I hereby accept my designation as registered agent and agree to serve
as the registered agent of Southern Hardwoods, Inc. I hereby state that I am
familiar with and accept the duties and responsibilities as registered agent
for Southern Hardwoods, Inc.
/s/ Eric D. Abel
- ------------------------------------
Eric D. Abel, Registered Agent
[STAMP]
ARTICLES OF INCORPORATION OF SOUTHERN HARDWOODS, INC.
PAGE 3
<PAGE>
BYLAWS
OF
SOUTERN HARDWOODS, INC.
ARTICLE I. SHAREHOLDERS
SECTION A. ANNUAL MEETINGS
Annual Meetings shall be held at the corporate office, on the first
Friday of every May, at 11:00 a.m., or as soon thereafter as possible, as
designated by the Board Of Directors, but shall be held no later than thirteen
months after the last preceding annual meeting. Business transacted at each
annual meeting shall include the election of directors.
SECTION B. SPECIAL MEETINGS
Special meetings shall be held when directed by the president or any
member of the Board Of Directors, or when requested in writing by the
shareholders of not less than FIFTY per cent of all the shares entitled to vote-
A special meeting requested by the shareholders, unless they designate a later
date, shall be called for a date not less than TEN nor more than SIXTY days
after the request is made. The call shall be issued by the secretary, unless the
president, Board Of Directors, or shareholders designate another person to do
so.
SECTION C. MEETING PLACE
Meetings may be held within or without Florida, and may be attended in
person, by proxy, by telephone, or by any other means of reasonable
communications.
SECTION D. MEETING NOTICE
Written notice, stating the time (date and hour) and place of a
meeting, and in the case of a special meeting, its purpose, shall be delivered
not less than TEN nor more than SIXTY days before the meeting, either personally
or by first class mail, by or at the direction of the secretary, to each
shareholder entitled to vote. If mailed, the notice, addressed to each
shareholder at his or her address as it appears on the stock transfer books,
shall be deemed to be delivered when deposited in the United States mail.
SECTION E. ADJOURNED MEETING NOTICE
When a meeting is adjourned to another designated time (date and hour)
or place, it shall not be necessary to give notice of the adjourned meeting. If,
however, after the adjournment, the Board Of Directors fixes a new record date
for the adjourned meeting, it shall be necessary to give notice.
SECTION F. SHAREHOLDER DETERMINATION
One of the following methods shall be used for the purpose of
determining the shareholders (1) entitled to notice of, or to vote at, a meeting
or an adjournment thereof, (2) entitled to receive dividends, or (3) for any
other purpose:
The Board Of directors may provide that the stock transfer books
shall be closed for a stated period. The period shall not be more than sixty
days, and in the case of a meeting, it shall not be less than ten days
immediately preceding the meeting.
In lieu of closing the stock transfer books, the Board Of Directors
may designate a date as
Bylaws - Page 1
<PAGE>
the record date. The date shall not be more than sixty days, and in the case
of a meeting, it shall not be less than ten days, prior to the date on which
the particular action is to be taken.
If the stock transfer books are not closed and a record date is not
designated, the date on which the notice of the meeting is mailed, or the date
on which the Board Of Directors adopted the resolution declaring the dividend,
shall be the record date.
When a determination has been made of the shareholders entitled to vote
at a meeting, the determination shall apply to any adjournment thereof, unless
the Board Of Directors designates a new record date for the adjourned meeting.
SECTION G. VOTING RECORD
If this corporation has ten or more shareholders, the officer having
charge of the stock transfer books shall make, at least ten days before each
meeting, a complete list of the names and addresses of the shareholders entitled
to vote, including the number, class, and series, if any, of shares held by
each. The list, for a period of ten days prior to the meeting, shall be kept on
file at this corporation's registered office, principal place of business, or
transfer agent's or registrar's office. Any shareholder shall be entitled to
inspect the list at any time during usual business hours. The list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder at any time during the meeting.
If these requirements have not been substantially complied with, the
meeting, on the demand of any shareholder, shall be adjourned until they are
complied with. If no demand is made, failure to comply with these requirements
shall not affect the validity of any action taken at the meeting.
SECTION H. QUORUM & VOTING
A majority of the shares entitled to vote and represented at a meeting
shall constitute a quorum.
If a quorum is present, an affirmative vote of a majority of the shares
entitled to vote on the matter and represented at the meeting shall be the act
of the shareholders, except as provided otherwise by law.
After a quorum has been established, the subsequent withdrawal of
shareholders, so as to reduce the number of shares entitled to vote on the
matter, below the number required for a quorum, shall not affect the validity
of any action taken at the meeting or any adjournment thereof.
SECTION I. VOTING SHARES
Each common share shall be entitled to one vote on each matter
submitted to a vote at the meeting.
Treasury shares, shares of this corporation owned by another
corporation, of which a majority of that corporation's voting shares are
owned or controlled by this corporation, and shares of this corporation held
by it in a fiduciary capacity shall not be voted, directly or indirectly, at
any meeting, and shall not be counted in determining the total number of
outstanding shares at any given time.
At each election for directors, each shareholder entitled to vote at
the election shall have the right to vote the number of shares owned by him
or her for as many persons as there are directors to be elected at that time.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated by the
corporation's bylaws or, in the absence of any applicable bylaws, by the
person designated by the corporation's Board Of Directors. Proof of the
Bylaws - Page 2
<PAGE>
designation may be made by the presentation of a certified copy of the
corporation's bylaws, or the Board Of Directors' designation. In the absence of
any designation, or in case of conflicting designations, the corporation's
chairman of the Board Of Directors, president, vice president, secretary, and
treasurer shall be presumed to possess, in that order, authority to vote the
shares.
Shares held by an administrator, executor, guardian, or conservator may
be voted by him or her, in person or by proxy, without a transfer of the shares
into his or her name.
Shares standing in the name of a trustee may be voted by him or her, in
person or by proxy, but a trustee shall not be entitled to vote shares held by
him or her without a transfer of the shares into his or her name.
Shares held by a receiver may be voted by him or her, in person or by
proxy, without a transfer of the shares into his or her name, if the authority
to do so is contained in an appropriate order of the court by which the receiver
was appointed.
A shareholder, whose shares are pledged, shall be entitled to vote the
shares until the shares have been transferred into the name of the pledgee.
Thereafter, the pledgee shall be entitled to vote the shares.
On or after the date on which written notice of redemption of
redeemable shares has been mailed to the shareholders thereof, and a sum
sufficient to redeem the shares has been deposited with a bank or trust company
along with irrevocable instructions and authority to pay the redemption price to
the shareholders thereof upon the surrender of the certificates therefor, the
shares shall not be entitled to vote and shall not be deemed to be outstanding
shares.
SECTION J. PROXIES
Any shareholder entitled to vote or to express consent or dissent, or
his or her duly authorized attorney-in-fact, may authorize another person or
persons to act for him or her by proxy.
A proxy must be in writing and must be signed by the shareholder or his
or her attorney-in-fact. A proxy shall not be valid after the expiration of
eleven months from the date thereof, unless it provides otherwise. A proxy shall
be revocable at the pleasure of the shareholder executing it, except as provided
otherwise by law.
A proxy holder's authority to act shall not be revoked by the death or
the incompetence of the shareholder who executed the proxy, unless, before the
authority is exercised, written notice and proof of the death or the
adjudication of incompetency is received by the officer responsible for
maintaining the shareholders list.
If a proxy for the same shares confers authority upon two or more
persons, and does not provide otherwise, a majority of them present, or if only
one is present, then that one, may exercise the powers conferred by the proxy.
However, if the proxy holders present are equally divided as to the right and
manner of voting, the voting of the shares shall be prorated.
If a proxy expressly so provides, the proxy holder may appoint, in
writing, a substitute to act in his or her place.
SECTION K. VOTING TRUSTS
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, as provided by law. When the counterpart of a voting trust
agreement and a copy of the record of the holders of voting trust certificates
have been deposited with this corporation, as provided by law, those documents
shall be subject to an examination by any shareholder or record holder of
Bylaws - Page 3
<PAGE>
voting trust certificates, in person, or by his or her agent or attorney.
SECTION L. VOTING AGREEMENTS
Two or more shareholders may enter into an agreement providing for the
manner of their exercising voting rights or relating to any phase of this
corporation's affairs, as provided by law. Nothing therein shall impair this
corporation's rights to treat the shareholders as entitled to vote their shares.
SECTION M. WRITTEN ACTION
Any action required to be taken or which may be taken, at any annual or
special meeting, may be taken without a meeting, without prior notice, and
without a vote, if a written consent, setting forth the action taken, is signed
by the shareholders of not less than a majority of the shares entitled to vote.
Within ten days after obtaining an authorization by written consent,
notice shall be given to the shareholders entitled to vote who did not consent
in writing. The notice shall fairly summarize the material features of the
action taken; If the action be a merger, consolidation, or sale or exchange of
assets, for which dissenting shareholders' rights are provided by law, the
notice shall contain a clear statement of those rights.
ARTICLE II. DIRECTORS
SECTION A. FUNCTION
All corporate powers shall be exercised by or under the authority of,
and this corporation's business and affairs shall be managed under the direction
of, the Board Of Directors.
SECTION B. QUALIFICATIONS
Directors do not need to be either shareholders of this corporation or
residents of Florida.
SECTION C. COMPENSATION
The Board Of Directors shall have the authority to designate the
compensation of the directors, if any.
SECTION D. DUTIES
A director shall perform his or her duties as a director and as a
member of any committee of the Board Of Directors upon which he or she may
serve, in good faith, in a manner he or she reasonably believes to be in the
best interests of this corporation, and with the care which an ordinarily
prudent person in the same position would use under similar circumstances.
In performing his or her duties, a director shall be entitled to rely
on information, opinions, reports, or statements, including financial statements
and other financial data, in each case prepared or presented by:
1. corporate officers or employees whom the director
reasonably believes to be reliable and competent in
the matters presented,
2. counsel, public accountants, or other persons, as to
matters which the director reasonably believes to be
within their professional or expert competence, or
3. committees of the Board Of Directors upon which he or
she does not serve,
Bylaws - Page 4
<PAGE>
duly designated in accordance with provisions of the
Articles Of Incorporation or Bylaws, as to matters
within their designated authority, which committees
the director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he or
she has knowledge concerning the matter in question that would cause his or her
reliance to be unwarranted.
A director who performs his or her duties in compliance with this
section shall have no liability by reason of being or having been a director.
SECTION E. ASSENT PRESUMPTION
A director who is present at a Board Of Directors meeting, at which
action on any corporate matter is taken, shall be presumed to have assented to
the action taken, unless he or she votes against the action or abstains from
voting in respect thereto because of an asserted conflict of interest.
SECTION F. NUMBER
The number of directors on this corporation's Initial Board Of
Directors shall be six (6). The number of directors may be increased or
decreased by amending these Bylaws, but no decrease shall have the effect of
shortening the term of any incumbent director.
SECTION G. ELECTION & TERM
Each member of the initial Board Of Directors shall hold office until
the shareholders' first annual meeting and until his or her successor shall have
been elected and qualified, or until his or her earlier resignation, removal
from office, or death.
At the shareholders' first annual meeting and at each annual meeting
thereafter, the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which he or she is elected and until his or her successor shall have been
elected and qualified, or until his or her earlier resignation, removal from
office, or death
SECTION H. VACANCIES
Any vacancy occurring in the Board Of Directors, including any vacancy
created by reason of an increase in the number of directors, may be filled by
the affirmative vote of a majority of the remaining directors, even though they
constitute less than a quorum of the Board Of Directors. A director elected to
fill a vacancy shall hold office only until the next election of directors by
the shareholders.
SECTION I. REMOVAL
At a shareholders' meeting called expressly for that purpose, any
director, or the entire Board Of Directors, may be removed, with or without
cause, by a vote of the shareholders as provided in the Articles of
Incorporation.
SECTION J. QUORUM & VOTING
A majority of the number of directors designated by these Bylaws shall
constitute a quorum for the transaction of business. An act of a majority of the
directors, at a meeting at which a quorum is present, shall be an act of the
Board Of Directors.
Bylaws - Page 5
<PAGE>
SECTION K. INTEREST CONFLICTS
No contract or other transaction, between this corporation and one or
more of its directors, or any other corporation, firm, association, or entity,
in which one or more of this corporation's directors are directors or officers
or are financially interested, shall be either void or voidable because of the
relationship or interest, or because the director or directors are present at
the meeting of the Board Of Directors or a committee thereof, at which the
contract or transaction was authorized, approved, or ratified, or because his,
her, or their votes are counted for such purpose, if:
1. the fact of the relationship or interest is disclosed or known
to the Board Of directors or the committee thereof, and the
authorization, approval, or ratification of the contract or
transaction was by a sufficient vote or written consent for the
purpose, without counting the votes or written consents of the
interested directors;
2. the fact of the relationship or interest is disclosed or known
to the shareholders entitled to vote, and they authorize,
approve, or ratify the contract or transaction by vote or written
consent; or,
3. the contract or transaction is fair and reasonable as to this
corporation at the time it is authorized by the Board Of
Directors or the committee thereof or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board Of Directors or a committee
thereof at which the contract or transaction is authorized, approved, or
ratified.
SECTION L. COMMITTEES
The Board Of Directors, by resolution adopted by a majority of the full
Board Of Directors, may designate from its members an executive committee and
one or more other committees, each of which, to the extent provided in the
resolution, shall have and may exercise all the authority of the Board Of
Directors, except that no committee shall have the authority to:
1. approve or recommend to the shareholders any actions
or proposals required by law to be approved by the
shareholders,
2. designate candidates for the office of director, for
purposes of proxy solicitation or otherwise,
3. fill vacancies on the Board Of Directors or any
committee thereof,
4. amend these Bylaws,
5. authorize or approve the reacquisition of shares,
unless pursuant to a general formula or method
specified by the Board Of Directors, or
6. authorize or approve the issuance or sale of shares
or any contract therefor, or designate the terms of a
series of a class of shares, except that the Board Of
Directors, having acted under its general
authorization for the issuance or sale of shares or
any contract therefor, and in the case of a series,
the designation thereof, and having specified a
general formula or method by resolution or by the
adoption of a stock option or other plan, may
authorize a committee to designate the terms of any
contract for the sale of shares and the terms upon
which the shares may be issued or sold, including,
without limitation, the price, the rate or manner of
payment of dividends, and provisions for redemption,
sinking funds, conversion, voting and preferential
Bylaws - Page 6
<PAGE>
rights, and other features of a class of shares or a
series of a class of shares, with full power in the
committee to adopt any final resolution setting forth
all the terms thereof and to authorize a statement of
the terms of a series for filing with the Department
Of State.
The Board Of Directors, by resolution adopted in accordance with this
section, may designate one or more directors as alternate committee members to
serve in the place and stead of absent committee members at a committee meeting.
SECTION M. MEETING PLACE
Regular and special meetings may be held within or without Florida.
SECTION N. MEETING TIME, NOTICE, & CALL
A regular meeting shall be held without notice immediately following
each shareholders' annual meeting. Written notice of the time (date and hour)
and place of a special meeting shall be given to each director by personal
delivery, telegram, or cablegram, at least two days before the meeting, or by
notice mailed to each director at least five days before the meeting.
Notice of a meeting need not be given to any director who signs a
waiver of notice before or after the meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of the meeting and of any objections
to its time (date and hour) and place and to the manner in which it has been
called or convened, unless the director states, at the beginning of the meeting,
any objection to the transaction of business because the meeting is not lawfully
called or convened.
The business to be transacted at, and the purpose of, a regular or
special meeting need not be specified in the notice or waiver of notice of the
meeting.
A majority of the directors present, whether or not a quorum exists,
may adjourn a meeting to another designated time (date and hour) and place.
Notice of the adjourned meeting shall be given to each director who was not
present at the time of the adjournment and to all directors if the time (date
and hour) and place of the adjourned meeting were not designated at the time
of the adjournment.
Meetings may be called by the president or any director.
SECTION O. CONFERENCE TELEPHONE MEETINGS
The Board Of Directors or a committee thereof may participate in a
meeting by using conference telephones or similar communication equipment which
permits all persons participating in the meeting to hear each other at the same
time. Participation in this manner shall constitute presence in person at the
meeting.
SECTION P. WRITTEN ACTION
Any action required to be taken or which may be taken by the Board Of
Directors or a committee thereof may be taken without a meeting if a written
consent setting forth the action so taken, signed by all the directors or
committee members, as the case may be, is filed in the minutes of the
proceedings of the Board Of Directors or committee. The consent shall have the
same effect as a unanimous vote.
Bylaws - Page 7
<PAGE>
ARTICLE III. OFFICERS
SECTION A. DESIGNATION
The officers shall consist of a president, secretary, and treasurer,
and may include several vice presidents, each of whom shall be elected by the
Board Of Directors at its regular meeting immediately following the
shareholders' annual meeting. These officers shall serve until their successors
are chosen and qualified. Other officers and assistant officers and agents, as
may be deemed necessary, may be elected or appointed by the Board Of Directors
from time to time. Any two or more offices may be held by the same person. The
failure to elect a president, vice-president, secretary, or treasurer shall not
affect the existence of this corporation.
SECTION B. DUTIES
The president shall be the chief executive officer, shall be
responsible for the general and active management of this corporation's business
and affairs, subject to the directions of the Board Of Directors, and shall
preside at all shareholders' and Board Of Directors' meetings.
The vice-president shall be an executive officer. The vice-president
shall, in the absence of the president, be responsible for the general and
active management of this corporation's business and affairs, subject to the
directions of the Board Of Directors, and shall preside at all shareholders' and
Board Of Directors' meetings.
The secretary shall be responsible for the custody and maintenance of
all corporate records, except financial records, shall record the minutes of all
shareholders' and Board Of Directors' meetings, shall send out all notices of
meetings, and shall perform any other duties prescribed by the president or the
Board Of Directors.
The treasurer shall be responsible for the custody and maintenance of
all corporate funds and financial records, shall keep full and accurate accounts
of all receipts and disbursements, shall render accounts thereof at the
shareholders' annual meetings and whenever else required by the president or the
Board Of Directors, and shall perform any duties prescribed by the president or
the Board Of Directors.
SECTION C. REMOVAL
Any officer or agent elected or appointed by the Board Of Directors may
be removed by the Board Of Directors whenever, in its judgment, the best
interests of this corporation will be served thereby.
Any officer or agent elected by the shareholders may be removed only by
the shareholders, unless the shareholders shall have authorized the Board Of
Directors to remove the officer or agent.
Any vacancy in any office may be filled by the Board Of Directors.
The election or appointment of the officer or agent shall not of
itself create contract rights.
ARTICLE IV. CAPITAL STOCK CERTIFICATES
SECTION A. ISSUANCE
Every shareholder shall be entitled to have a certificate representing
the shares to which he or she is entitled. The certificate shall not be issued
for the shares until they are fully paid.
Bylaws - Page 8
<PAGE>
SECTION B. FORM
Certificates representing shares shall be signed by the president or
vice president and the secretary or assistant secretary, and may be sealed with
the corporate seal or a facsimile thereof. The signatures of the president or
vice president and the secretary or assistant secretary may be facsimiles if the
certificate is manually signed by a transfer agent or registrar (other than this
corporation itself) or a corporate employee. In case any officer, who signed or
whose facsimile signature has been placed upon a certificate, shall have ceased
to be an officer before the certificate is issued, it may be issued by this
corporation with the same effect as if he or she were the officer at the date of
its issuance.
Every certificate shall set forth or fairly summarize, or shall state
that this corporation will furnish to any shareholder upon request and without
charge, a full statement of the preferences, limitations, relative rights, and
series designation provisions pertaining to the shares of each class or series
authorized to be issued, the variations in the relative rights and preferences
between the shares of each series so far as these have been designated and
determined, and the authority of the Board Of Directors to designate and
determine the relative rights and preferences of subsequent series.
Every certificate, representing shares which are restricted as to their
sale, disposition, or other transfer, shall state that the shares are restricted
as to transfer and shall set forth or fairly summarize, or shall state that
this corporation will furnish to any shareholder upon request and without
charge, a full statement of the restrictions.
Every certificate shall state upon its face the name of this
corporation, that this corporation is organized under the laws of Florida, the
name of the person to whom it is issued, the number and class of shares and any
series designation, and the par value of the shares or a statement that the
shares are without par (no par) value.
SECTION C. TRANSFER
This corporation shall register a certificate presented to it for
transfer if the certificate is properly endorsed by the shareholder or his or
her duly authorized attorney. This corporation may require that the signature be
guaranteed by a commercial bank or trust company or by a member of the New York
or American Stock Exchange.
SECTION D. LOSS, DESTRUCTION, OR THEFT
This corporation shall issue a new certificate in place of any
certificate previously issued if the shareholder:
1. makes proof in affidavit form that it has been lost,
destroyed, or stolen,
2. requests the issuance of a new certificate before
this corporation has notice that the certificate has
been acquired by a purchaser for value in good faith
and without notice of any adverse claim,
3. gives bond in such form as this corporation may
direct to indemnify this corporation and its transfer
agent and registrar against any claim that may be
made on account of the alleged loss, destruction, or
theft of the certificate, and
4. satisfies any other reasonable requirements imposed
by this corporation.
Bylaws - Page 9
<PAGE>
ARTICLE V. BOOKS, RECORDS, & MINUTES
SECTION A. REQUIREMENTS
This corporation shall kcep correct and complete books and records of
accounts and shall keep minutes of all meetings of its shareholders and Board Of
Directors and committees thereof.
This corporation shall keep records of its shareholders at its
registered office or principal place of business or at its transfer agent's or
registrar's office. The records shall contain the names and addresses of all
shareholders and the number, class, and series, if any, of the shares held by
each.
All books, records, and minutes shall be in written form, or in any
other form capable of being converted into written form within a reasonable
time.
SECTION B. INSPECTION RIGHTS
Any person who has been a shareholder or a record holder of voting
trust certificates for at least six months immediately preceding his or her
request, or who is a shareholder or record holder of voting trust certificates
representing at least five per cent of the outstanding shares of any class or
series, upon written request stating the purpose thereof, shall have the right
to examine, in person or by agent or attorney, at any reasonable time or times,
for any proper purpose, this corporation's relevant books and records of
accounts, minutes, and records of shareholders, and to make extracts therefrom.
SECTION C. FINANCIAL INFORMATION
Not later than four months after the close of each fiscal year, this
corporation shall prepare a balance sheet, showing in reasonable detail its
financial condition as of the close of that fiscal year, and a profit and loss
statement, showing the financial result of its operation during that fiscal
year.
Upon the written request of any shareholder or record holder of voting
trust certificates, this corporation shall mail to the shareholder or record
holder of voting trust certificates, a copy of the most recent balance sheet and
profit and loss statement.
Balance sheets and profit and loss statements shall be filed in this
corporation's registered office in Florida; shall be kept for at least five
years, and shall be subject to inspection during business hours by any
shareholder or record holder of voting trust certificates, in person or by agent
or attorney.
ARTICLE VI. DIVIDENDS
The Board Of Directors may from time to time declare, and this
corporation may pay, dividends on shares in cash, property, or its own shares,
except when this corporation is insolvent, when the payment thereof would render
this corporation insolvent, or when the declaration or payment thereof would be
contrary to any restrictions contained in the Articles Of Incorporation, subject
to the following provisions:
1. dividends in cash or property may be declared and
paid, except as otherwise provided in this article,
only out of the unreserved and unrestricted earned
surplus or capital surplus, howsoever arising, but
all dividends paid out of the capital surplus shall
be identified as a distribution of the capital
surplus, and the amount per share paid from the
capital surplus shall be disclosed to the
shareholders receiving the dividends concurrently
with the distribution of the
Bylaws - Page 10
<PAGE>
dividends,
2. dividends may be declared and paid in this
corporation's own treasury shares,
3. dividends may be declared and paid in this
corporation's own authorized but unissued shares out
of any unreserved and unrestricted surplus, subject
to the following conditions:
a. if the dividends are payable in shares having
a par value, the shares shall be issued at not
less than the par value thereof, and there
shall be transferred to the stated capital, at
the time the dividends are paid, an amount of
surplus equal to the aggregate par value of
the shares to be issued as the dividends,
and
b. if the dividends are payable in shares without
par (no par) value, the shares shall be issued
at the stated value as shall be designated by
the Board Of Directors by resolution adopted
at the time the dividends are declared, there
shall be transferred to the stated capital,
at the time the dividends are paid, an amount
of surplus equal to the aggregate stated
value so designated in respect to the shares,
and the amount per share so transferred to the
stated capital shall be disclosed to the
shareholders receiving the dividends
concurrently with the distribution of the
dividends,
c. dividends payable in shares of any class shall
not be paid to the shareholders of shares of
any other class, unless the Articles Of
Incorporation so provide or the payment is
authorized by the affirmative vote or written
consent of the shareholders of a majority of
the shares of the class in which the payments
are to be made, and
d. a split-up or division of the issued shares of
any class into a greater number of shares of
the same class, without increasing the stated
capital, shall not be construed to be
dividends within the meaning of this article.
ARTICLE VII. CORPORATE SEAL
The Board Of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the year of
incorporation and the following:
SOUTHERN HARDWOODS, INC.
FLORIDA
ARTICLE VIII. BYLAWS
Bylaws may be adopted, altered, amended, or repealed by the
shareholders or the Board Of Directors, but the Board Of Directors may not
alter, amend, or repeal any bylaw adopted by the shareholders if the
shareholders specifically provide that bylaw is not subject to alteration,
amendment, or repeal by the Board Of Directors.
Bylaws - Page 11
<PAGE>
These Bylaws, consisting of Articles I-VIII, inclusive, were adopted
by the Board Of Directors on this 15th day of May, 1998.
/s/ Eric D. Abel
---------------------------
Eric D. Abel, Secretary
Bylaws - Page 12
<PAGE>
EXHIBIT NO. 6.1
BINDING LETTER OF INTENT - ACQUISTION OF
SOUTHERN HARDWOODS, INC.
<PAGE>
SOUTHERN HARDWOODS, INC.
- --------------------------------------------------------------------------------
Mr. Aziz Hirji, C.E.O. 13 May, 1999
Timber Resources International
New York, New York
via facsimile: (212) 355-7026
BINDING LETTER OF INTENT
Dear Mr. Hirji:
We understand that Timber Resources International, Inc., a Delaware
corporation, (herein "TRI") desires to acquire Southern Hardwoods, Inc., a
Florida corporation (herein "SHI"). It is our understanding that you desire to
operate SHI as a wholly-owned subsidiary of TRI. With that understanding, and
the terms and conditions hereof, we hereby submit this binding letter of intent,
subject to the conditions set forth herein. Please review and consider the terms
and conditions, then, if you have a BONA FIDE interest in SHI, please
acknowledge your intention to be bound to the terms of this letter by signing
below. This letter must be accepted by TRI by 5:00 p.m., Thursday, May 13, 1999,
or it shall be deemed null and void.
1. SHI has heretofore submitted a true and correct copy (unless otherwise
stated) of the following documentation to TRI for its review and
consideration:
a. Certificate of Incorporation for SHI;
b. Articles of Incorporation for SHI;
c. Conformed copy of the Organizational Minutes of SHI;
d. Conformed copy of the Bylaws of SHI;
e. Internal Revenue Service Notice of Acceptance as an
S-Corporation, this is produced to provide you with evidence
of SHI's taxpayer identification number;
f. Short term lease agreement between City of Pensacola and SHI;
g. Fully executed Lease Agreement between the City of Pensacola,
Florida, and SHI, for all of Warehouse #7, Building #7C and
225 square feet of open ground storage;
h. Import Permit (No. 40-0967) for Plants and Plant Products,
issued by the U.S. Department of Agriculture to SHI for
various species of tropical hardwood logs;
i. Agreement between Hank Midden and SHI for the installation of
SHI's sawmill at the Port of Pensacola, and for commissions
payable on sales
<PAGE>
procured by Hank Midden;
j. Initial contract for portable toilet facilities at the Port
site;
k. Non-Circumvention Agreement between Vanguard International,
Inc. and SHI;
1. Receipt for SHI's purchase of its sawmill, Minor edger, green
chains, some electrical panels, blower and table saw;
m. Bill of lading for transportation of sawmill equipment from
Alabama to Port of Pensacola;
n. Order for SHI's purchase of two hundred 2x30' nylon swings
(5,000 lb. capacity), which have been freighted to Linden,
Guyana port site;
o. Everest National Insurance Company Workers Compensation and
Employers Liability Insurance Policy, with Longshore and
Harbor Workers' Endorsement;
p. Proof of payments to date for Workers Compensation Insurance
Policy;
q. Florida Windstorm Underwriting Association policy declaration
page;
r. Pennsylvania Lumbermens Mutual Insurance Company policy, with
endorsements, for general liability and property insurance;
s. Receipt for 10 bandsaw blades purchased from Select Sawmill
Co., Ontario, Canada;
t. Secretary's certificate, corporate resolutions, and corporate
promissory notes establishing loan arrangement between SHI and
Theodore S. Williams, Barry Cook, Michael White and Roger
Carlson;
u. UCC-1 financing statement filed with the Florida Secretary of
State, securing the corporate promissory notes;
v. Proposal from Ray Hathorn, another tenant at the Port of
Pensacola, requesting that we use his equipment for initial
operations, and the effective rates therefor;
w. Letter of interest from Universal Building Specialties, Inc.
to SHI; and,
x. Letter of interest from L&L Enterprises, Ltd. To SHI.
2. SHI has represented to TRI, that SHI:
a. has polled its Board of Directors, who have indicated a
willingness to consider an offer of publicly-traded stock in
TRI, which would be the parent corporation of SHI;
b. has an installed and operating sawmill at its Port of
Pensacola, Florida warehouse, which includes an in-feed deck,
green chain with sorting deck, stacking carts (4), edger, dust
collection system with discharge pipe and dust bin;
c. owns and maintains the Internet domain name:
southernhardwoods.com;
d. has a cash balance in its bank accounts, held at SunTrust,
N.A., in Hernando, Florida and Pensacola, Florida of about
$8,000.00;
e. has paid up its liability insurance premiums through
September, 1999;
f. has paid its workers compensation insurance premiums
$12,979.00;
g. owns a multi-purpose fax/scanner/copier machine at its office
space in the Port of Pensacola; and,
h. owns 20 extra bandsaw blades for its sawmill.
<PAGE>
3. TRI hereby represents that it will not publish or otherwise disclose
the terms of this Letter of Intent, or any documents supplied herewith,
to any third party, unless and until such information becomes public
information, or until such time as this Letter of Intent is agreed to
be binding upon the parties hereto.
4. TRI hereby agrees to purchase all of the stock of SHI for a total of
$500,000.00 worth of TRI treasury stock. In addition, TRI understands
and acknowledges the secured debt of $200,000.00 in principal, plus
interest accruing since the date of the promissory notes, which debt
shall follow the stock of SHI being purchased by TRI. The $500,000.00
worth of TRI treasury stock being paid to the current shareholders of
SHI shall be paid as follows: $200,000.00 worth (at the then-current
publicly traded price) of TRI stock payable at the time of transfer of
SHI's stock (to be paid pro rata to each selling shareholder);
$100,000.00 worth (at the then-current publicly traded price) of TRI
stock payable on each of the following dates, May 15, 2000, May 15,
2001, and May 15, 2002 (to be paid pro rata to each selling
shareholder). In addition, this agreement is conditoned upon TRI
entering into binding employment agreements with Jeff Abel and Glenn
Abel, upon terms acceptable to TRI, Jeff Abel and Glenn Abel.
5. It is understood by the members of the Board of Directors of SHI that
any purchase of the stock of SHI by TRI would be made with stock from
the treasury of TRI, and that such stock would be restricted from being
publicly traded for a period of one year. In addition, the
consideration to be given to the current creditors of SHI for the
replacement of their promissory notes would be made in the form of
corporate debentures, which may be paid off according to the terms of
the promissory notes, or converted to shares of stock in TRI, in the
discretion of each creditor.
6. SHI understands and expects that TRI will make a BONA FIDE and diligent
effort to support SHI, financially and business-wise, to ensure its
success, including, without limitation, the acquisition of hardwood
logs, and sales of hardwood lumber and lumber products.
7. SHI has several non-principal management personnel, who desire to
remain in a nominal working capacity with SHI, in order to remain
active in the business. However, this is not an essential condition.
IN WITNESS WHEREOF, the parties whose signatures appear below have
executed this Letter as of the date set forth beside such signature.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
Southern Hardwoods, Inc., a Timber Resources International
Florida corporation, a Delaware corporation,
"SHI" "TRI"
By: /s/ B. Jeffrey Abel By:
--------------------------------- ---------------------------
B. Jeffrey Abel, Vice-President
Attest: /s/ Eric D. Abel Attest:
----------------------------- ----------------------
Eric D. Abel, Secretary Name:
------------------------
Name:
-----------------------
Title, if any:
---------------
<PAGE>
EXHIBIT NO. 6.2
U.S. DEPARTMENT OF AGRICULTURE IMPORT PERIOD FOR
PLANTS AND PLANT PRODUCTS - SOUTHERN HARDWOODS, INC.
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------
U.S. DEPARTMENT OF AGRICULTURE 1 PERMIT NUMBER
ANIMAL AND PLANT HEALTH INSPECTION SERVICE
PLANT PROTECTION AND QUARANTINE 40-0967
4700 RIVER ROAD, UNIT 136
RIVERDALE, MARYLAND 20737-1236
IMPORT PERMIT FOR PLANTS AND PLANT PRODUCTS TRANSMIT PERMIT NUMBER TO YOUR SHIPPER
BUT RETAIN THE PERMIT
-------------------------------------------------
- -------------------------------------------------------
3 NAME AND ADDRESS OF PERMITTEE (Include Zip Code) 2. EXPIRATION DATE
PERMITEE SHOULD NOTIFY PLANT PROTECTION AND VALID UNTIL AMENDED
QUARANTINE, APHIS, USDA, PROMPTLY OF CHANGE OF ADDRESS OR REVOKED
-------------------------------------------------
SOUTHERN HARDWOODS, INC.
(JEFF ABEL)
74 WEST CHASE STREET
HERNANDO, FLORIDA 34442
TEL: (352) 528-5999
- ---------------------------------------------------------------------------------------------------------
4. UNDER AUTHORITY OF THE PLANT QUARANTINE ACT, AS AMENDED, PERMISSION IS HEREBY GRANTED TO
PERMITTEE TO IMPORT IN ACCORDANCE WITH
7 CFR 319.40
- ---------------------------------------------------------------------------------------------------------
5. THE PLANTS OR PLANT PRODUCTS SPECIFIED BELOW, GROWN OR PRODUCED IN GUYANA
- ---------------------------------------------------------------------------------------------------------
6. THROUGH THE PORT(S) OF
PENSACOLA, FL
- ---------------------------------------------------------------------------------------------------------
</TABLE>
7. DESIGNATION OF PLANTS OR PLANT PRODUCTS
THE FOLLOWING ARTICLES ARE AUTHORIZED UNDER THE CONDITIONS
DESCRIBED IN THE ATTACHED ANNEXES.
GREENHEART (OCOTEA RODIAEI), PURPLEHEART (PELTOGYNE
PANICULATA), KOPIE (GOUPIA GLABRAA), CRABWOOD (CARAPA
GUIANENSIS), TATABU (DIPLOTROPIS PURPUREA), LOCUST
(HYMENAEA COURBARIL), SIMAROUBA (SIMAROUBA AMARA), DETERMA
(OCOTEA RUBRA), HUBUBALLI (LOXOPKTERYGIUM SAGOTII), WAMARA
(SWARTZIA CUBENSIS), TAURONIRO (HUMIRIA BALSAMIFERA),
BAROMALLI (CATOSTEMMA FRAGRANS), SHIBADAN (ASPIDOSPERA
DESMANTHUM), BULLETWOOD (MANILKARA BIDENTATA), WALLABA
(EPERUA FALCATA), BLACK KAKARALLI (ESCHWEILERA SAGOTIANA),
BANAK (VIROLA KOSCHNYI), AND MORA (MORA GONGRIPII);
TROPICAL HARDWOOD LOGS WITHOUT BARK: ANNEX -A- AND
ANNEX -C-
This permit does not authorize the importation of any genetically engineered
plants or products thereof. To import such plants (or to move them interstate),
write to the Biotechnology Biologics and Environmental Protection, Biotechnology
Permit, USDA, APHIS, 4700 River Road, Unit 149, Riverdale, Maryland 20737-1237.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
8. SIGATURE OF AUTHORIZING OFFICIAL (301) 734-8645 9. DATE ISSUED
<S> <C> <C>
[ILLEGIBLE] DEBORAH M. KNOTT 6/22/98
- ------------------------------------------------------------------------- -------------------------------
ENCLOSURES
319.40
- ---------------------------------------------------------------------------------------------------------
PPQ FORM 597
</TABLE>
<PAGE>
Southern Hardwoods, Inc. Page 2 Permit Number 40-0967
- --------------------------------------------------------------------------------
ANNEX -A-
GENERAL REQUIREMENTS
In accordance with 319.40-2, documentation accompanying each shipment (an
importer document) must identify the commodity, quantity, and origin of the
regulated material.
In accordance with 319.40-9, all shipments are subject to inspection and may
require other actions deemed necessary by Plant Protection and Quarantine as a
result of inspection. Notice of arrival may be required at the discretion of the
Officer in Charge at the port of first arrival.
The regulated commodity, the container in which it is shipped, or the documents
accompanying shipments will adequately describe the shipment in accordance with
319.40-9-C- unless the Officer in Charge for Plant Protection and Quarantine at
the port of first arrival has notified the permittee that such documentation or
portions of the documentation will be understood without being written for each
shipment.
Permittee will notify the office issuing this permit of any changes in the
status of the activities authorized in this permit, or substantive changes in
the status of the permittee (such as change of company name, address, phone
number, etc.) within 30 days of such changes occurring or 30 days prior to a
shipment being authorized under this permit.
ANNEX -C-
TROPICAL HARDWOOD LOGS AND LUMBER
(DEBARKED)
(1) In accordance with 319.40-5(c)(1); tropical hardwood logs with no more than
2% of the total surface in a lot with bark and no single log with more than 5%
bark on its surface. Lumber must be completely free of bark.
(2) All pallets and other solid wood packing materials used with the shipment
are subject to inspection and must be totally free from bark and apparently free
from live plant pests.
-OR-
All pallets and other solid wood packing materials used with the shipment must
be heat treated, fumigated, or treated with preservatives. An importer document
certifying treatment in accordance with 319.40-7(c), (d), (f), or (g) must
accompany the regulated material at the time of importation.
<PAGE>
- --------------------------------------------------------------------------------
7CFR 319.40
IMPORTATION OF LOGS, LUMBER,
AND OTHER UNMANUFACTURED WOOD ARTICLES
- --------------------------------------------------------------------------------
SEC.
319.40-1 Definitions.
319.40-2 General prohibitions and restrictions; relation to other
regulations.
319.40-3 General permits; articles that may be imported without a
specific permit; articles that may be imported without either a
specific permit or an importer document.
319.40-4 Application for a permit to import regulated articles;
issuance and withdrawal of permits.
319.40-5 Importation and entry requirements for specified articles.
319.40-6 Universal importation options.
319.40-7 Treatments and safeguards.
319.40-8 Processing at facilities operating under compliance
agreements.
319.40-9 Inspection and other requirements at port of first arrival.
319.40-10 Costs and charges.
319.40-11 Plant pest risk assessment standards.
SEC.319.40-1 DEFINITIONS.
ADMINISTRATOR. The Administrator of the Animal and Plant Health Inspection
Service, United States Department of Agriculture, or any employee of the
United States Department of Agriculture delegated to act in his or her
stead.
APHIS. The Animal and Plant Health Inspection Service, United States Department
of Agriculture.
BARK CHIPS. Bark fragments broken or shredded from log or branch surfaces.
CERTIFICATE. A certificate of inspection relating to a regulated article, which
is issued by an official authorized by the national government of the
country in which the regulated article was produced or grown, which
contains a description of the regulated article, which certifies that
the regulated article has been inspected, is believed to be free of
plant pests, and is believed to be eligible for importation pursuant to
the laws and regulations of the United States, and which may contain
any specific additional declarations required under this subpart.
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 2
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COMPLIANCE AGREEMENT. A written agreement between APHIS and a person engaged in
processing, handling, or moving regulated articles, in which the person
agrees to comply with requirements contained in the agreement.
DEPARTMENTAL PERMIT. A document issued by the Administrator authorizing the
importation of a regulated article for experimental, scientific, or
educational purposes.
FREE FROM ROT. No more than two percent by weight of the regulated articles in a
lot show visual evidence of fructification of fungi or growth of other
microorganisms that cause decay and the breakdown of cell walls in the
regulated articles.
GENERAL PERMIT. A written authorization contained in Sec. 319.40-3 [[Page
27675]] for any person to import the articles named by the general
permit, in accordance with the requirements specified by the general
permit, without being issued a specific permit.
HUMUS, COMPOST, AND LITTER. Partially or wholly decayed plant matter.
IMPORT (IMPORTED, IMPORTATION). To bring or move into the territorial limits of
the United States.
IMPORTER DOCUMENT. A written declaration signed by the importer of regulated
articles, which must accompany the regulated articles at the time of
importation, in which the importer accurately declares information about
the regulated articles required to be disclosed by Sec. 319.40-2(b).
INSPECTOR. Any individual authorized by the Administrator to enforce this
subpart.
LOG. The bole of a tree; trimmed timber that has not been sawn further than to
form cants.
LOOSE WOOD PACKING MATERIAL. Excelsior (wood wool), sawdust, and wood shavings,
produced as a result of sawing or shaving wood into small, slender, and
curved pieces.
LOT. All the regulated articles on a single means of conveyance that are
derived from the same species of tree and were subjected to the same
treatments prior to importation, and that are consigned to the same
person.
LUMBER. Logs that have been sawn into boards, planks, or structural members such
as beams.
PERMIT. A specific permit to import a regulated article issued in accordance
with Sec. 319.40-4, or a general permit promulgated in Sec. 319.40-3.
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 3
- --------------------------------------------------------------------------------
PLANT PEST. Any living stage of any insects, mites, nematodes, slugs, snails,
protozoa, or other invertebrate animals, bacteria, fungi, other parasitic
plants or reproductive parts of parasitic plants, noxious weeds, viruses,
or any organism similar to or allied with any of the foregoing, or any
infectious substances, which can injure or cause disease or damage in any
plants, parts of plants, or any products of plants.
PORT OF FIRST ARRIVAL. The area (such as a seaport, airport, or land border
station) where a person or a means of conveyance first arrives in the
United States, and where inspection of regulated articles is carried out
by inspectors.
PRIMARY PROCESSING. Any of the following processes: cleaning (removal of soil,
limbs, and foliage), debarking, rough sawing (bucking or squaring), rough
shaping, spraying with fungicide or insecticide sprays, and fumigation.
REGULATED ARTICLE. The following articles, if they are unprocessed or have
received only primary processing: logs; lumber; any whole tree; any cut
tree or any portion of a tree, not solely consisting of leaves, flowers,
fruits, buds, or seeds; bark; cork; laths; hog fuel; sawdust; painted raw
wood products; excelsior (wood wool); wood chips; wood mulch; wood
shavings; pickets; stakes; shingles; solid wood packing materials; humus;
compost; and litter.
SEALED CONTAINER; SEALABLE CONTAINER. A completely enclosed container designed
for the storage or transportation of cargo, and constructed of metal or
fiberglass, or other rigid material, providing an enclosure which
prevents the entrance or exit of plant pests and is accessed through
doors that can be closed and secured with a lock or seal. Sealed
(sealable) containers are distinct and separable from the means of
conveyance carrying them.
SOLID WOOD PACKING MATERIAL. Wood packing materials other than loose wood
packing materials, used or for use with cargo to prevent damage,
including, but not limited to, dunnage, crating, pallets, packing blocks,
drums, cases, and skids.
SPECIFIC PERMIT. A written document issued by APHIS to the applicant in
accordance with Sec. 319.40-4 that authorizes importation of articles in
accordance with this subpart and specifies or refers to the regulations
applicable to the particular importation.
TREATMENT MANUAL. The Plant Protection and Quarantine Treatment Manual, which is
incorporated by reference at Sec. 300.1 of this chapter in accordance
with 5 U.S.C. 552(a) and 1CFR part 51.
TROPICAL HARDWOODS. Hardwood timber species which grow only in tropical
climates. United States. All of the States of the United States, the
District of Columbia, Guam, the Northern Mariana Islands, Puerto Rico,
the Virgin Islands of the United States, and all other territories and
possessions of the United States.
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 4
- --------------------------------------------------------------------------------
WOOD CHIPS. Wood fragments broken or shredded from any wood.
WOOD MULCH. Bark chips, wood chips, wood shavings, or sawdust intended for use
as a protective or decorative ground cover.
SEC. 319.40-2 GENERAL PROHIBITIONS AND RESTRICTIONS; RELATION TO OTHER
REGULATIONS.
(a) Permit required. Except for regulated articles exempted from this
requirement by paragraph (c) of this section or Sec. 319.40-3, no regulated
article may be imported unless a specific permit has been issued for importation
of the regulated article in accordance with Sec. 319.40-4, and unless the
regulated article meets all other applicable requirements of this subpart and
any requirements specified by APHIS in the specific permit.
(b) Importer document; documentation of type, quantity, and origin of
regulated articles. Except for regulated articles exempted from this requirement
by paragraph (c) of this section or Sec. 319.40-3, no regulated article may be
imported unless it is accompanied by an importer document stating the following
information. A certificate that contains this information may be used in lieu of
an importer document at the option of the importer:
(1) The genus and species of the tree from which the regulated article was
derived;
(2) The country, and locality if known, where the tree from which the
regulated article was derived was harvested;
(3) The quantity of the regulated article to be imported;
(4) The use for which the regulated article is imported; and
(5) Any treatments or handling of the regulated article required by this
subpart that were performed prior to arrival at the port of first
arrival.
(c) Regulation of articles imported for propagation or human consumption.
The requirements of this subpart do not apply to regulated articles that are
allowed importation in accordance with Sec. 319.19, Subpart--Citrus Canker and
Other Citrus Diseases"; Sec. 319.34, "Subpart--Bamboo Capable of Propagation";
or Secs. 319.37 through 319.37-14, "Subpart--Nursery Stock, Plants, Roots,
Bulbs, Seeds, and Other Plant Products"; or to regulated articles imported for
human consumption that are allowed importation in accordance with Secs. 319.56
through 319.56-8, "Subpart--Fruits and Vegetables."
(d) Regulated articles imported for experimental, scientific or educational
purposes. Any regulated article. may be imported without further restriction
under this subpart if:
(1) Imported by the United States Department of Agriculture for
experimental, scientific, or educational purposes;
(2) Imported pursuant to a Departmental permit issued by APHIS for the
regulated article prior to its importation and kept on file at the
port of first arrival; and
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 5
- --------------------------------------------------------------------------------
(3) Imported under conditions specified on the Departmental permit and
found by the Administrator to be adequate to prevent the introduction
into the United States of plant pests.
(e) Designation of additional regulated articles. An inspector may
designate any article as a regulated article by giving written notice of the
designation to the owner or person in possession or control of the article.
APHIS will implement rulemaking to add articles designated as regulated articles
to the definition of regulated article in Sec. 319.40-1 if importation of the
article appears to present a recurring significant risk of introducing plant
pests. Inspectors may designate an article as a regulated article after
determining that:
(1) The article was imported in the same container or hold as a regulated
article;
(2) Other articles of the same type imported from the same country have
been found to carry plant pests; or
(3) The article appears to be contaminated with regulated articles or
soil.
SEC. 319.40-3 GENERAL PERMITS; ARTICLES THAT MAY BE IMPORTED WITHOUT A SPECIFIC
PERMIT; ARTICLES THAT MAY BE IMPORTED WITHOUT EITHER A SPECIFIC PERMIT OR AN
IMPORTER DOCUMENT.
(a) Canada and Mexico. APHIS hereby issues a general permit to import
articles authorized by this paragraph. Regulated articles from Canada and from
states in Mexico adjacent to the United States border, other than regulated
articles of the subfamilies Aurantioideae, Rutoideae, and Toddalioideae of the
botanical family Rutaceae, may be imported without restriction under this
subpart, except that they must be accompanied by an importer document stating
that the regulated articles are derived from trees harvested in, and have never
been moved outside, Canada or states in Mexico adjacent to the United States
border, and except that they are subject to the inspection and other
requirements in Sec. 319.40-9.
(b) Solid wood packing materials--
(1) Free of bark; used with non-regulated articles. APHIS hereby issues a
general permit to import regulated articles authorized by this
paragraph. Solid wood packing materials that are completely free of
bark and are in actual use at the time of importation as packing
materials for articles which are not regulated articles may be
imported without restriction under this subpart, except that:
(i) The solid wood packing materials are subject to the inspection
and other requirements in Sec. 319.40-9; and
(ii) The solid wood packing materials must be accompanied at the time
of importation by an importer document, stating that the solid
wood packing materials are totally free from bark, and
apparently free from live plant pests.
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 6
- --------------------------------------------------------------------------------
(2) Free of bark; used with regulated articles. APHIS hereby issues a
general permit to import regulated articles authorized by this
paragraph. Solid wood packing materials that are completely free of
bark and are in actual use at the time of importation as packing
materials for regulated articles may be imported without restriction
under this subpart, except that:
(i) The solid wood packing materials are subject to the inspection
and other requirements in Sec. 319.40-9;
(ii) The solid wood packing materials must be accompanied at the time
of importation by an importer document, stating that the solid
wood packing materials are totally free from bark, and
apparently free from live plant pests; and
(iii) The solid wood packing materials must be accompanied at the time
of importation by an importer document, stating that the solid
wood packing materials have been heat treated, fumigated, or
treated with preservatives in accordance with Sec. 319.40-7, or
meet all the importation and entry conditions required for the
regulated article the solid wood packing material is used to
move.
(3) Not free of bark; used with regulated or nonregulated articles. APHIS
hereby issues a general permit to import regulated articles
authorized by this paragraph. Solid wood packing materials that are
not completely free of bark and are in actual use as packing at the
time of importation may be imported without restriction under this
subpart, except that:
(i) The solid wood packing materials are subject to the inspection
and other requirements in Sec. 319.40-9;
(ii) The solid wood packing materials must be accompanied at the time
of importation by an importer document, stating that the solid
wood packing materials have been heat treated, fumigated, or
treated with preservatives in accordance with Sec. 319.40-7.
(4) Pallets moved as cargo. APHIS hereby issues a general permit to import
regulated articles authorized by this paragraph. Pallets that are
completely free of bark and that are not in actual use as packing at
the time of importation (i.e., pallets moved as cargo) may be imported
without restriction under this subpart, except that:
(i) The pallets are subject to the inspection and other requirements
in Sec. 319.40-9; and
(ii) The pallets are accompanied by an importer document stating that
the pallets were previously eligible for importation in
accordance with paragraph (b) of this section and have not had
wood added to them since that use. Solid wood packing materials
other than pallets that are imported as cargo must be imported
in accordance with the requirements of this subpart for raw
lumber.
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 7
- --------------------------------------------------------------------------------
(c) Loose wood packing materials. APHIS hereby issues a general permit to
import regulated articles authorized by this paragraph. Loose wood packing
materials (whether in use as packing or imported as cargo) that are dry may be
imported subject to the inspection and other requirements in Sec. 319.40-9 and
without further restriction under this subpart.
(d) Bamboo timber. APHIS hereby issues a general permit to import regulated
articles authorized by this paragraph. Bamboo timber which is free of leaves and
seeds and has been sawn or split lengthwise and dried may be imported subject to
the inspection and other requirements in Sec. 319.40-9 and without further
restriction under this subpart.
(e) Regulated articles the permit process has determined to present no
plant pest risk. Regulated articles for which a specific permit has been
issued in accordance with Sec. 319.40-4(b)(2)(i) may be imported without other
restriction under this subpart, except that they are subject to the inspection
and other requirements in Sec. 319.40-9.
SEC. 319.40-4 APPLICATION FOR A PERMIT TO IMPORT REGULATED ARTICLES; ISSUANCE
AND WITHDRAWAL OF PERMITS.
(a) Application procedure. A written application for a permit must be
submitted to the Animal and Plant Health Inspection Service, Plant Protection
and Quarantine, Port Operations Permit Unit, 4700 River Road, Unit 136,
Riverdale, MD 20737-1228. The completed application must include the following
information:
- --------------------------------------------------------------------------------
Application forms for permits are available without charge from the
Administrator, c/o the Permit Unit, Plant Protection and Quarantine, Animal and
Plant Health Inspection Service, U.S. Department of Agriculture, 4700 River
Road, Riverdale, MD 20737, or local offices of Plant Protection and Quarantine,
which are listed in telephone directories.
- --------------------------------------------------------------------------------
(1) The specific type of regulated article to be imported, including the
genus and species name of the tree from which the regulated article
was derived;
(2) Country, and locality if known, where the tree from which the
regulated article was derived was harvested;
(3) The quantity of the regulated article to be imported;
(4) A description of any processing, treatment or handling of the
regulated article to be performed prior to importation, including
the location where any processing or treatment was or will be
performed and the names and dosage of any chemicals employed in
treatments; [[Page 27677]]
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 8
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(5) A description of any processing, treatment, or handling of the
regulated article intended to be performed following importation,
including the location where any processing or treatment will be
performed and the names and dosage of any chemicals employed in
treatments;
(6) Whether the regulated article will or will not be imported in a sealed
container or in a hold;
(7) The means of conveyance to be used to import the regulated article;
(8) The intended port of first arrival in the United States of the
regulated article, and any subsequent ports in the United States at
which regulated articles may be unloaded;
(9) The destination and general intended use of the regulated article;
(10) The name and address of the applicant and, if the applicant's address
is not within the United States, the name and address of an agent in
the United States whom the applicant names for acceptance of service
of process; and
(11) A statement certifying the applicant as the importer of record.
(b) Review of application and issuance of permit. After receipt and review
of the application, APHIS shall determine whether it appears that the regulated
article at the time of importation will meet either the specific importation
requirements in Sec. 319.40-5 or the universal importation requirements in Sec.
319.40-6.
(1) If it appears that the regulated article proposed for importation will
meet the requirements of either Sec. 319.40-5 or Sec. 319.40-6, a permit stating
the applicable conditions for importation under this subpart shall be issued for
the importation of the regulated article identified in the application.
(2) If it appears that the regulated article proposed for importation will
not meet the requirements of either Sec. 319.40-5 or Sec. 319.40-6 because these
sections do not address the particular regulated article identified in the
application, APHIS shall review the application by applying the plant pest risk
assessment standards specified in Sec. 319.40-11.
(i) If this review reveals that importation of the regulated article
under a permit and subject to the inspection and other
requirements in Sec. 319.40-9, but without any further
conditions, will not result in the introduction of plant pests
into the United States, a permit for importation of the
regulated article shall be issued. The permit may only be
issued in unique and unforeseen circumstances when the
importation of the regulated article is not expected to recur.
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 9
- --------------------------------------------------------------------------------
(ii) If this review reveals that the regulated article may be imported
under conditions that would reduce the plant pest risk to an
insignificant level, APHIS may implement rulemaking to add the
additional conditions to this subpart, and after the
regulations are effective, may issue a permit for importation
of the regulated article.
(3) No permit will be issued to an applicant who has had a permit
withdrawn under paragraph (d) of this section during the 12 months
prior to receipt of the permit application by APHIS, unless the
withdrawn permit has been reinstated upon appeal.
(c) Permit does not guarantee eligibility for import. Even if a permit has
been issued for the importation of a regulated article, the regulated article
may be imported only if all applicable requirements of this subpart are met and
only if an inspector at the port of first arrival determines that no emergency
measures pursuant to the Federal Plant Pest Act or other measures pursuant to
the Plant Quarantine Act are necessary with respect to the regulated article.
- --------------------------------------------------------------------------------
Section 105(a) of the Federal Plant Pest Act (7 U.S.C. 150dd(a)) provides,
among other things, that the Secretary of Agriculture may, whenever he deems it
necessary as an emergency measure in order to prevent the dissemination of any
plant pest new to or not theretofore known to be widely prevalent or distributed
within and throughout the United States, seize, quarantine, treat, apply other
remedial measures to, destroy, or dispose of, in such manner as he deems
appropriate, subject to section 105(d) of the Federal Plant Pest Act (7 U.S.C.
150dd(d)), any product or article, including any article subject to this
subpart, which is moving into or through the United States, and which he has
reason to believe is infested with any such plant pest at the time of the
movement, or which has moved into the United States, and which he has reason to
believe was infested with any such plant pest at the time of the movement.
Section 10 of the Plant Quarantine Act (7 U.S.C. 164a) and section 107 of the
Federal Plant Pest Act (7 U.S.C. 150ff) also authorize measures against
regulated articles which are not in compliance with thissubpart.
- --------------------------------------------------------------------------------
(d) Denial and withdrawal of permits. Any permit which has been issued may
be withdrawn by an inspector or the Administrator if he or she determines that
the person to whom the permit was issued has violated any requirement of this
subpart. If the withdrawal is oral, the decision to withdraw the permit and the
reasons for the withdrawal of the permit shall be confirmed in writing as
promptly as circumstances permit. Any person whose permit has been denied or
withdrawn may appeal the decision in writing to the Administrator within 10 days
after receiving the written notification of the withdrawal. The appeal shall
state all of the facts and reasons upon which the person relies to show that the
permit was wrongfully denied or withdrawn. The Administrator shall grant or deny
the appeal, in writing, stating the reasons for granting or denying the appeal
as promptly as circumstances permit. If there is a conflict as to any material
fact and the person from whom the permit is withdrawn requests a hearing, a
hearing shall be held to resolve the conflict. Rules of practice concerning the
hearing shall be adopted by the Administrator.
<PAGE>
7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
Articles Page 10
- --------------------------------------------------------------------------------
See. 319.40-5 IMPORTATION AND ENTRY REQUIREMENTS FOR SPECIFIED ARTICLES.
(a) Bamboo timber. Bamboo timber consisting of whole culms or canes may be
imported into Guam or the Northern Mariana Islands subject to inspection and
other requirements of Sec. 319.40-9. Bamboo timber consisting of whole culms or
canes that are completely dry as evidenced by lack of moisture in node tissue
may be imported into any part of the United States subject to inspection and
other requirements of Sec. 319.40-9.
(b) Monterey pine logs and lumber from Chile and New Zealand; Douglas-fir
logs and lumber from New Zealand.
(1) Logs.
(i) Requirements prior to importation. Monterey or Radiata pine
(Pinus radiata) logs from Chile or New Zealand and Douglas-fir
(Pseudotsuga menziesii) logs from New Zealand that are
accompanied by a certificate stating that the logs meet the
requirements of paragraph (b)(1)(i) (A) through (D) of this
section, and that are consigned to a facility in the United
States that operates in accordance with Sec. 319.40-8, may be
imported in accordance with paragraphs (b)(1)(i)(A) through
(b)(1)(iii) of this section.
(A) The logs must be from live healthy trees which are
apparently free of plant pests, plant pest damage, and
decay organisms.
(B) The logs must be debarked in accordance with Sec.
319.40-7(b) prior to fumigation.
(C) The logs and any solid wood packing materials to be used
with the logs during shipment to the United States must be
fumigated in accordance with Sec. 319.40-7(f)(1), within
45 days following the date the trees are felled and prior
to arrival of the logs in the United States, in the holds
or in sealable containers. Fumigation must be conducted in
the same sealable container or hold in which the logs and
solid wood packing materials are exported to the United
States.
(D) During shipment to the United States, no other regulated
article is permitted on the means of conveyance with the
logs, unless the logs and the other regulated articles are
in separate holds or separate sealed containers, or, if
the logs and other regulated articles are mixed in a hold
or sealed container, the other regulated articles either
have been heat treated with moisture reduction in
accordance with Sec. 319.40-7(d), or have been fumigated
in the hold or sealable container in accordance with
paragraph (b)(1)(i)(C) of this section.
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7CFR 319.40 - Importation of Logs, Lumber, and Other Unmanufactured Wood
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(ii) Requirements upon arrival in the United States. The following
requirements apply upon arrival of the logs in the United
States.
(A) The logs must be kept segregated from other regulated
articles from the time of discharge from the means of
conveyance until the logs are completely processed at a
facility in the United States that operates under a
compliance agreement in accordance with Sec. 319.40-8.
(B) The logs must be moved from the port of first arrival to the
facility that operates under a compliance agreement in
accordance with Sec. 319.40-8 by as direct a route as
reasonably possible.
(iii) Requirements at the processing facility. The logs must be
consigned to a facility operating under a compliance agreement
in accordance with Sec. 319.40-8 that includes the following
requirements:
(A) Logs or any products generated from logs, including
lumber, must be heat treated in accordance with Sec.
319.40-7(c), or heat treated with moisture reduction in
accordance with Sec. 319.40-7(d).
(B) The logs, including sawdust, wood chips, or other products
generated from the logs in the United States, must be
processed in accordance with paragraph (b)(1)(iii) of
this section within 60 days from the time the logs are
released from the port of first arrival.
(C) Sawdust, wood chips, and waste generated by sawing or
processing the logs must be disposed of by burning, heat
treatment in accordance with Sec. 319.40-7(c), heat
treatment with moisture reduction in accordance with Sec.
319.40-7(d), or other processing that will destroy any
plant pests associated with the sawdust, wood chips, and
waste. Composting and use of the sawdust, wood chips, and
waste as mulch are prohibited unless composting and use
as mulch are preceded by fumigation in accordance with
Sec. 319.40-7(f)(3), heat treatment in accordance with
Sec. 319.40-7(c), or heat treatment with moisture
reduction in accordance with Sec. 319.40-7(d). Wood
chips, sawdust, and waste may be moved in enclosed trucks
for processing at another facility operating under a
compliance agreement in accordance with Sec. 319.40-8.
(2) Raw lumber. Raw lumber, including solid wood packing materials
imported as cargo, from Chile or New Zealand derived from Monterey or
Radiata pine (Pinus radiata) logs and raw lumber from New Zealand
derived from Douglas-fir (Pseudotsuga menziesii) logs may be imported
in accordance with paragraphs (b)(2) (i) and (ii) of this section.
(i) During shipment to the United States, no other regulated article
(other than solid wood packing materials) is permitted on the
means of conveyance with the raw lumber, unless the raw lumber
and the other regulated articles are in separate holds or
separate sealed containers; Except for mixed shipments of logs
and raw lumber fumigated in accordance with Sec. 319.40-7(f)(2)
and moved in accordance with paragraph (b)(1)(i)(D) of this
section. Raw lumber on the vessel's deck must be in a sealed
container.
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(ii) The raw lumber must be consigned to a facility operating under a
compliance agreement in accordance with Sec. 319.40-8 that
requires the raw lumber to be heat treated in accordance with
Sec. 319.40-7(c) or heat treated with moisture reduction in
accordance with Sec. 319.40-7(d) before any cutting, planing,
or sawing of the raw lumber, and within 30 days from the time
the lumber is released from the port of first arrival.
(c) Tropical hardwoods
(1) Debarked. Tropical hardwood logs and lumber that have been debarked in
accordance with Sec. 319.40-7(b) may be imported subject to the
inspection and other requirements of Sec. 319.40-9.
(2) Not debarked. Tropical hardwood logs that have not been debarked may be
imported if fumigated in accordance with Sec. 319.40-7(f)(1) prior to
arrival in the United States.
(3) Not debarked; small lots. Tropical hardwood logs that have not been
debarked may be imported into the United States, other than into
Hawaii, Puerto Rico, or the Virgin Islands of the United States, if
imported in a lot of 15 or fewer logs and subject to the inspection
and other requirements of Sec. 319.40-9.
(d) Temperate hardwoods. Temperate hardwood logs and lumber (with or
without bark) from all places except places in Asia that are east of 60 deg.
East Longitude and north of the Tropic of Cancer may be imported if fumigated in
accordance with Sec. 319.40-7(f) prior to arrival in the United States and
subject to the inspection and other requirements of Sec. 319.40-9.
(e) Regulated articles associated with exclusively tropical climate pests.
Regulated articles that have been identified by a plant pest risk assessment as
associated solely with plant pests that can successfully become established only
in tropical or subtropical climates may be imported if:
(1) The regulated article is imported only to a destination in the
continental United States; and,
(2) the regulated article is not imported into any tropical or subtropical
areas of the United States specified in the permit.
(f) Cross-ties (railroad ties) from all places except places in Asia that
are east of 60 deg. East Longitude and north of the Tropic of Cancer may be
imported if completely free of bark and accompanied by an importer document
stating that the cross-ties will be pressure treated within 30 days following
the date of importation.
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SEC. 319.40-6 UNIVERSAL IMPORTATION OPTIONS.
(a) Logs. Logs may be imported if prior to importation the logs have been
debarked in accordance with Sec. 319.40-7(b) and heat treated in accordance with
Sec. 319.40-7(c). During the entire interval between treatment and export, the
logs must be stored and handled in a manner which excludes any access to the
logs by plant pests.
(b) Lumber.
(1) Heat treated or heat treated with moisture reduction. Lumber that prior
to importation has been heat treated in accordance with Sec.
319.40-7(c), or heat treated with moisture reduction in accordance
with Sec. 319.40-7(d), may be imported in accordance with paragraphs
(b)(1) (i) and (ii) of this section.
(i) During shipment to the United States, no other regulated article
(other than solid wood packing materials) is permitted on the
means of conveyance with the lumber, unless the lumber and the
other regulated articles are in separate holds or separate
sealed containers, or, if the lumber and other regulated
articles are mixed in a hold or sealed container, all the
regulated articles have been heat treated in accordance with
Sec. 319.40-7(c), or heat treated with moisture reduction in
accordance with Sec. 319.40-7(d). Lumber on the vessel's
deck must be in a sealed container, unless it has been heat
treated with moisture reduction in accordance with Sec.
319.40-7(d).
(ii) If lumber has been heat treated in accordance with Sec.
319.40-7(c), that fact must be stated on the importer document,
or by a permanent marking on each piece of lumber in the form
of the letters "HT" or the words "Heat Treated." If lumber has
been heat treated with moisture reduction in accordance with
Sec. 319.40-7(d), that fact must be stated on the importer
document, or by a permanent marking, on each piece of lumber or
on the cover of bundles of lumber, in the form of the letters
"KD" or the words "Kiln Dried."
(2) Raw lumber. Raw lumber, including solid wood packing materials imported
as cargo, from all places except places in Asia that are east of 60
deg. East Longitude and north of the Tropic of Cancer may be imported
in accordance with paragraphs (b)(2) (i) and (ii) of this section.
(i) During shipment to the United States, no other regulated article
(other than solid wood packing materials) is permitted on the
means of conveyance with the raw lumber, unless the raw lumber
and the other regulated articles are in separate holds or
separate sealed containers. Raw lumber on the vessel's deck
must be in a sealed container.
(ii) The raw lumber must be consigned to a facility operating under a
compliance agreement in accordance with Sec. 319.40-8 that
requires the raw lumber to be heat treated in accordance with
Sec. 319.40-7(c) or heat treated with moisture
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reduction in accordance with Sec. 319.40-7(d), within 30
days from the time the lumber is released from the port of
first arrival. Heat treatment must be completed before any
cutting, planing, or sawing of the raw lumber.
(c) Wood chips and bark chips. Wood chips and bark chips from any place
except places in Asia that are east of 60 deg. East Longitude and north of the
Tropic of Cancer may be imported in accordance with this paragraph.
(1) The wood chips or bark chips must be accompanied by an importer
document stating that the wood chips or bark chips were either:
(i) Derived from live, healthy, tropical species of plantation-grown
trees grown in tropical areas; or
(ii) Fumigated with methyl bromide in accordance with Sec.
319.40-7(f)(3), heat treated in accordance with Sec.
319.40-7(c), or heat treated with moisture reduction in
accordance with Sec. 319.40-7(d).
(2) During shipment to the United States, no other regulated articles
(other than solid wood packing materials) are permitted in the holds
or sealed containers carrying the wood chips or bark chips. Wood
chips or bark chips on the vessel's deck must be in a sealed
container, Except that; If the wood chips or bark chips are derived
from live, healthy, plantation-grown trees in tropical areas, they
may be shipped on deck if no other regulated articles are present on
the vessel, and the wood chips or bark chips are completely covered
by a tarpaulin during the entire journey directly to the United
States.
(3) The wood chips or bark chips must be free from rot at the time of
importation, unless accompanied by an importer document stating that
the entire lot was fumigated with methyl bromide in accordance with
Sec. 319.40-7(f)(3), heat treated in accordance with Sec.
319.40-7(c), or heat treated with moisture reduction in accordance
with Sec. 319.407(d).
(4) Wood chips or bark chips imported in accordance with this paragraph
must be consigned to a facility operating under a compliance
agreement in accordance with Sec. 319.40-8. The wood chips or bark
chips must be burned, heat treated in accordance with Sec.
319.40-7(c), heat treated with moisture reduction in accordance with
Sec. 319.40-7(d), or otherwise processed in a manner that will
destroy any plant pests associated with the wood chips or bark
chips, within 30 days of arrival at the facility. If the wood chips
or bark chips are to be used for mulching or composting, they must
first be fumigated in accordance with Sec. 319.40-7(f)(3), heat
treated in accordance with Sec. 319.40-7(c), or heat treated with
moisture reduction in accordance with Sec. 319.40-7(d).
(d) Wood mulch, humus, compost, and litter. Wood mulch, humus, compost, and
litter may be imported if accompanied by an importer document stating that the
wood mulch, humus, compost, or litter was fumigated in accordance with Sec.
319.40-7(f)(3), heat treated in accordance with
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Sec. 319.40-7(c), or heat treated with moisture reduction in accordance with
Sec. 319.40-7(d).
(e) Cork and bark. Cork and cork bark, cinnamon bark, and other bark to be
used for food, manufacture of medicine, or chemical extraction may be imported
if free from rot at the time of importation and subject to the inspection and
other requirements of Sec. 319.40-9.
SEC. 319.40-7 TREATMENTS AND SAFEGUARDS.
(a) Certification of treatments or safeguards. If APHIS determines that a
document required for the importation of regulated articles is inaccurate, the
regulated articles which are the subject of the certificate or other document
shall be refused entry into the United States. In addition, APHIS may determine
not to accept any further certificates for the importation of regulated articles
in accordance with this subpart from a country in which an inaccurate
certificate is issued, and APHIS may determine not to allow the importation of
any or all regulated articles from any such country, until corrective action
acceptable to APHIS establishes that certificates issued in that country will be
accurate.
(b) Debarking. Except for raw lumber, no more than 2 percent of the surface
of all regulated articles in a lot may retain bark, with no single regulated
article retaining bark on more than 5 percent of its surface. For raw lumber,
debarking must remove 100 percent of the bark.
(c) Heat treatment. Heat treatment must be performed only at a facility
where APHIS or an inspector authorized by the Administrator and the national
government of the country in which the facility is located has inspected the
facility and determined that its operation complies with the standards of this
paragraph. Heat treatment procedures may employ steam, hot water, kilns,
exposure to microwave energy, or any other method (e.g., the hot water and steam
techniques used in veneer production) that raises the temperature of the center
of each treated regulated article to at least 71.1 deg.C and maintains the
regulated article at that center temperature for at least 75 minutes. For
regulated articles heat treated prior to arrival in the United States, during
the entire interval between treatment and export the regulated article must be
stored, handled, or safeguarded in a manner which excludes any infestation of
the regulated article by plant pests.
(d) Heat treatment with moisture reduction.
(1) Heat treatment with moisture reduction may employ:
(i) Kiln drying conducted in accordance with the schedules prescribed
for the regulated article in the Dry Kiln Operator's Manual,
Agriculture Handbook 188, which is incorporated by reference at
Sec. 300.1 of this chapter; or,
(ii) Dry heat, exposure to microwave energy, or any other method that
raises the temperature of the center of each treated regulated
article to at least 71.1 deg.C, maintains the regulated
articles at that center temperature for at least 75 minutes,
and reduces the moisture content of the regulated article to 20
percent or less as
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measured by an electrical conductivity meter.
(2) For regulated articles heat treated with moisture reduction prior to
arrival in the United States, during the entire interval between
treatment and export the regulated article must be stored, handled,
or safeguarded in a manner which excludes any infestation of the
regulated article by plant pests.
(e) Surface pesticide treatments. All United States Environmental
Protection Agency registered surface pesticide treatments are authorized for
regulated articles imported in accordance with this subpart. Surface pesticide
treatments must be conducted in accordance with label directions approved by the
United States Environmental Protection Agency. When used on heat treated logs, a
surface pesticide treatment must be first applied within 48 hours following heat
treatment. The surface pesticide treatment must be repeated at least every 30
days during storage of the regulated article, with the final treatment occurring
no more than 30 days prior to departure of the means of conveyance that carries
the regulated articles to the United States.
(f) Methyl bromide fumigation. The following minimum standards for methyl
bromide fumigation treatment are authorized for the regulated articles listed in
paragraphs (f)(1) through (f)(3) of this section. Any method of fumigation that
meets or exceeds the specified temperature/time/concentration products is
acceptable.
(1) Logs.
(i) T-312 schedule. The entire log and the ambient air must be at a
temperature of 5 deg.C or above throughout fumigation. The
fumigation must be conducted using schedule T-312 contained in
the Treatment Manual. In lieu of the schedule T-312 methyl
bromide concentration, fumigation may be conducted with an
initial methyl bromide concentration of at least 240 g/m with
exposure and concentration levels adequate to provide a
concentration-time product of at least 17,280 gram-hours
calculated on the initial methyl bromide concentration.
(ii) T-404 schedule. The entire log and the ambient air must be at a
temperature of 5 deg.C or above throughout fumigation. The
fumigation must be conducted using schedule T-404 contained
in the Treatment Manual. In lieu of the schedule T-404 methyl
bromide concentration, fumigation may be conducted with an
initial methyl bromide concentration of at least 120 g/m with
exposure and concentration levels adequate to provide a
concentration-time product of at least 1920 gram-hours
calculated on the initial methyl bromide concentration.
(2) Lumber. The lumber and the ambient air must be at a temperature of 5
deg.C or above throughout fumigation. The fumigation must be
conducted using schedule T-404 contained in the Treatment Manual. In
lieu of the schedule T-404 methyl bromide concentration, fumigation
may be conducted with an initial methyl bromide concentration of at
least 120 g/m with exposure and concentration levels adequate to
provide a concentration-time product of at least 1920 gram-hours
calculated on the initial methyl
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bromide concentration.
(3) Regulated articles other than logs or lumber.
(i) If the ambient air and the regulated articles other than logs or
lumber are at a temperature of 21 deg.C or above throughout
fumigation, the fumigation must be conducted using schedule
T-404 contained in the Treatment Manual. In lieu of the
schedule T-404 methyl bromide concentration, fumigation may be
conducted with an initial methyl bromide concentration of at
least 48 g/m with exposure and concentration levels adequate
to provide a concentration-time product of at least 760
gram-hours calculated on the initial methyl bromide
concentration.
(ii) If the ambient air and the regulated articles other than logs or
lumber are at a temperature of 4.5-20.5 deg.C throughout
fumigation, the fumigation must be conducted using schedule
T-404 contained in the Treatment Manual. In lieu of the
schedule T-404 methyl bromide concentration, fumigation may be
conducted with an initial methyl bromide concentration of at
least 120 g/m with exposure and concentration levels adequate
to provide a concentration-time product of at least 1920
gram-hours calculated on the initial methyl bromide
concentration.
(g) Preservatives. All preservative treatments that use a preservative
product that is registered by the United States Environmental Protection Agency
are authorized for treatment of regulated articles imported in accordance with
this subpart. Preservative treatments must be performed in accordance with label
directions approved by the United States Environmental Protection Agency.
SEC. 319.40-8 PROCESSING AT FACILITIES OPERATING UNDER COMPLIANCE AGREEMENTS.
(a) Any person who operates a facility in which imported regulated articles
are processed may enter into a compliance agreement to facilitate the
importation of regulated articles under this subpart. The compliance agreement
shall specify the requirements necessary to prevent spread of plant pests from
the facility, requirements to ensure the processing method effectively destroys
plant pests, and the requirements for the application of chemical materials in
accordance with the Treatment Manual. The compliance agreement shall also state
that inspectors must be allowed access to the facility to monitor compliance
with the requirements of the compliance agreement and of this subpart.
Compliance agreement forms may be obtained from the Administrator or an
inspector.
(b) Any compliance agreement may be canceled by the inspector who is
supervising its enforcement, orally or in writing, whenever the inspector finds
that the person who entered into the compliance agreement has failed to comply
with the conditions of the compliance agreement. If the cancellation is oral,
the decision to cancel the compliance agreement and the reasons for cancellation
of the compliance agreement shall be confirmed in writing, as promptly as
circumstances permit. Any person whose compliance agreement has been canceled
may appeal the decision in writing to the Administrator within 10 days after
receiving written notification of
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the cancellation. The appeal shall state all of the facts and reasons upon which
the person relies to show that the compliance agreement was wrongfully canceled.
The Administrator shall grant or deny the appeal, in writing, stating the
reasons for granting or denying the appeal, as promptly as circumstances permit.
If there is a conflict as to any material fact and the person whose compliance
agreement has been canceled requests a hearing, a hearing shall be held to
resolve the conflict. Rules of practice concerning the hearing will be adopted
by the Administrator.
SEC. 319.40-9 INSPECTION AND OTHER REQUIREMENTS AT PORT OF FIRST ARRIVAL.
(a) Procedures for all regulated articles.
(1) All imported regulated articles shall be inspected at the port of first
arrival. If the inspector finds signs of plant pests on or in the
regulated article, or finds that the regulated article may have been
associated with other articles infested with plant pests, the
regulated article shall be cleaned or treated as required by an
inspector, and the regulated article and any products of the
regulated article shall also be subject to reinspection, cleaning,
and treatment at the option of an inspector at any time and place
before all applicable requirements of this subpart have been
accomplished.
(2) Regulated articles shall be assembled for inspection at the port of
first arrival, or at any other place prescribed by an inspector, at a
place and time and in a manner designated by an inspector.
(3) If an inspector finds that an imported regulated article is so infested
with a plant pest that, in the judgment of the inspector, the
regulated article cannot be cleaned or treated, or contains soil or
other prohibited contaminants, the entire lot may be refused entry
into the United States.
(4) No person shall move any imported regulated article from the port of
first arrival unless and until an inspector notifies the person, in
writing or through an electronic database, that the regulated
article:
(i) Is in compliance with all applicable regulations and has been
inspected and found to be apparently free of plant pests; or,
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Certain regulated articles may also be subject to Secs. 319.56 through
319.56-8, "Subpart--Fruits and Vegetables," or to Noxious Weed Act regulations
under part 360 of this chapter, or to Endangered Species Act regulations under
parts 355 and 356 of this chapter and 50 CFR parts 17 and 23.
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(ii) Has been inspected and the inspector requires reinspection,
cleaning, or treatment of the regulated article at a place
other than the port of first arrival.
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(b) Notice of arrival; visual examination of regulated articles at port of
first arrival.
(1) At least 7 days prior to the expected date of arrival in the United
States of a shipment of regulated articles imported in accordance
with this subpart, the permittee or his or her agent must notify the
APHIS Officer in Charge at the port of arrival of the date of
expected arrival. The address and telephone number of the APHIS
Officer in Charge will be specified in any specific permit issued by
APHIS. This notice may be in writing or by telephone. The notice must
include the number of any specific permit issued for the regulated
articles; the name, if any, of the means of conveyance carrying the
regulated articles; the type and quantity of the regulated articles;
the expected date of arrival; the country of origin of the regulated
articles; the name and the number, if any, of the dock or area where
the regulated articles are to be unloaded; and the name of the
importer or broker at the port of arrival.
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A list of APHIS Officers in Charge may be obtained from the Administrator, c/o
Port Operations, Plant Protection and Quarantine, Animal and Plant Health
Inspection Service, 4700 River Road, Riverdale, MD 20737.
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(2) Imported regulated articles which have been debarked in accordance with
Sec. 319.40-7(b) and can be safely and practically inspected will be
visually examined for plant pests by an inspector at the port of
first arrival. If plant pests are found on or in the regulated
articles or if the regulated article cannot be safely and practically
inspected, the regulated articles must be treated in accordance with
the Treatment Manual.
(c) Marking and identity of regulated articles. Any regulated article, at
the time of importation shall bear on the outer container (if in a container),
on the regulated article (if not in a container), or on a document accompanying
the regulated article the following information:
(1) General nature and quantity of the regulated articles;
(2) Country and locality, if known, where the tree from which the regulated
article was derived was harvested;
(3) Name and address of the person importing the regulated article;
(4) Name and address of consignee of the regulated article;
(5) Identifying shipper's mark and number; and
(6) Number of the permit (if one was issued) authorizing the importation of
the regulated article into the United States.
(d) Sampling for plant pests at port of first arrival. Any imported
regulated article may be sampled for plant pests at the port of first
arrival. If an inspector finds it necessary to order treatment of a regulated
article at the port of first arrival, any sampling will be done prior to
treatment.
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SEC. 319.40-10 COSTS AND CHARGES.
The services of an inspector during regularly assigned hours of duty and at
the usual places of duty shall be furnished without cost to the importer. The
inspector may require the importer to furnish any labor, chemicals, packing
materials, or other supplies required in handling regulated articles under
this subpart. APHIS will not be responsible for any costs or charges, other
than those identified in this section.
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Provisions relating to costs for other services of an inspector are contained in
part 354 of this chapter.
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SEC. 319.40-11 PLANT PEST RISK ASSESSMENT STANDARDS.
When evaluating a request to import a regulated article not allowed
importation under this subpart, or a request to import a regulated article
under conditions other than those prescribed by this subpart, APHIS will
conduct the following analysis to determine the plant pest risks associated
with each requested importation in order to determine whether or not to issue
a permit under this subpart or to propose regulations establishing conditions
for the importation into the United States of the regulated article.
(a) Collecting commodity information.
(1) APHIS will evaluate the application for information describing the
regulated article and the origin, processing, treatment, and handling
of the regulated article; and
(2) APHIS will evaluate history of past plant pest interceptions or
introductions (including data from foreign countries) associated with
the regulated article.
(b) Cataloging quarantine pests. For the regulated article specified
in an application, APHIS will determine what plant pests or
potential plant pests are associated with the type of tree from
which the regulated article was derived, in the country and
locality from which the regulated article is to be exported. A
plant pest that meets one of the following criteria is a
quarantine pest and will be further evaluated in accordance
with paragraph (c) of this section:
(1) Non-indigenous plant pest not present in the United States;
(2) Non-indigenous plant pest, present in the United States and
capable of further dissemination in the United States;
(3) Non-indigenous plant pest that is present in the United
States and has reached probable limits of its ecological
range, but differs genetically from the plant pest in the
United States in a way that demonstrates a potential for
greater damage potential in the United States;
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(4) Native species of the United States that has reached
probable limits of its ecological range, but differs
genetically from the plant pest in the United States in a
way that demonstrates a potential for greater damage
potential in the United States; or
(5) Non-indigenous or native plant pest that may be able to
vector another plant pest that meets one of the criteria
in paragraphs (b)(1) through (4) of this section.
(c) Determining which quarantine pests to assess.
(1) APHIS will divide quarantine pests identified in paragraph (b) of this
section into groups depending upon where the plant pest is most
likely to be found. The plant pests would be grouped as follows:
(i) Plant pests found on the bark;
(ii) Plant pests found under the bark; and
(iii) Plant pests found in the wood.
(2) APHIS will subdivide each of the groups in paragraph (c)(1) of this
section into associated taxa.
(3) APHIS will rank the plant pests in each group in paragraph (c)(2) of
this section according to plant pest risk, based on the available
biological information and demonstrated plant pest importance.
(4) APHIS will identify any plant pests ranked in paragraph (c)(3) of this
section for which plant pest risk assessments have previously been
performed in accordance with this section. APHIS will conduct
individual plant pest risk assessments for the remaining plant pests,
starting with the highest ranked plant pest(s) in each group.
(5) The number of plant pests in each group to be evaluated through
individual plant pest risk assessment will be based on biological
similarities of members of the group as they relate to measures taken
in connection with the importation of the regulated article to
mitigate the plant pest risk associated with the regulated article.
For example, if the plant pest risk assessment for the highest ranked
plant pest indicates a need for a mitigation measure that would
result in the same reduction of risk for other plant pests ranked in
the group, the other members need not be subjected to individual
plant pest risk assessment.
(d) Conducting individual plant pest risk assessments. APHIS will evaluate
each of the plant pests identified in paragraph (c)(4) of this section by:
(1) Estimation of the probability of the plant pest being on, with, or in
the regulated article at the time of importation;
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(2) Estimation of the probability of the plant pest surviving in transit on
the regulated article and entering the United States undetected;
(3) Estimation of the probability of the plant pest colonizing once it has
entered into the United States;
(4) Estimation of the probability of the plant pest spreading beyond any
colonized area; and
(5) Estimation of the damage to plants that could be expected upon
introduction and dissemination within the United States of the plant
pest.
(e) Estimating unmitigated overall plant pest risk. APHIS will develop an
estimation of the overall plant pest risk associated with importing the
regulated article based on compilation of individual plant pest risk assessments
performed in accordance with paragraph (d) of this section.
(f) Evaluating available requirements to determine whether they would allow
safe importation of the regulated article. The requirements of this subpart, and
any other requirements relevant to the regulated article and plant pests
involved, will be compared with the individual plant pest risk assessments in
order to determine whether particular conditions on the importation of the
regulated article would reduce the plant pest risk to an insignificant level. If
APHIS determines that the imposition of particular conditions on the importation
of the regulated article could reduce the plant pest risk to an insignificant
level, and determines that sufficient APHIS resources are available to implement
or ensure implementation of the conditions, APHIS will implement rulemaking to
allow importation of the requested regulated article under the conditions
identified by the plant pest risk assessment process.
<PAGE>
EXHIBIT NO. 6.3
EXCLUSIVE PURCHASING AGREEMENT WITH
HARDWOODS LIMITED DATED NOVEMBER 1, 1999.
<PAGE>
EXCLUSIVE PURCHASING AGREEMENT
THIS AGREEMENT made this 1st day of November, 1999, by and between
TIMBER RESOURCES INTERNATIONAL, INC., a Delaware corporation, with its principal
place of business in New York, New York, hereinafter referred to as "TMBE," and
EXOTIC AFRICAN HARDWOODS LIMITED, a Nigerian corporation, with its principal
place of business in Lagos, Nigeria, hereinafter referred to as "EAH".
W I T N E S S E T H :
WHEREAS, TMBE is in the business of importing various types of forest
products from various parts of the world;
WHEREAS, EAH is in the business of growing, importing and exporting
forest products to various parts of the world;
NOW, THEREFORE, it is agreed by and between the Parties hereto as
follows:
(1) That this contract shall be and remain in full force and effect for
a period of three (3) years from and after the date hereof, and shall continue
in full force and effect thereafter until such time as either of the Parties
hereto shall have given to the other a notice in writing of its intention to
terminate this contract not less than six (6) months prior to the time fixed in
such notice for such termination. In the event of the giving of such notice this
contract and the rights of the Parties hereunder shall terminate at the time
fixed in said notice for such termination.
(2) That during the term of this contract, TMBE and its subsidiaries
will diligently carry on and promote the sale of forest products that EAH is
able to procure from West Africa. TMBE shall exclusively purchase from EAH all
natural growing forest products that exist in West Africa including but not
limited to African mahogany, teak, iroko, red and yellow apa, ofun and oomo.
(3) TMBE further agrees that it will not, at any time, during the term
of this contract, purchase either directly or indirectly through a subsidiary or
through ownership, in whole or in part, of a corporation or business by it or by
any of its shareholders within the limits of the United States, those forest
products that EAH is able to procure from the West African region.
<PAGE>
(4) Orders for forest products from TMBE to EAH shall be in writing
stating therein the quantity and specifications of the forest products, the name
and address of the Consignee, and the time and place for delivery.
(5) EAH agrees to procure and ship the forest products in accordance
with the specifications on the respective orders, and deliver the same F.O.B.
factory or warehouse, with freight prepaid or allowed to any destination in the
continental United States.
(6) EAH warrants that all timber products shipped on orders of TMBE
will be in accordance with the specifications stated in the respective orders,
and of good quality and workmanship and that service will be in accord with
normal commercial practice. It is agreed that no implied warranty or warranties
shall arise out of or in connection with any purchase orders.
(7) All of such invoices shall be payable on terms noted on the
purchase orders, and TMBE agrees to make prompt payment for the same in
accordance with the terms of the respective invoices.
(8) In the event that either of the Parties hereto shall fail or refuse
to keep or perform any term of this contract on its part to be kept and
performed, and such failure shall remain uncorrected for a period of 30 days
after written notice from the other Party, such failure or refusal shall
constitute a default on the other Party a right, at its option and discretion,
to terminate this contract, and in event of the exercise of such option, the
Party so electing shall give written notice to the Party in default whereupon
this contract shall terminate.
(9) In the event that either of the Parties hereto shall suffer a
significant change in the ownership thereof, or if either Party hereto shall
merge or consolidate with one or more other corporations, or shall become
insolvent, or shall be adjusted bankrupt, or if proceedings are instituted by or
against it for reorganization or other relief under the bankruptcy law, or if it
or any substantial part of its assets shall come into the hands of a receiver or
trustee, or any other officer authorized by law or by a court, this contract
may, at the option of the other Party, be terminated by written notice by that
Party to the other, of such termination, such notice to be given 30 days prior
to the date fixed therein for termination.
<PAGE>
(10) It is agreed that all covenants of a restrictive nature set forth
in this agreement and all restraints upon either of the parties imposed thereby
shall be limited to the term and any extended term or terms of this agreement.
(11) Any notice provided for herein may be given to TMBE by mail
addressed to it at 570 Lexington Avenue, 45th Floor, New York, New York 10022,
or to EAH by mail addressed to it at c/o Olajide Oyewole & Co., 8/10 Broad
Street, Lagos, Nigeria.
(12) This contract and the rights thereunder shall not be assigned or
transferred by either of the Parties hereto without the written consent of the
other.
(13) Any dispute under this agreement shall be settled by arbitration
in New York City, New York, pursuant to the rules, then obtaining, of the
American Arbitration Association. This agreement shall be governed by the laws
of the State of New York.
(14) Except as otherwise specifically provided herein, this contract
shall be binding upon the Parties hereto and their successors and assigns.
IN WITNESS WHEREOF, the Parties hereto have caused their names to be
signed the day first above written.
TIMBER RESOURCES INTERNATIONAL, INC.
By: /s/ Aziz Hirji
-------------------------
President
EXOTIC AFRICAN HARDWOODS LIMITED
By: [illegible]
--------------------------
President
<PAGE>
EXOTIC AFRICAN HARDWOODS, LIMITED
WESTERN HOUSE, 18TH FLOOR
8/10 BROAD STREET
LAGOS-NIGERIA
TEL: 01-4702855
FAX: 01-2632294
SHIP TO: SOUTHERN HARDWOODS, INC.
730 SOUTH BARRACKS STREET
PENSACOLA, FL 32501
TEL: 850-436-8800
BILL TO: SOUTHERN HARDWOODS, INC.
730 SOUTH BARRACKS STREET
PENSACOLA, FLORIDA 32501
C/O TIMBER RESOURCES INTERNATIONAL, INC.
570 LEXINGTON AVENUE, 45th FLOOR
NEW YORK, NY 10022
TEL: 212-751-1511
- -------------------------------------------------------------------------------
Sales Coordinator: Dapo Oyebolu Date of order: October 1, 1999
- -------------------------------------------------------------------------------
Method of shipment: Maersk Line Date order shipped: October 20, 1999
- -------------------------------------------------------------------------------
Port of Loading: Port Harcourt, Nigeria Invoice date: January 10, 2000
- -------------------------------------------------------------------------------
Destination: Southern Hardwoods, Inc.
Pensacola, FL
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ITEM NO. QTY DESCRIPTION SHIPPING AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Container No. One See packing list (21.527 cubic meters via Maersk $16,000.00
MAEU2955167 of teak at $608.26 per cubic meter)
Container No. One See packing list (21.988 cubic meters via Maersk $16,000.00
GSTU2655722 of teak at $608.26 per cubic meter)
Container No. One See packing list (20.649 cubic meters via Maersk $16,000.00
TEXU3731163 of teak at $608.26 per cubic meter)
Container No. One See packing list (20.002 cubic meters via Maersk $16,000.00
TRIU3608574 of teak at $608.26 per cubic meter)
Container No. One See packing list (20.549 cubic meters via Maersk $16,000.00
GTSU2682857 of teak at $608.26 per cubic meter)
Container No. One See packing list (19.141 cubic meters via Maersk $16,000.00
GATU0579674 of teak at $608.26 per cubic meter)
Container No. One See packing list (18.127 cubic meters via Maersk $16,000.00
GTSU4215867 of teak at $608.26 per cubic meter)
Container No. One See packing list (20.324 cubic meters via Maersk $16,000.00
PRSU2261044 of teak at $608.26 per cubic meter)
- -------------------------------------------------------------------------------------------------------------
Total: $128,000.00
----------------
Discount (25%): $32,000.00
----------------
Previous owing: 0
----------------
You pay this amount: $96,000.00
----------------
</TABLE>
<PAGE>
EXHIBIT NO. 6.4
AGREEMENT FOR EXCLUSIVE DISTRIBUTION WITH
TIMBER PRODUCTS, S.A. AND TIMBER TRADERS, S.A., INC.
DATED DECEMBER 2, 1999
<PAGE>
AGREEMENT FOR EXCLUSIVE DISTRIBUTION
THE PARTIES TO THIS AGREEMENT:
TIMBER PRODUCTS, S.A. a duly incorporated company operating under the laws of
the Dominican Republic with its principal place of business at Cayetano
Rodriguez # 257, Suite 300, Santo Domingo, Dom. Rep., represented by Miguel
A. Guzman-Fabian, (heretofore referred to as "the DISTRIBUTOR");
TIMBER TRADERS S.A. INC., a duly incorporated company operating under the
laws of Guyana, with its principal place of business at 62 Radfield & Cross
Streets, Georgetown, Guyana, duly represented by Ravi Persaud, (heretofore
referred to as "TIMBER TRADERS"); and
TIMBER RESOURCES INTERNATIONAL, a duly incorporated company operating under
the laws of the State of Delaware, with its principal place of business at
570 Lexington Avenue, 45th Floor, New York, NY, 10022, duly represented by
Aziz Hirji, (heretofore referred to as "the SUPPLIER");
DEFINITIONS. When used in this Agreement, except as noted herein, the
following terms shall have the respective meanings stipulated below:
(a) "Products" means all woods and wood products, finished or not, originated
by the SUPPLIER or any affiliated or subsidiary company, as well as any other
the Parties may add to this Agreement.
(b) "Territory" means the Dominican Republic, Puerto Rico, Haiti, Guatemala,
Honduras, El Salvador, Costa Rica and Panama, as well as any other country
the Parties may agree to add. Whenever conditions allow unencumbered sales to
Cuba, said country will be included in the Territory.
WHEREAS the Supplier has an agreement with Timber Traders for the latter to
act as Master Distributor for the supplier's product line in the Caribbean
Region including the Territory.
WHEREAS Timber Traders has agreed to relinquish the exclusive distribution
rights in the Territory to the DISTRIBUTOR in exchange for 10% of the
DISTRIBUTOR'S stock.
THEREFORE, it is agreed and convened by the Parties as follows:
FIRST. During the term of this Agreement the SUPPLIER appoints the
DISTRIBUTOR as Exclusive Distributor for the Products within the Territory,
according to the terms and conditions stipulated in this Agreement; the
DISTRIBUTOR accepts the appointment and agrees to exclusively sell and
promote the sale of the Products.
SECOND. The Parties agree in setting a minimum sales goal for annual sales of
the Products, which will be set by mutual agreement on or before December
15th of each year to apply during the next year.
THIRD. All purchases made by the DISTRIBUTOR shall be made at the current
prices established by the SUPPLIER and could be dispatched from any of the
production facilities the SUPPLIER may have in the United States or
elsewhere. Each order will become effective only when the Supplier confirms
it.
FOURTH. The DISTRIBUTOR hereby agrees to make payment for every order in
United States Dollars, by check or wire transfers to a bank that will be
designated by the SUPPLIER, or by bank Letter of Credit in terms and
conditions acceptable to the SUPPLIER.
FIFTH. The DISTRIBUTOR shall be responsible for the development and
implementation of whatever activities are deemed necessary to enhance the
recognition of the name brands for the Products and to increase the level of
sales. The SUPPLIER agrees to provide the DISTRIBUTOR with any required
information and materials to enable the DISTRIBUTOR to carry on the promotion
and advertising campaigns.
1
<PAGE>
SIXTH. The DISTRIBUTOR shall present the SUPPLIER with periodic reports as
follows:
(a) Quarterly sales projections with expected sales for the following quarter
detailed by product.
(b) Quarterly reports with realized sales for the previous quarter detailed
by product.
(c) Monthly reports as to market conditions; such as wholesale and retail
prices prevailing in the different markets in which the DISTRIBUTOR operates.
These reports should include, to the extent that it is possible, information
about the competition's prices and market share.
SEVENTH. All Parties to this Agreement convene that in cases of disagreement
or dispute regarding any of the stipulations of this Agreement or the
business transactions covered under this Agreement, the Parties will do their
best to resolve it amicably and by mutual cooperation. For any case not
resolved in this manner the Parties agree to resolve it through mediation.
EIGHTH. The Parties agree that this Agreement will become effective on the
date it is signed by the last Party signing the Agreement and that it shall
remain in force until the Parties mutually agree to terminate it.
PARAGRAPH. The Parties explicitly agree that every two years the Parties to
the Agreement will review this Agreement as to its terms and conditions and
the performance by each Party.
BY VIRTUE OF WHICH, the Parties hereto have executed this Agreement in three
(3) originals, one for each Party, on the dates stated.
TIMBER PRODUCTS, S.A.
/s/ Miguel A. Guzman-Fabian Date: 12/2/99
- --------------------------------------- -------------------
Miguel A. Guzman-Fabian
TIMBER RESOURCES INTERNATIONAL, INC.
/s/ Aziz Hirji Date: 12/2/99
- --------------------------------------- -------------------
Aziz Hirji
Agreed to by:
TIMBER TRADERS, S.A., INC.
/s/ Peter Rajlumar Date: 12/2/99
- --------------------------------------- -------------------
Peter Rajlumar
Vice President
<PAGE>
EXHIBIT NO. 6.5
EXCLUSIVE PURCHASING AGREEMENT WITH
TIMBER TRADERS, S.A., INC. DATED JANUARY 4, 2000
<PAGE>
EXCLUSIVE PURCHASING AGREEMENT
THIS AGREEMENT made this 4th day of January, 2000, by and
between TIMBER RESOURCES INTERNATIONAL, INC., a Delaware corporation, with its
principal place of business at 570 Lexington Avenue, 45th Floor, New York, New
York, 10022, hereinafter referred to as "TMBE," and TIMBER TRADERS S.A. INC., a
company operating under the laws of Guyana, with its principal place of business
at 62 Hadfield Street, Hadfield & Cross Streets, Georgetown, Guyana, hereinafter
referred to as "TT".
W I T N E S S E T H :
WHEREAS, TMBE is in the business of importing various types of
forest products from various parts of the world;
WHEREAS, TT is in the business of growing, importing and
exporting forest products to various parts of the world;
NOW, THEREFORE, it is agreed by and between the Parties hereto
as follows:
(1) That this contract shall be and remain in full force and
effect for a period of three (3) years from and after the date hereof, and shall
continue in full force and effect thereafter until such time as either of the
Parties hereto shall have given to the other a notice in writing of its
intention to terminate this contract not less than six (6) months prior to the
time fixed in such notice for such termination. In the event of the giving of
such notice this contract and the rights of the Parties hereunder shall
terminate at the time fixed in said notice for such termination.
(2) That during the term of this contract, TMBE and its
subsidiaries will diligently carry on and promote the sale of forest products
that TT is able to procure from Guayan.TMBE shall exclusively purchase from TT
all natural growing forest products that exist in Guyana including but not
limited to greenheart, shibadan, mora, andiroba,purpleheart and jatoba lumber.
(3) TMBE further agrees that it will not, at any time, during
the term of this contract, purchase either directly or indirectly through a
subsidiary or through ownership, in whole or in part, of a corporation or
business
<PAGE>
by it or by any of its shareholders within the limits of the United States,
those forest products that TT is able to procure from Guyana.
(4) Orders for forest products from TMBE to TT shall be in
writing stating therein the quantity and specifications of the forest products,
the name and address of the Consignee, and the time and place for delivery.
(5) TT agrees to procure and ship the forest products in
accordance with the specifications on the respective orders, and deliver the
same F.O.B. factory or warehouse, or any other destination in the continental
United States.
(6) TT warrants that all timber products shipped on orders of
TMBE will be in accordance with the specifications stated in the respective
orders, and of good quality and workmanship and that service will be in accord
with normal commercial practice. It is agreed that no implied warranty or
warranties shall arise out of or in connection with any purchase orders.
(7) All of such invoices shall be payable on terms noted on
the purchase orders, and TMBE agrees to make prompt payment for the same in
accordance with the terms of the respective invoices.
(8) In the event that either of the Parties hereto shall fail
or refuse to keep or perform any term of this contract on its part to be kept
and performed, and such failure shall remain uncorrected for a period of 30 days
after written notice from the other Party, such failure or refusal shall
constitute a default on the other Party a right, at its option and discretion,
to terminate this contract, and in event of the exercise of such option, the
Party so electing shall give written notice to the Party in default whereupon
this contract shall terminate.
(9) In the event that either of the Parties hereto shall
suffer a significant change in the ownership thereof, or if either Party hereto
shall merge or consolidate with one or more other corporations, or shall become
insolvent, or shall be adjusted bankrupt, or if proceedings are instituted by or
against it for reorganization or other relief under the bankruptcy law, or if it
or any substantial part of its assets shall come into the hands of a receiver or
trustee, or any other officer authorized by law or by a court, this contract
may, at the option of the other Party, be terminated by written notice by that
Party to the other, of such
2
<PAGE>
termination, such notice to be given 30 days prior to the date fixed therein for
termination.
(10) It is agreed that all covenants of a restrictive nature
set forth in this agreement and all restraints upon either of the parties
imposed thereby shall be limited to the term and any extended term or terms of
this agreement.
(11) Any notice provided for herein may be given to TMBE by
mail addressed to it at 570 Lexington Avenue, 45th Floor, New York, New York
10022, or to TT by mail addressed to it at 62 Hadfield Street, Hadfield & Cross
Streets, Georgetown, Guyana.
(12) This contract and the rights thereunder shall not be
assigned or transferred by either of the Parties hereto without the written
consent of the other.
(13) Any dispute under this agreement shall be settled by
arbitration in New York City, New York, pursuant to the rules, then obtaining,
of the American Arbitration Association. This agreement shall be governed by the
laws of the State of New York.
(14) Except as otherwise specifically provided herein, this
contract shall be binding upon the Parties hereto and their successors and
assigns.
IN WITNESS WHEREOF, the Parties hereto have caused their names
to be signed the day first above written.
TIMBER RESOURCES INTERNATIONAL, INC.
By: /s/ Aziz Hirji
-------------------------------
Mr. Aziz Hirji
President
TIMBER TRADERS S.A. Inc.
By: /s/ Ravi Persaud
-------------------------------
Mr. Ravi Persaud
President
3
<PAGE>
EXHIBIT NO. 6.6
LEASE BETWEEN SOUTHERN HARDWOODS, INC. AND
CITY OF PENSACOLA, FLORIDA DATED NOVEMBER 18, 1999
<PAGE>
STATE OF FLORIDA)
COUNTY OF ESCAMBIA }
LEASE
THIS LEASE made and entered into this 18th day of November, 1999 between
the CITY OF PENSACOLA, a Municipal Corporation, organized and existing under
the laws of the State of Florida, as Party of the First Part, hereinafter
called Lessor;
and
Southern Hardwoods, Inc., a Florida Corporation, as Party of the
Second Part, hereinafter called Lessee.
THIS LEASE is made for the benefit of the parties, their heirs, personal
representatives, successors and assigns and for convenience, reference is made
to them in the singular number and neuter gender.
WITNESSETH, THAT, in consideration of the covenants hereinafter contained
it is agreed as follows:
1) DEMISE.
Lessor does hereby lease to Lessee the following described property,
owned by Lessor and located in Escambia County.
All of Warehouse #9, Warehouse #7, Office Trailer
#7C and 225 square feet of open ground storage.
(See Exhibit A attached).
2) TERM.
The term of this Lease shall be for a period of ten years (10)
beginning January 5, 2000, and ending January 4, 2010.
Provided Lessee is not in default and provided further that Lessee has made
all
1
<PAGE>
payments required to be made hereunder, Lessor may extend this lease for ten
additional contract years if requested by the Lessee under to be determined
mutually agreed upon terms and conditions. Lessee shall be required to give not
less than 180 days advance written notice of its intention to renew the basic
ten-year term as described above.
LESSEE COVENANTS AND AGREES WITH LESSOR AS FOLLOWS:
3) USE.
A) To use the demised premises for the operation and administration
only of a business devoted to those activities related to import and export
cargo receipt and processing of wood products at the Port of Pensacola. Said
use of the demised premises shall contribute predominately to the waterborne
commerce through the Port of Pensacola as it pertains to wood products.
B) To make no unlawful, improper or offensive use of the demised premises
and to comply with all laws, codes, ordinances, rules and regulations of all
governmental bodies having jurisdiction thereof.
4) RENT
A) Lessee agrees to pay to Lessor and Lessor agrees to accept as rent for
the leased premises of Warehouse #9, Warehouse #7, Office Trailer #7C, and 225
square feet of open ground storage for the ten year term of this lease which
shall end on January 4, 2010 of this Agreement the following: Year 1 - $60,000;
Year 2 - $65,000; Year 3 - $70,000; Year 4 - $75,000; Year 5 - $85,000; Year 6 -
$90,000; Year 7 - $95,000; Year 8 - $100,000; Year 9 - $105,000; Year 10 -
$110,000. Rent shall by payable in monthly payments in advance on the Ninth
(9th) day of each and every month beginning with the payment due on January 5,
2000 and continuing monthly thereafter on the 9th day of each and every month
until the entire rental payment agreed to be paid hereunder for the lease term
has been made.
B) To pay to Lessor appropriate Florida State Sales Tax applicable to each
rental payment and Lessor shall remit each such Sales Tax payment to the Florida
Department of
2
<PAGE>
Revenue. The Sales Tax currently applicable is Seven and One-Half percent
(7.5%) of each payment.
5) GUARANTEED ANNUAL MINIMUM REVENUES
This guaranteed annual minimum would consist of the following fees -
wharfage, dockage, handling, and stevedore - that would generate as the result
of Southern Hardwoods having a presence at the Port. The only instance in which
the Port would bill Southern Hardwood for this annual minimum would be if the
fees generated by wharfage, dockage, handling, and stevedore did not reach the
following amounts in a specific year: Year 1 - $93,600; Year 2 - $93,600; Year 3
- - $93,600; Year 4 - $93,600; Year 5 - $109,200; Year 6 - $124,800; Year 7 -
$140,400; Year 8 - $156,000; Year 9 - $171,600; Year 10 - $187,200. The wharfage
rates in effect during the initial term of this lease shall be as follows: $1.40
for annual short tons from 1 to 30,000; $1.20 for annual short tons from 30,001
to 60,000; and $1.00 for annual short tons from 60,001 and greater.
6) UTILITIES
Lessee shall pay promptly when due all charges for utilities used on or
from the demised premises during the term of this Lease.
7) IMPROVEMENTS
Lessee shall have no right to undertake the construction of any
improvements or alterations, nor to alter nor add to improvements once
constructed without having first obtained the written consent of Lessor except
as provided herein below. Lessee shall submit to Lessor detailed plans and
specifications for any contemplated improvement or alteration before Lessor
shall be required to give such consent which consent shall not be unreasonably
withheld, delayed or conditioned. The cost of any such construction or
alteration shall be undertaken at Lessee's expense.
Lessee shall obtain all required permits from the County of Escambia, State
Board of Health and any municipality or other governmental body having
jurisdiction thereof and any
3
<PAGE>
construction thereon shall be in accordance with all ordinances, laws, rules and
regulations applicable thereto.
Any alterations, additions or improvements which may be erected, installed
or affixed on or in the Premises during the term of the Lease shall be deemed a
part of the demised property and become the sole and absolute property of the
Lessor at the termination of the Lease. Notwithstanding the foregoing, Lessor
shall have the right to require Lessee to remove such alterations and restore
the Premises to its original condition prior to the termination of the Lease
term.
Southern Hardwoods will receive a rent credit in Year 1 of the lease for
the actual cost of the electrical improvements to Warehouse No. 9 and
water/sewer improvements to facilitate an office trailer up to a maximum of
$52,750. This is based upon the Port of Pensacola's consulting engineer's
estimate to perform the electrical upgrade of $40,000 and the water and sewer
improvements south of Warehouse #7 of $12,750.
8) RIGHT TO INSPECT
Lessor or any of its authorized agents or employees shall have the right to
enter upon the demised premises upon reasonable notice during reasonable hours
with a representative of Lessee to inspect same for any reason or in order to
make inquiry or ascertain whether Lessee is complying with the terms of this
Lease.
9) BANKRUPTCY OR INSOLVENCY OF LESSEE
If Lessee shall become insolvent or if bankruptcy shall be begun by or
against Lessee, and within ninety (90) days thereof Lessee fail to secure a
discharge thereof, or if Lessee should make an assignment for the benefit of
creditors before the end of the Lease term, Lessor is hereby irrevocably
authorized at its option, to forthwith cancel this Lease as for a default.
Lessor may elect to accept rent from any receiver, trustee or other judicial
officer during the term of their occupancy in their fiduciary capacity without
affecting Lessor's right as contained in this agreement, but no receiver,
trustee or other judicial officer shall ever have any
4
<PAGE>
right, title or interest in and to the above described property by virtue of
this Lease.
10) POLLUTION/ENVIRONMENTAL PROTECTION
Lessee shall at all times be responsible for compliance with all Federal
and State regulations concerning pollution control, abatement and clean up and
shall not suffer or permit any pollutants or hazardous substances to remain on
the premises in violation of public law.
Lessee agrees to indemnify, defend and hold harmless Lessor from and
against any and all cost, expenses (including reasonable attorney's fees),
claims, damages, actions, liabilities, fines and penalties of whatsoever
nature arising out of or in connection with Lessee's noncompliance with
Federal and State regulations concerning pollution control, abatement and
clean up or in connection with the presence of any pollutants or hazardous
substances on the premises in violation of applicable law during the term of
the lease,. This provision shall survive termination of this lease.
11) TIME OF ESSENCE
It is understood and agreed between the parties hereto that time is of the
essence of this Lease and shall apply to all terms and conditions contained
herein.
12) MAINTENANCE
Lessee agrees to maintain the interior of the building and other
improvements situate on the demised premises in a good state of repair and in
safe condition at its own expense. Lessor shall maintain all structural
portions, building systems and the exterior of the building including without
limitation, the roof and all common ground parking areas in a good state of
repair and condition which Lessor represents are in good working order. The
parking areas will stay well lit at all times.
Lessee shall maintain the grounds and parking area within the demised
premises in a safe, neat and orderly manner, free from trash, debris or other
unsafe, unsightly and unsanitary manner.
5
<PAGE>
Should Lessee fail to comply with the terms and conditions of this Section
within a period of forty-five (45) days following written notice of such
failure, the Lessor reserves the right to take any action to cure said failure.
Should the Lessor take action to cure failures, the Lessee shall pay to the
Lessor an amount equal to the Lessor's cost for such actions plus a ten percent
(10%) administrative charge. Said payment is to be made by the 10th day of the
following month in addition to any other payments due.
13) ASSIGNMENT OR SUBLETTING
Lessee shall not assign its interest in this Lease nor sublet all or any
part of the demised premises nor mortgage, hypothecate nor otherwise encumber
its interest in the Lease except to an affiliate of the Lessee, unless the
Lessee has obtained a prior written approval and consent of the Lessor, which
consent shall not be unreasonably withheld or delayed.
14) COMPLIANCE WITH GOVERNMENTAL REGULATIONS.
Lessee, in the use and enjoyment of said premises, shall comply with all
governmental regulations, statutes, ordinances, rules and directives of any
Federal, State, County or Municipal governmental units or agencies having
jurisdiction over the demised premises or the business being conducted thereon
and all rules and regulations now in effect or hereafter imposed by Lessor shall
be imposed uniformly against all businesses or industries located or providing
services at the Port of Pensacola.
If the Lessor incurs any fines and/or penalties imposed by Federal, State,
County or Municipal authorities as a result of the acts or omissions of Lessee,
its partners, officers, agents, employees, contractors, subcontractors, assigns,
subtenants, or anyone acting under its direction and control, then Lessee shall
be responsible to pay or reimburse the Lessor for all such costs and expenses.
15) TARIFF
Lessee agrees to be bound and governed by all rules and regulations
published in the Port of Pensacola Terminal Tariff No. 4 and all amendments
thereto or reissues thereof.
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Nothing herein contained shall be construed to confer upon Lessee any
special rights with respect to tariff charges imposed at the Port of Pensacola.
Nothing in this agreement shall be construed or interpreted as granting Lessee
preferential berthing for vessels owned or controlled by Lessee at any facility
within the Port. Lessee shall pay all applicable tariff charges in addition to
the fees and assessments provided for in this lease
16) INSURANCE AND INDEMNIFICATION
The Lessee shall procure and maintain insurance of the types and to the
limits specified at all times during the terms of this lease.
The term City as used in this section of the Lease Agreement is defined
to mean the City of Pensacola itself, any subsidiaries or affiliates, elected
and appointed officials, employees, volunteers, representatives and agents.
The Lessee and the City understand and agree that the minimum limits of
insurance herein required may become inadequate during the term of this
Lease. The Lessee and the City agree that the minimum limits may be increased
to reasonable amounts upon any annual anniversary date of this Lease.
Insurance shall be issued by an insurer whose business reputation,
financial stability and claims payment reputation is satisfactory to the
City, for the City's protection only. Unless otherwise agreed, the amounts,
form and type of insurance shall conform to the following minimum
requirements:
1.WORKERS' COMPENSATION
The Lessee shall purchase and maintain Workers' Compensation Insurance
Coverage for all Workers' Compensation obligations whether legally required
or not. Additionally, the policy, or separately obtained policy, must
include Employers Liability Coverage of at least $100,000 each person -
accident, $100,000 each person - disease, $500,000 aggregate -disease.
Coverage must be included for the Longshore and Harbor Workers Compensation
Act. This coverage may be written on an "if any" basis.
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<PAGE>
2.COMMERCIAL GENERAL, AUTOMOBILE AND UMBRELLA LIABILITY
COVERAGES
The Lessee shall purchase coverage on forms no more restrictive than the latest
editions of the Commercial General Liability and Business Auto policies filed by
the Insurance Services Office. The City shall be an Additional Insured under the
policy for the terms and conditions of this Lease. The City shall not be
considered liable for premium payment, entitled to any premium return or
dividend and shall not be considered a member of any mutual or reciprocal
company. Minimum limits of $1,000,000 per occurrence, and per accident, combined
single limit for liability must be provided, with umbrella insurance coverage
making up any difference between the policy limits of underlying policies
coverage and the total amount of coverage required.
COMMERCIAL GENERAL LIABILITY coverage must be provided, including bodily
injury and property damage liability for premises and operations, products
and completed operations, contractual liability, and independent
contractors. Broad Form Commercial General Liability coverage, or its
equivalent shall provide at least, broad form contractual liability
applicable to this specific Lease, personal injury liability and broad form
property damage liability. The coverage shall be written on occurrence-type
basis. Fire Liability shall be endorsed onto this policy in an amount of at
least $100,000 per occurrence.
BUSINESS AUTO POLICY coverage must be provided, including bodily injury and
property damage arising out of operation, maintenance or use of owned,
non-owned and hired automobiles and employee non-ownership use.
UMBRELLA LIABILITY INSURANCE coverage shall not be more restrictive than
the underlying insurance policy coverages. The coverage shall be written on
an occurrence-type basis.
3.CERTIFICATES OF INSURANCE
Required insurance shall be documented in the Certificates of Insurance which
provide that the City of Pensacola shall be notified at least thirty (30) days
in advance of cancellation, non-renewal or adverse change or restriction in
coverage. The City of Pensacola shall be named
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<PAGE>
on each Certificate as an Additional Insured and this Lease shall be listed. If
required by the City, the Lessee shall furnish copies of the Lessee's insurance
policies, forms, endorsements, jackets and other items forming a part of or
relating to such policies. Certificates shall be on the "Certificate of
Insurance" form equal to, as determined by the City an ACORD 25. Any wording in
a Certificate which would make notification of cancellation, adverse change or
restriction in coverage to the City an option shall be deleted or crossed out by
the insurance carrier or the insurance carrier's agent or employee. The Lessee
shall replace any canceled, adversely changed, restricted or non-renewed
policies with new policies acceptable to the City and shall file with the City
Certificates of Insurance under the new policies prior to the effective date of
such cancellation, adverse change or restriction. If any policy is not timely
replaced, in a manner acceptable to the City, the Lessee shall, upon
instructions of the City, cease all operations under the Lease until directed by
the City, in writing, to resume operations. The Certificate Holder should read:
City of Pensacola
Department of Risk Management
P.O. Box 12910
Pensacola, Fl. 32521-0063
4. INSURANCE OF THE LESSEE PRIMARY
The Lessee required coverage shall be considered primary, and all other
insurance shall be considered as excess, over and above the Lessee's coverage.
The Lessee's policies of coverage will be considered primary as relates to all
provisions of the Lease.
The Lessor agrees that with the exception of any Lessee improvements
or Lessee's contents, the Lessor shall maintain property insurance on the leased
premises during the term of this lease. If the leased premises are rendered
substantially unfit for the occupancy or use herein contemplated by any casualty
or peril insured against, the Lessor shall restore the leased premises to the
condition existing prior to the occurrence of the insurable casualty or peril.
If the leased premises are rendered substantially unfit for the occupancy or use
herein contemplated by any casualty or peril other than an insured
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<PAGE>
casualty or peril, then Lessor, at Lessor's sole option, may either cause the
premises to be restored in which event the rental shall abate or be justly
reduced, or terminate this lease provided, however, that Lessor must notify
Lessee in writing of its election within thirty (30) days following the date of
the occurrence of such casualty or peril. Nothing contained in this section
relieves the Lessee from its obligations under the section titled 'Damage to
Premises,' contained elsewhere in this Lease."
LOSS CONTROL AND SAFETY
The Lessee shall retain control over its employees, agents, servants and
subcontractors, as well as control over its invitees, and its activities on
and about the subject premises and the manner in which such activities
shall be undertaken and to that end, the Lessee shall not be deemed to be
an agent of the City. Precaution shall be exercised at all times by the
Lessee for the protection of all persons, including employees, and
property. The Lessee shall make special effort to detect hazards and shall
take prompt action where loss control/safety measures should reasonable be
expected.
HOLD HARMLESS
The Lessee shall hold harmless the City of Pensacola its subsidiaries or
affiliates, elected and appointed officials, employees, volunteers,
representatives and agents from any and all claims, suits, actions,
damages, liability and expenses in connection with loss of life bodily or
personal injury, or property damage, including loss or use thereof,
directly or indirectly caused by, resulting from, arising out of or
occurring in connection with the performance of this Lease, presence or
operations of the Lessee, whether arising solely out of the negligence of
the Lessee or not. The Lessee's obligation shall not be limited by, or in
any way to, any insurance coverage or by any provision in or exclusion or
omission from any policy of insurance.
PAY ON BEHALF OF THE CITY
The Lessee agrees to pay on behalf of the City, as well as provide a legal
defense for
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<PAGE>
the City, both of which will be done only if and when requested by the
City, for all claims as described in the Hold Harmless paragraph. Such
payment on the behalf of the City shall be in addition to any and all other
legal remedies available to the City and shall not be considered to be the
City's exclusive remedy.
17) FORCE MAJEURE.
In the event that the Leased Premises are rendered untenantable by reason
of war, acts of God, acts of the public enemy, restrictions or prohibitions of
the City, County, State or Federal Government, or any of their respective
departments, divisions or agencies, which were not caused by actions of the
Lessee or which cannot be remedied or removed exclusively by Lessee, or in the
event of the inability of Lessor to provide the space leased hereunder or any
part thereof, or in the event that damage or destruction to any facilities at
the Port of Pensacola renders the Leased Premises untenantable for reasons other
than the fault of Lessee; then the rental and other charges and obligations,
except for Lessee's obligations under 10 and 16, will be equitably abated, based
upon the extent of the loss of space involved, provided however, if as a result
thereof the Leased Premises become unusable for a period of six (6) months, for
the entire purpose contemplated hereunder, Lessee may terminate this agreement
upon thirty (30) days prior written notice to the Lessor.
18) DEFAULT
The prompt payment of the rent hereunder at the time the same becomes due
and payable and the prompt and faithful performance of all the terms and
conditions hereof are the conditions upon which this Lease is made. In the event
that Lessee should fail to comply with the terms of this Lease or if it should
abandon or vacate the premises before the end of the term hereof, Lessor, at its
option, may declare this Lease terminated and all Lessee's right and interest
hereunder shall forthwith terminate and Lessor, its agents, employees or
attorneys shall have the right to enter the premises and remove all persons
therefrom and to accelerate and declare immediately due and payable all unpaid
rents or other sums required to be paid to Lessor from Lessee by the terms of
this Lease.
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<PAGE>
19) PROTECTION AGAINST LIENS
Lessee shall not incur any indebtedness giving rise to a lien on the
premises or Lessee's right therein and the existence of any claim or lien of
record for a period in excess of sixty (60) days after written notice thereof to
Lessee or sixty (60) days after knowledge thereof by Lessee, shall constitute a
material breach of this Lease.
20) NOTICES
Any notices required by this Lease or by law to be sent to Lessor shall be
sufficient if transmitted by registered mail, addressed to Lessor as follows:
PORT DIRECTOR
PORT OF PENSACOLA
105 East Gregory Square
Pensacola, Florida 32501
Any notices required by this Lease or by law to be sent to Lessee shall be
sufficient if transmitted by registered mail, addressed to Lessee as follows:
Southern Hardwoods, Incorporated
730 S. Barracks Street
Pensacola, Florida 32501
Attention: Hank Midden, President
21) ADVANCES BY LESSOR
In the event Lessee shall fail to make payments of any sums required to be
paid by Lessee under this Lease other than the payment of rent, Lessor, at its
option, may pay such sums for Lessee provided that Lessor has given written
notice to Lessee of such unpaid sums and Lessee has failed to pay such sums
within sixty (60) days of such notice. All sums so advanced shall be paid by
Lessee to Lessor on the fifteenth (15th) day of the month following the advance;
and Lessee will pay interest on such advance at the rate of fifteen percent
(15%) per annum until paid.
22) INDEMNITY AGAINST COSTS.
Lessee shall be liable to Lessor for all reasonable costs, reasonable
expenses,
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<PAGE>
reasonable attorneys' fees and reasonable damages which may be incurred or
sustained by Lessor by reason of Lessee's breach of any of the provisions of
this indenture. Any sums due Lessor under the provisions of this paragraph shall
constitute a lien against the interest of Lessee in the leased premises and all
its property situate thereon to the same extent and on the same conditions as
delinquent rent would constitute a lien on said premises and property.
23) TAXES
The Lessee agrees to pay all taxes levied and assessed upon the demised
premises, the leasehold and all improvements built and placed by the Lessee
there, together with all special assessments of whatsoever kind levied or
assessed against the leasehold property and the leasehold by any other
governmental agency empowered to do so.
Nothing herein shall prevent Lessee from challenging any assessment or any
tax to the same extent and in the same manner as may any other property owner,
taxpayer or resident of Escambia County. Failure to pay any such tax or
assessment during the time in which the same is being challenged pursuant to the
right hereby given shall not be construed as a default under the terms of this
Leases. Lessee shall have the right to claim any tax exemption applicable to it,
the leased premises, the leasehold estate or the business being conducted
thereon. The City shall cooperate with the Lessee in furnishing such documents
as shall be reasonably requested to perfect any application required for such
exemption.
24) NONDISCRIMINATION
Lessee shall make its accommodations and/or services available to the
public on fair and reasonable terms without unjust discrimination on the basis
of race, creed, color, sex, age, national origin or disability.
25) SURRENDER
Lessee shall at the expiration or other termination of this Lease remove
all Lessee's goods and effects from the leased premises. Lessee shall deliver to
Lessor the Leased Premises and all alterations and additions made to or upon the
premises, in the same condition
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<PAGE>
as they are at the commencement of the term, or as they were put in during the
term thereof, reasonable wear and tear expected. In the event of lessee's
failure to remove any of Lessee's property at Lessee's expense, within thirty
(30) days of expiration or termination hereof, Lessor may retain same under
Lessor's control or sell at public sale, without notice, any or all of the
property not so removed and apply the net proceeds of such sale to the payment
of any sum due hereunder, or destroy such property.
26) DAMAGE TO PREMISES
The Lessee shall be liable for any damage to the Leased Premises caused by
the Lessee, its officers, agents, employees, contractors, subcontractors, or
anyone acting under its direction or control, ordinary wear and tear expected.
27) HEADINGS
The headings contained in this Agreement are inserted only as a matter of
convenience and for reference and do not define or limit the scope or intent of
any provision of this Lease Agreement and shall not be construed to affect in
any manner the terms and provisions hereof or the interpretation or construction
thereof.
28) REPRESENTATION REGARDING AUTHORITY
The Lessor represents that it has the authority to enter into this
Agreement and grant the rights contained herein to Lessee.
If Lessee is a corporation, the undersigned warrants and represents that
(1) he/she is an agent of the corporation; (2) he/she is authorized to execute
this Lease on the corporation's behalf; and (3) the corporation shall be bound
as a signatory to this Lease by his/her execution of this Lease.
29) RELATIONSHIP OF PARTIES
It is understood that the Lessor is not in any way or for any purpose a
partner or joint venturer with, or agent of, Lessee in the use of the Leased
Premises or any improvements
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thereon, for any purpose.
30) PARKING AND QUIET ENJOYMENT
Lessee shall be permitted to use ten (10) parking spaces immediately
adjacent to the Leased Premises. The Lessor represents that upon payment of fees
when due and upon performance of all other conditions herein, Lessee shall
peaceably have, possess, and enjoy the Leased Premises and uses granted herein
without hindrance or disturbance from the Lessor, subject to the Lessor's audit,
inspection, and maintenance rights contained in this Lease.
31) MISCELLANEOUS
All legal problems arising out of this transaction and this Lease hereunder
shall be governed by the laws of the State of Florida. Venue for any actions
arising out of this Lease will lie in Escambia County Florida.
32) ENTIRETY
This lease contains the entire agreement between the Lessee and the Lessor
and supersedes all prior negotiations, representations or agreements, either
written or oral.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed on the day and year first written above.
THE CITY OF PENSACOLA
A Municipal Corporation
By: /s/ Thomas J. Bonfield
---------------------------------
City Manager Thomas J. Bonfield
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ATTEST:
/s/ Shirley F. White
- ----------------------------------
City Clerk
SOUTHERN HARDWOODS, INCORPORATED
ATTEST: A Florida Corporation
/s/ [ILLEGIBLE]
- ---------------------------------- --------------------------------
Secretary Its President
WITNESSES:
/s/ [ILLEGIBLE]
- ----------------------------------
[SEAL]
/s/ [ILLEGIBLE]
- ----------------------------------
Approved as to Content: Approved as to Form and Execution
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ---------------------------------- --------------------------------
Port Director City Attorney
16
<PAGE>
EXHBIT A
PROPOSED
[MAP] SOUTHERN
HARDWOODS
RENTAL PROPERTY
<PAGE>
EXHIBIT NO. 6.7
AGREEMENT FOR CERTAIN SERVICES AND AMENITIES WITH
VILLIERS CAPITAL CORPORATION DATED MAY 28, 1998.
<PAGE>
AGREEMENT
This Agreement is made on May 28, 1998 by and between Villiers Capital
Corporation, a company organized under the laws of the State of New York and
having a place of business at 570 Lexington Avenue, 45th Floor, New York, NY,
10022 ("Villiers") and Timber Resources International, Inc., a newly formed
company organized under the laws of the State of Delaware ("TRI").
WITNESSETH
WHEREAS, in connection with its operations, TRI requires the assistance
of Villiers with regard to office premises, and other support facilities, and
services; and
WHEREAS, Villiers has agreed to provide TRI with certain services
and amenities.
NOW, THEREFORE, in consideration of their mutual premises,
Villiers and TRI hereby agree as follows:
ARTICLES
1. At the request of TRI, Villiers has agrees to provide TRI with
the following services and amenities:
(a) Office premises and other support facilities including
furniture, computer and other office equipment for up to
four employees.
(b) Until such time as full time staff is engaged by TRI,
Villiers shall provide receptionist, secretarial and
bookkeeping services.
(c) Conference room facilities as required by TRI.
(d) Telephone and telefax equipment, and local and long distance
access as required by TRI.
<PAGE>
(e) Villiers shall make available to TRI introductions to other
consultants, agents, and third party vendors already
providing services to Villiers.
2. As compensation for the services and amenities provided to TRI
under this Agreement and as an inducement to Villiers for standing
ready to provide such services, TRI shall pay Villiers $ 15,000
per month beginning June 1, 1998. Expenses may include, without
limitation, rents, salaries, benefit programs and other overheads
incurred by Villiers, telephone and telefax charges, travelling
and subsistence expenses, printing and photocopying charges and
payments to consultants, agents, and third party vendors engaged
by Villiers.
3. If Villiers in its reasonable discretion determines that
additional costs, expenses and disbursements are necessary in
connection with the fulfillment of its obligations under this
Agreement or if such additional services and amenities are
requested by TRI, Villiers shall promptly submit to TRI an invoice
or statement for each such additional expense.
4. Expenses under Articles 2 and 3 hereof, respectively, shall be
paid incrementally during the term of this Agreement in such
amounts and on such dates as the parties from time to time shall
agree upon, provided that full payment under Articles 2 and 3
hereof for the initial term of this Agreement and, if applicable,
for each renewal thereof shall be made by TRI to Villiers no later
than the last business day of the initial term of this Agreement
and, if applicable, of each renewal thereof.
5. This Agreement shall be for an initial term of one (1) year from
the date thereof. Thereafter, this Agreement shall automatically
be renewed for successive one (1) year terms unless either party
notifies the other in writing of its intent not to renew not less
than thirty (30) days before the end of the initial term or the
one-year renewal term.
6. No termination of this Agreement, however brought about, shall
deprive Villiers of the right to receive the fees, expenses and
reimbursements contemplated by Articles 2 and 3 hereof that have
then accrued but have not yet been paid to Villiers with respect
to any period prior to such termination. Concurrently with
termination, TRI shall pay to Villiers any such accrued but unpaid
fees, expenses and reimbursements.
2
<PAGE>
IN WITNESS WHEREOF, VILLIERS CAPITAL CORPORATION and TIMBER RESOURCES
INTERNATIONAL, INC. have caused this Agreement to be executed and delivered by
their duly authorized representatives as of the date first above written.
VILLIERS CAPITAL CORPORATION
By: /s/ Anna Petinova
------------------
Name: Anna Petinova
Title: Vice President
TIMBER RESOURCES INTERNATIONAL, INC.
By: /s/ Aziz Hirji
------------------
Name: Aziz Hirji
Title: President
3
<PAGE>
EXHIBIT NO. 6.8
FINANCIAL ADVISORY AGREEMENT WITH
VILLIERS CAPITAL PARTNERS, LLC DATED NOVEMBER 1, 1998
<PAGE>
FINANCIAL ADVISORY AGREEMENT
This FINANCIAL ADVISORY AGREEMENT is made by and between VILLIERS CAPITAL
PARTNERS, LLC, a New York Corporation, (hereafter "VCP"), and TIMBER RESOURCES
INTERNATIONAL, INC. a Delaware Corporation, (hereafter "TRI") and dated November
1, 1998. In consideration of the mutual promises contained herein, and on the
terms and conditions herein set forth, the parties agree as follows:
ARTICLE I.
ENGAGEMENT.
VCP is hereby retained as TRI's financial advisor.
ARTICLE II.
SERVICES.
VCP agrees to provide to TRI the financial advisory services described
below:
(i) Assist in the preparation and dissemination of information
materials for potential investors;
(ii) Identify and contact individuals, firms and their
financial advisors that may be suitable prospective
investors satisfactory to TRI;
(iii)Act as an exclusive agent to TRI to employ the
underwriters;
(iv)Coordinate and advise on aspects of public relations,
shareholders relations, audit coordination, relationships
with underwriters, transfer agents, market-makers and
other broker dealers in matters related to the securities
of TRI;
(v) Assist in the preparation and coordination of annual,
quarterly and current filings as required of TRI pursuant
to the Securities and Exchange Act of 1934 and Regulations
of the Securities and Exchange Commission.
Page 1 of 7
<PAGE>
ARTICLE III.
COMPENSATION.
3.01 In consideration for such services, TRI agrees to pay VCP a
monthly advisory fee of $ 3,500 shall be paid by TRI for the term of this
agreement beginning November 1, 1998;
3.02 In addition to the monthly financial advisory fees payable to VCP
pursuant to Article 3.01, TRI shall pay or cause to be paid to VCP the amounts
of which will be equal to stated percentages of the funds raised. The fees shall
be payable in accordance with the "Lehman" formula as follows:
(i) 5% of the first $1 million of the funds raised;
(ii) 4% of the second $1 million of the funds raised;
(iii)3% of the third $1 million of the funds raised;
(iv) 2% of the fourth $1 million of the funds raised; and
(v) 1% of any additional funds raised.
3.03 The Fees set forth above shall be payable with respect to and upon
completion of any transaction with any financing source:
(i) While this Agreement remains in effect; or
(ii) During an eight (8) month period (the "Tail Period")
following the termination of this Agreement. Within ten (10)
days following the termination of this Agreement by either
party for any reason, VCP shall designate in writing to TRI
all prospective financing sources to which VCP or TRI, during
the term of this Agreement, made a presentation and had
discussions with, regarding a possible funding. Within ten
days of receipt of VCP list, TRI shall notify VCP in writing
of all prospective financial sources which were in contact
with TRI during the term of this Agreement and which are not
included in VCP's designation. If a financing is concluded
with the prospective financing source, included in either
such designations during the Tail Period, VCP shall be
entitled to be compensated as provided in this Agreement.
3.04 While this Agreement remains in effect, VCP shall have a right of
first refusal to raise funds for TRI;
3.05 In addition to any fees payable to VCP pursuant to this Agreement,
VCP shall be entitled to reimbursement on a monthly basis for all reasonable and
itemized out-
Page 2 of 7
<PAGE>
of-pocket expenses, incurred by VCP in connection with the performance of
services hereunder. The costs that will be charged to TRI shall include, among
other things, printing, travel expense, legal and accounting fees, postage,
overnight mail costs and messenger fees. Expenses shall not be incurred without
the advance approval of TRI.
ARTICLE IV.
TERMS AND TERMINATION.
3.01 This Agreement shall be for an initial term of five (5) years from
the date hereof. Thereafter, this Agreement shall automatically be renewed for
successive one (1) year terms unless either party notifies the other in writing
of its intent not to renew not less than thirty (30) days before the end of the
initial term or the one-year renewal term.
4.02 Either party hereto shall have the right to terminate this
Agreement upon ninety (90) days written notice to the other party.
4.03 No termination of this Agreement, however brought about, shall
deprive VCP of the right to receive all of the following:
(i) A prorated (for the number of days up to the date of
termination) portion of the monthly Advisory Fees set forth
in Article 3.01 above.
(ii) The full amount of the Fees set forth in Article 3.02 above
for raising the funds for TRI during the period before early
termination of this Agreement and continuing through the
Tail Period.
(iii) All reasonable expenses incurred by VCP up to the date of
early termination and authorized under this Agreement.
ARTICLE V.
CONFIDENTIALITY.
5.01. TRI and VCP agree that any information or advice, written or
oral, provided by either party pursuant to this Agreement will be treated by the
receiving party as confidential, and will be used solely by the parties hereto
and will not be used, circulated, quoted or otherwise referred to for any other
purpose, nor will it be included in or referred to, in whole or in part in any
communication whether written or oral, prepared, issued or transmitted by either
party or any affiliate, director, officer, employee, agent or representative of
either party, without, in each instance, the originating party's prior written
consent. Further, in connection with this engagement of VCP, it is contemplated
that either party may supply to the other party certain nonpublic or
Page 3 of 7
<PAGE>
proprietary information concerning the originating party or its operations
("Confidential Information"). Both parties agree to use their best efforts to
appropriately denote as confidential all such information which is delivered in
written form.
5.02. VCP shall disclose Confidential Information of TRI solely for the
purposes of rendering services pursuant to and in accordance with this
Agreement; provided, however, that the foregoing shall not apply to any
information which becomes publicly available other than as a result of the
breach of either parties' undertakings hereunder, or that which either party may
be required to disclose by judicial or administrative process in connection with
any action, suit, proceeding or claim.
ARTICLE VI.
CONFLICTS.
TRI acknowledges that VCP and its affiliates have and will continue to
have financial advisory and other relationships with parties other than the TRI
pursuant to which VCP may acquire information of interest to the TRI. VCP shall
have no obligation to disclose such information to TRI. TRI recognizes that VCP
is being engaged hereunder to provide the services described above only to TRI
and to such other parties, if any, who execute this Agreement in specified other
capacities, and is not acting as an agent or a fiduciary of, and shall have no
duties or liability to, the holders of the TRI's equity or debt or any third
party in connection with its engagement hereunder, all of which purported duties
are hereby expressly waived. No one other that TRI is authorized to rely upon
the engagement of VCP hereunder or any statements, advice or opinions rendered
by VCP.
ARTICLE VII.
EXCLUSIVITY.
TRI agrees that no other financing transactions will be authorized by it
during the term of this Agreement and it will not directly or indirectly
negotiate or enter into any other agreement to perform services on its behalf of
the type which VCP is authorized to perform hereunder without the prior express
written consent of VCP. No fee payable to any other financial advisor, either by
TRI or another entity, shall reduce or otherwise affect the fees payable
hereunder to VCP.
Page 4 of 7
<PAGE>
ARTICLE VIII.
PUBLIC ANNOUNCEMENT.
TRI agrees that VCP shall have the right to place announcements and
advertisements in financial newspapers and other financial trade journals
subject to the following terms and conditions:
(i) TRI shall have the right to approve of the form and content of
any and all announcements and advertisements before the
placement of such announcements or advertisements;
(ii) Any and all announcements or advertisements are to be limited
to the subject of describing VCP's service in connection with
this Agreement; and
(iii) All costs associated with publishing any and all announcements
or advertisements contemplated under this paragraph shall be
borne solely by VCP.
ARTICLE IX.
INDEMNIFICATION.
9.01 TRI shall indemnify and hold harmless VCP and its affiliates,
officers, directors, agents and employees from and against any and all losses,
claims, damages, liabilities or actions which arise out of or based upon:
(i) any untrue statement or information contained in the materials
furnished to VCP by TRI, or any supplement thereto;
(ii) any omission to state a fact which renders information
supplied misleading;
(iii) any breach of the representations, warranties, covenants
and/or agreements of TRI contained in this Agreement; and
(iv) any actions, direct or indirect, by TRI or its agents (other
than VCP) in connection with any offering and sale of
securities which are in violation of any applicable federal or
state securities laws and regulations.
9.02 VCP shall indemnify and hold harmless TRI and its officers,
directors, agents and employees, from and against any and all losses, claims,
damages, liabilities or actions which arise out of or are based upon:
Page 5 of 7
<PAGE>
(i) any misrepresentations by VCP concerning TRI which is not
based upon material provided by TRI;
(ii) any breach of the representations, warranties, covenants
and/or agreements of VCP contained in this Agreement; and
(iii) any action, direct or indirect, by VCP in violation of any
applicable federal or state securities laws and regulations in
connection with the offering and sale of the TRI's securities.
9.03 Each indemnifying party under this Article IX shall immediately
reimburse each indemnified party for all expenses (including, without
limitation, reasonable fees and disbursements of legal counsel) incurred by the
indemnified party in connection with investigating, preparing for or defending
any action or claim, whether or not in connection with pending or threatened
litigation or an administrative proceeding.
9.04 Promptly after receipt by an indemnified party under this Article IX
of notice of the commencement of any action or proceeding, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party under this Article IX, notify the indemnifying party in writing of the
commencement thereof, and the indemnifying party shall have the right to
participate in and, to the extent the indemnifying party so desires jointly with
any other indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the indemnifying parties. The failure to
notify an indemnifying party promptly of the commencement of any such action or
proceeding, if prejudicial to its ability to defend such action or proceeding,
shall relieve such indemnifying party of any liability to the indemnified party
under this Article IX, but the omission to so notify an indemnifying party will
not relieve such indemnifying party of any liability which it may have to any
indemnified party otherwise under this Article IX. No indemnifying party shall
be liable for the settlement of any proceeding (including any governmental
investigation) effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, such indemnifying
party shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
9.05 Neither VCP nor TRI will be responsible for any losses, claims,
damages, liabilities or expenses of the other which are determined by a final
judgment of a court of competent jurisdiction to have resulted solely from
actions taken or omitted to be taken by such other party due to such other
party's false statements, willful misconduct or gross negligence.
Page 6 of 7
<PAGE>
IN WITNESS WHEREOF, VILLIERS CAPITAL PARTNERS, LLC and TIMBER RESOURCES
INTERNATIONAL, INC. have caused this Agreement to be executed and delivered by
their duly authorized representatives as of the date first written above, to be
effective.
VILLIERS CAPITAL PARTNERS, LLC
By: /s/ Anna Petinova
----------------------------------
Name: Anna Petinova
---------------------------------
Title: Managing Partner
-------------------------------
TIMBER RESOURCES INTERNATIONAL, INC.
By: /s/ Aziz Hirji
---------------------------------
Name: Aziz Hirji
-------------------------------
Title: Chairman/CEO
------------------------------
Page 7 of 7
<PAGE>
EXHIBIT NO. 6.9
EMPLOYMENT AGREEMENT WITH AZIZ HIRJI
DATED JUNE 1, 1998
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement, made as of the 1st day of June, 1998 by and between
TIMBER RESOURCES INTERNATIONAL, INC. (the "Company"), a Delaware Corporation
having a place of business at 570 Lexington Avenue, 45th Floor. New York, New
York 10022 and AZIZ HIRJI (the "Executive"), C/O 570 Lexington Avenue, 45th
Floor, New York, NY 10022.
WITNESSETH:
Whereas, the Company is willing to employ the Executive upon the terms
and conditions set out below; and
Whereas, the Executive has had an opportunity to consider and evaluate
the terms of employment offered to him;
Now, therefore, in consideration of their mutual promises as
hereinafter set forth, the parties hereto agree as follows:
1. DESIGNATION AND DUTIES
The Executive shall be employed as Chief Executive Officer and
President of the Company. The Executive will also be elected as a
Director of the Company and Chairman of the Board of Directors in
accordance with the bylaws of the Company. He shall perform all duties
and undertake all responsibilities as would be customary and
appropriate for the Chief Executive Officer and President of the
Company, and additionally, shall perform all duties and tasks as are
entrusted to him by the Company's Board of Directors. Without limiting
the generality of the foregoing, the Executive shall be responsible to
develop a business plan of strategic development for the Company,
define intermediate goals and objectives, supervise production,
marketing, sales, purchasing, accounting and finance functions,
develop a budget for the Company on a year to year and calendar
quarter to calendar quarter basis, monitor expenses and variances from
budgetary allocations, develop and implement personnel policies,
recruit appropriate personnel to achieve the Company's goals, delegate
tasks and responsibilities as required to other executives and advise
the Board of Directors on a periodic basis on the financial condition
and business prospects of the Company.
2. TERM OF EMPLOYMENT
The Executive shall be employed for a term commencing on June 1, 1998
and ending on May 31, 2003. This agreement may be renewed for a
further five-year
PAGE 1 OF 8
<PAGE>
term on such terms and conditions as shall be mutually agreed upon by
the parties. At least ninety (90) days prior to the end of the term as
set out herein, the Company shall make a written offer to renew the
Executive's employment.
3. NO RESTRICTIONS ON EMPLOYMENT WITH COMPANY
The Executive represents and warrants that he is not a party to any
agreement and otherwise is not subject to any restriction, whether
voluntary or involuntary, which would in any manner prohibit or limit
him from entering into this agreement and performing his duties as set
out herewith. In the event the Executive has, in any position held by
him prior to the execution of this agreement, executed any
confidentiality agreement or other similar agreement restricting his
subsequent employment, the Executive represents that copies of all of
such confidentiality or similar agreements have been furnished to the
Company prior to the execution of this agreement.
4. COMPANY'S OWNERSHIP OF WORK PRODUCT
The Executive acknowledges that all work product initiated, developed
and created by him while in the employment of the Company shall be the
sole and exclusive property of the Company irrespective of whether or
not any special, unique or proprietary knowledge or technique of the
Executive was utilized to develop or create such work product. The
Executive shall, in accordance with standard Company policy or
otherwise in any manner at the Company's request, execute all other
necessary documents and instruments of assignment to establish and
protect the Company's ownership of work product developed or created
by the Executive during the course of his employment.
5. CONFIDENTIALITY
Unless available in the public domain other than by reason of a breach
of the provisions of this paragraph or other misconduct on the part of
the Executive, all data and data bases, information, research,
business strategy, business contacts, and any written or printed
material as well as material recorded and accessed by electronic media
produced or generated by the Executive or any other employee or
professional consultant engaged by the Company shall be the property
of the Company, and shall be kept secret and confidential by the
Executive during the term of his employment and for a period of five
years thereafter. The Executive agrees that a breach of this provision
can cause irreparable injury to the Company, and further agrees that
the Company shall be entitled to seek injunctive relief from an
appropriate court of law.
PAGE 2 OF 8
<PAGE>
6. COMPENSATION
The executive shall be paid compensation during the term of his
employment as follows:
(a) BASE COMPENSATIONS: During the first year of employment the
Executive shall be paid a base salary of $150,000 (One Hundred Fifty
Thousand Dollars) per annum payable at the rate of $12,500 (Twelve
Thousand Five Hundred Dollars) per month. During the second year of
employment, the Executive shall be paid a base salary of $180,000 (One
Hundred Eighty Thousand Dollars) per annum payable at the rate of
$15,000 (Fifteen Thousand Dollars) per month. During the third and
fourth year of employment, the Executive shall be paid a base salary
of $240,000 (Two Hundred Forty Thousand Dollars) per annum payable at
the rate of $20,000 (Twenty Thousand Dollars) per month. During the
fifth year, the Executive shall be paid a base salary of $300,000
(Three Hundred Thousand Dollars) per annum payable at the rate of
$25,000 (Twenty Five Thousand Dollars) per month.
(b) BONUS COMPENSATION: The Executive's Bonus Awards are granted based
on the Company's performance against financial targets including
return on equity, earnings per share and predetermined targets of
qualitative non-financial performance factors, such as quality, safety
and environment and people development. The Company's Board of
Directors shall determine financial targets for each fiscal year prior
to the commencement of the year. If the threshold level of performance
is not attained, no bonus compensation is earned.
For the fiscal year ending June 30, 1999, the Executive shall be paid
bonus compensation of $50,000 (Fifty Thousand Dollars) provided the
Company achieved 100% of the goal. Furthermore, for each 10% increase
over financial targets, the Executive's bonus compensation shall be
increased by $15,000 (Fifteen Thousand Dollars), subject to a maximum
bonus compensation of $80,000 (Eighty Thousand Dollars) for the first
year and $120,000 (One Hundred Twenty Thousand Dollars) for the
second, third, fourth and fifth year of the contract.
7. WARRANTS
During the first year of employment, the Executive shall be granted
ten year warrants for common stock priced at $.05 at the rate of
1,000,000 warrants a year issued on the last day of the fiscal year,
beginning June 30, 1999. During the second, third, and fourth year of
the contract, the Executive shall be granted ten year warrants for
common stock priced at $.05 at the rate of 1,500,000 warrants a year
issued on the last day of each fiscal year. During the fifth year of
the contract, the Executive shall be granted ten year warrants for
common stock priced at $.05 at the rate of 2,000,000 warrants a year
issued on the last day of the
PAGE 3 OF 8
<PAGE>
fiscal year. The number of warrants should be adjusted to any split or
reverse split of the Company's stock.
8. BENEFITS
(a) The Executive and his family shall receive medical insurance
coverage in accordance with the medical benefits plan adopted by
the Company.
(b) The Company agrees to provide the Executive with term life
insurance coverage in an amount of $2,000,000 (Two Million
Dollars).
(c) The Company agrees to provide Directors and Officers liability
insurance in such amount as may be deemed appropriate by its Board
of Directors. Such liability insurance shall be obtained not later
than six months after the date of execution of this agreement.
Irrespective of whether or not such insurance coverage is in force
and effect, the Company agrees to indemnify the Executive and hold
him free and harmless from all claims, injury, damages and costs
(subject to the Company's right to select counsel of its choice)
arising from any action against the Company or any act or activity
undertaken by the Executive in the conduct of the Company's
business or the performance of his duties hereunder provided
however that such indemnification shall not extend to actions or
activities by the Executive involving a violation of law, breach
of contract or moral turpitude. Notwithstanding anything stated
above, the Executive shall not be denied indemnification if he has
taken any action or engaged in any activity in accordance with
directives of the Board of Directors or the Chairman of the
Company, or, in good faith, attempted to implement policies or
guidelines established by them.
9. VACATIONS/ILLNESS/EXPENSE/REIMBURSEMENTS
(a) The Executive shall be entitled to vacations from work for an
aggregate of four (4) calendar weeks per annum. Vacations shall be
taken by the Executive in such manner as to avoid or minimize any
disruption in the Company's business, and the timing of vacations
taken by the Executive shall be approved by the Board of
Directors. Based upon consent by the Company, vacation time may be
accumulated for a maximum of eight (8) weeks.
(b) The Executive shall be entitled to avail of four (4) weeks of
absence with full salary on account of documented injury or
illness during each year of his employment. Leave of absence for
medical reasons may not be cumulated from year to year. The
Company may in its discretion grant the Executive additional leave
of absence on account of illness with full or part salary based
upon prior extraordinary performance by the Executive.
PAGE 4 OF 8
<PAGE>
(c) The Company shall reimburse the Executive for all reasonable out
of pocket expenses incurred by him in the conduct of the Company's
business. The Company may from time to time establish guidelines
or other rules with regard to reimbursements of expenses.
Reimbursements shall be made within thirty (30) business days
after receiving an expense statement from the Executive supported
by appropriate invoices or other documentation acceptable to the
Company's auditors, and shall be paid notwithstanding an
intervening termination of employment.
10. TERMINATION
The employment agreement may be terminated by the Company prior to the
expiration of the term provided herein in accordance with the
following:
(a) DEATH OF THE EXECUTIVE: In the event of the death of the
Executive, this agreement shall terminated in all respects,
provided however that (i) the estate of the Executive shall be
entitled, without any diminution of set-off of any kind, to all
base and bonus compensation, as well as warrants earned by the
Executive under the terms of this agreement, and (ii) the Company
shall be entitled to assert any claim arising from a breach of the
terms of this agreement against the estate of the Executive
provided such claim has been asserted prior to the death of the
Executive.
(b) DISABILITY: The Executive shall become physically or mentally
disabled and be unable to perform his duties and responsibilities
for a continuous period of eight weeks or during intermittent
periods which in the aggregate shall exceed eight weeks in any
twelve month period. The Company may, in its discretion and based
upon the performance and/or exceptional contributions made by the
Executive to the Company, relax the restrictions set out in this
subparagraph. The Company shall provide thirty days notice for
termination of employment pursuant to the provisions of this
subparagraph.
(c) UNLAWFUL ACTIVITIES: Activities engaged in by the Executive which
shall be exclusively or partially responsible for the Company
having violated or being placed in a situation when, in the
opinion of its counsel, it may be in violation of any state or
federal law including, without limitation, securities laws, tax
laws, RICO statutes, and anti-discrimination and sexual
harassment laws. Termination of employment pursuant to the terms
of this subparagraph shall be at the discretion of the Board of
Directors based on the gravity of the violation involved, and the
notice period shall also be at the discretion of the Board.
(d) FRAUD/DIVERSION OF BUSINESS, ETC: It shall be established to the
satisfaction of the Company that the Executive has engaged in one
or more acts or omissions involving fraud, dishonesty, violations
of law, or breach of confidentiality
PAGE 5 OF 8
<PAGE>
undertakings which have resulted in material injury to the
Company. Prior to taking any action pursuant to the provisions of
this subparagraph, the Company shall provide the Executive with a
reasonably detailed statement of the charges made against him. The
Executive shall have two weeks to provide a written response to
such charges. The Company may suspend the Executive and deny him
access to his office or certain files or departments within the
office until such time as the Company makes a final decision on
the matter. After the Executive's written response to the
Company's charges is received by the Company, it shall be
forwarded to the Board of Directors of the Company. The Board
shall take a decision regarding the Executive's employment
pursuant to discussion of the matter at a meeting of the Board
which shall be chaired by a Director other than the Executive. The
decision of the Board of Directors shall be communicated to the
Executive in writing. The Company's decision need not contain any
rebuttal of the Executive's response or provide any other reason
for the termination of employment. Termination of employment
pursuant to the terms of this subparagraph may be made with
immediate effect at the discretion of the Company.
(e) TERMINATION FOR CONVENIENCE: The Company shall be entitled to
terminate this Employment Agreement without assigning any reason
and entirely in its discretion by providing ninety (90) days
written notice thereof to the Executive.
(i) In the event the employment is terminated during the
first two years of this Employment Agreement, a
severance payment of $50,000 (Fifty Thousand Dollars)
shall be paid within thirty (30) business days of the
date of termination.
(ii) In the event the employment is terminated during the
third, fourth, and fifth year of this Employment
Agreement, the amount of the severance payment shall be
$75,000 (Seventy Five Thousand Dollars), payable within
thirty (30) business days of the date of termination.
11. RESIGNATION
In the event the Executive chooses to resign from the Company's
employment, he shall provide the Company with at least ninety (90)
days written notice failing which the Company shall be entitled to
claim damages from the Executive.
12. NOTICES
All notices shall be deemed to have been properly provided if they
shall be sent by registered mail, return receipt requested, to the
last known address of either party as set out in the records of the
Company.
PAGE 6 OF 8
<PAGE>
14. HEADINGS
All headings in this agreement are set out for convenience and shall
not in any manner impact upon the interpretation of this agreement.
15. AMENDMENTS
This agreement sets out the entire agreement between the parties,
which relate to the Executive's employment and other matters set out
in this agreement. Both parties acknowledge that all other prior or
contemporaneous agreements and understandings, whether written or
oral, are void and of no effect. A waiver on one or more occasions of
any of the provisions contained herein shall not be construed as an
amendment to this agreement. This agreement may be amended only by a
document signed by the party against whom the provisions of such
amendment are sought to be enforced.
16. GOVERNING LAW AND JURISDICTION
This agreement shall be interpreted and enforced in accordance with
the internal laws of the State of New York without reference to rules
regarding conflict of laws. All disputes arising under this agreement
shall be referred to arbitration under the procedures and auspices of
the American Arbitration Association. The venue for such arbitration
shall be in New York City.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BALNK]
PAGE 7 OF 8
<PAGE>
In witness whereof, the Company and the Executive have executed this
agreement on the date first above written.
THE COMPANY
By: /s/ Anna Petinova
-----------------------------
Anna Petinova/ Director
THE EXECUTIVE
/s/ Aziz Hirji
--------------------------------
Aziz Hirji
PAGE 8 OF 8
<PAGE>
EXHIBIT NO. 6.10
EMPLOYMENT AGREEMENT WITH ANNA PETINOVA
DATED JUNE 1, 1998
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement, made as of the 1st day of June, 1998 by and between
TIMBER RESOURCES INTERNATIONAL, INC. (the "Company"), a Delaware Corporation
having a place of business at 570 Lexington Avenue, 45h Floor. New York, New
York 10022 and ANNA PETINOVA (the "Executive"), C/O 570 Lexington Avenue, 45th
Floor, New York, NY 10022.
WITNESSETH:
Whereas, the Company is willing to employ the Executive upon the terms
and conditions set out below; and
Whereas, the Executive has had an opportunity to consider and evaluate
the terms of employment offered to her;
Now, therefore, in consideration of their mutual promises as
hereinafter set forth, the parties hereto agree as follows:
1. DESIGNATION AND DUTIES
The Executive shall be employed as Interim Vice President of Finance
and Administration. The Executive will also be elected as a Director
of the Company in accordance with the bylaws of the Company. She shall
perform all duties and undertake all responsibilities as would be
customary and appropriate for the Interim Vice President of Finance
and Administration, and additionally, shall perform all duties and
tasks as are entrusted to her by the Company's Chairman and CEO and
the Board of Directors. Without limiting the generality of the
foregoing, the Executive shall be responsible to:
(a) analyze and evaluate, from a financial point of view, the
Company, its business and prospects, including any business
or operating plan and the appropriateness of the capital
structure of the Company;
(b) assist in the determination of an appropriate plan to raise
equity and/or debt financing for the Company, and render
financial and operational advice in connection with the
design and implementation of such transactions, coordinate
and evaluate proposals for any potential financing;
(c) assist in the design, implementation and administration of
an investor relations program, including the preparation and
dissemination of information to the Company's current and
prospective investors;
Page 1 of 8
<PAGE>
(d) supervise accounting and finance functions, participate in
developing a budget for the Company on a year to year and
calendar quarter to calendar quarter basis, review the
Company's operating statements, balance sheets and
projections, as well as corporate documents, contracts and
other legal documents;
(e) monitor expenses and variances from budgetary allocations,
develop and implement personnel policies, recruit
appropriate personnel to achieve the Company's goals;
2. TERM OF EMPLOYMENT
The Executive shall be employed for an initial term of six (6) months
commencing on June 1, 1998 and ending on November 30, 1998.
Thereafter, this Employment Agreement shall be automatically renewed
for successive six (6) month period unless either party notifies the
other in writing of its intent not to renew not less than sixty (60)
days before the end of the initial six month term or sixty (60) days
before the end of any of the six month renewal term.
3. NO RESTRICTIONS ON EMPLOYMENT WITH COMPANY
The Executive represents and warrants that she is not a party to any
agreement and otherwise is not subject to any restriction, whether
voluntary or involuntary, which would in any manner prohibit or limit
her from entering into this agreement and performing her duties as set
out herewith. In the event, the Executive has, in any position held by
her prior to the execution of this agreement, executed any
confidentiality agreement or other similar agreement restricting her
subsequent employment, the Executive represents that copies of all of
such confidentiality or similar agreements have been furnished to the
Company prior to the execution of this agreement.
4. COMPANY'S OWNERSHIP OF WORK PRODUCT
The Executive acknowledges that all work product initiated, developed
and created by her while in the employment of the Company shall be the
sole and exclusive property of the Company irrespective of whether or
not any special, unique or proprietary knowledge or technique of the
Executive was utilized to develop or create such work product. The
Executive shall, in accordance with standard Company policy or
otherwise in any manner at the Company's request, execute all other
necessary documents and instruments of assignment to establish and
protect the Company's ownership of work product developed or created
by the Executive during the course of her employment.
Page 2 of 8
<PAGE>
5. CONFIDENTIALITY
Unless available in the public domain other than by reason of a breach
of the provisions of this paragraph or other misconduct on the part of
the Executive, all data and data bases, information, research,
business strategy, business contacts, and any written or printed
material as well as material recorded and accessed by electronic media
produced or generated by the Executive or any other employee or
professional consultant engaged by the Company shall be the property
of the Company, and shall be kept secret and confidential by the
Executive during the term of her employment and for a period of five
years thereafter. The Executive agrees that a breach of this provision
can cause irreparable injury to the Company, and further agrees that
the Company shall be entitled to seek injunctive relief from an
appropriate court of law.
6. COMPENSATION
The Executive shall be paid compensation during the term of his
employment as follows:
(a) BASE COMPENSATIONS: During the first six (6) months of employment,
the Executive shall be paid a base salary of $ 3,500 (Three Thousand
Five Hundred Dollars) per month. During the second and third term of
employment, the Executive shall be paid a base salary of $5,000 (Five
Thousand Dollars) per month. If the Executive continues to be employed
by the Company after the expiration of the third term, the Executive
shall be paid a base salary of $ 7,500 (Seven Thousand Five Hundred
Dollars) per month. During the initial term of this Employment
Agreement and during each of the renewal terms, the Executive shall be
available for the Company twenty (20) hours per week.
(b) BONUS COMPENSATION: The Executive's Bonus Cash Awards are granted
based on the Company's performance against financial targets including
return on equity, earnings per share and predetermined targets of
qualitative non-financial performance factors, such as quality, safety
and environment and people development. The Company's Board of
Directors shall determine financial targets for each fiscal year prior
to the commencement of the year. If the threshold level of performance
is not attained, no bonus compensation is earned.
For the fiscal year ending June 30, 1999, the Executive shall be paid
bonus compensation of $ 25,000 (Twenty Five Thousand Dollars) provided
the Company achieved 100% of the goal and the Executive's initial
six-month employment contract is renewed. Furthermore, for each 10%
increase over financial targets, the Executive's bonus compensation
shall be increased by $10,000 (Ten Thousand Dollars), subject to a
maximum bonus compensation of $50,000 (Fifty Thousand Dollars) for
each fiscal year.
Page 3 of 8
<PAGE>
7. WARRANTS
Executive shall be granted ten year warrants for common stock priced
at $.05 at the rate of 100,000 (one hundred thousand) warrants a month
issued on the first of each month beginning July 1, 1998. The number
of warrants should be adjusted to any split or reverse split of the
Company's stock.
8. BENEFITS
(a) The Executive and her family shall receive medical insurance
coverage in accordance with the medical benefits plan adopted by the
Company.
(b) The Company agrees to provide Directors and Officers liability
insurance in such amount as may be deemed approprate by its Board of
Directors. Irrespective of whether or not such insurance coverage is
in force and effect, the Company agrees to indemnify the Executive and
hold her free and harmless from all claims, injury, damages and costs
(subject to the Company's right to select counsel of its choice)
arising from any actiion against the Company or any act or activity
undertaken by the Executive in the conduct of the Company's business
or the performance of her duties hereunder provided however that such
indemnification shall not extend to actions or activites by the
Executive involving a violation of law, breach of contract or moral
turpitude. Notwithstanding anything stated above, the Executive shall
not be denied indemnification if she has taken any action or engaged
in any activity in accordance with directives of the Board of
Directors or the Chairman of the Company, or, in good faith, attempted
to implement policies or guidelines established by them.
9. VACATIONS/ILLNESS/EXPENSE/REIMBURSEMENTS
(a) The Executive shall be entitled to vacations from work for an
aggregate of one calendar week per six months. Vacations shall be
taken by the Executive in such manner as to avoid or minimize any
disruption in the Company's business, and the timing of vacations
taken by the Executive shall be approved by the Chairman. Based upon
consent by the Company, vacation time may be accumulated for a maximum
of four weeks.
(b) The Executive shall be entitled to two weeks of absence with full
salary on account of documented injury or illness in any six month
period. Leave of absence for medical reasons may not be accumulated
from year to year. The Company may in its discretion grant the
Executive additional leave of absence on account of illness with full
or part salary based upon prior extraordinary performance by the
Executive.
Page 4 of 8
<PAGE>
(c) The Company shall reimburse the Executive for all reasonable out
of pocket expenses incurred by her in the conduct of the Company's
business. The Company may from time to time establish guidelines or
other rules with regard to reimbursements of expenses. Reimbursements
shall be made within thirty (30) business days after receiving an
expense statement from the Executive supported by appropriate invoices
or other documentation acceptable to the Company's auditors, and shall
be paid notwithstanding an intervening termination of employment.
10. TERMINATION
The Employment Agreement may be terminated by the Company prior to the
expiration of the term provided herein in accordance with the
following:
(a) DEATH OF THE EXECUTIVE: In the event of the death of the
Executive, this agreement shall terminated in all respects, provided
however that (i) the estate of the Executive shall be entitled,
without any diminution of set-off of any kind, to all base and bonus
compensation, as well as warrants earned by the Executive under the
terms of this agreement, and (ii) the Company shall be entitled to
assert any claim arising from a breach of the terms of this agreement
against the estate of the Executive provided such claim has been
asserted prior to the death of the Executive.
(b) DISABILITY: The Executive shall become physically or mentally
disabled and be unable to perform her duties and responsibilities for
a continuous period of four (4) weeks in any six month period. The
Company may, in its discretion and based upon the performance and/or
exceptional contributions made by the Executive to the Company, relax
the restrictions set out in this subparagraph. The Company shall
provide thirty (30) days notice for termination of employment pursuant
to the provisions of this subparagraph.
(C)UNLAWFUL ACTIVITIES: Activities engaged in by the Executive which
shall be exclusively or partially responsible for the Company having
violated or being placed in a situation when, in the opinion of its
counsel, it may be in violation of any state or federal law including,
without limitation, securities laws, tax laws, RICO statutes, and
anti-discrimination and sexual harassment laws. Termination of
employment pursuant to the terms of this subparagraph shall be at the
discretion of the Board of Directors based on the gravity of the
violation involved, and the notice period shall also be at the
discretion of the Board.
(d) FRAUD/DIVERSION OF BUSINESS, ETC: It shall be established to the
satisfaction of the Company that the Executive has engaged in one or
more acts or omissions involving fraud, dishonesty, violations of law,
or breach of confidentiality undertakings which have resulted in
material injury to the Company. Prior to
Page 5 of 8
<PAGE>
taking any action pursuant to the provisions of this subparagraph, the
Company shall provide the Executive with a reasonably detailed
statement of the charges made against her. The Executive shall have
two weeks to provide a written response to such charges. The Company
may suspend the Executive and deny her access to her office or certain
files or departments within the office until such time as the Company
makes a final decision on the matter. After the Executive's written
response to the Company's charges is received by the Company, it shall
be forwarded to the Board of Directors of the Company. The Board shall
take a decision regarding the Executive's employment pursuant to
discussion of the matter at a meeting of the Board which shall be
chaired by a Director other than the Executive. The decision of the
Board of Directors shall be communicated to the Executive in writing.
The Company's decision need not contain any rebuttal of the
Executive's response or provide any other reason for the termination
of employment. Termination of employment pursuant to the terms of this
subparagraph may be made with immediate effect at the discretion of
the Company.
(e) TERMINATION FOR CONVENIENCE: The Company shall be entitled to
terminate this Employment Agreement without assigning any reason and
entirely in its discretion by providing sixty (60) days written notice
thereof to the Executive. In the event, the employment is terminated
in any six-month period of this Employment Agreement, a severance
payment of $25,000 (twenty five thousand dollars) shall be paid within
thirty (30) business days of the date of termination.
11. RESIGNATION
In the event the Executive chooses to resign from the Company's
employment, she shall provide the Company with at least sixty (60)
days written notice failing which the Company shall be entitled to
claim damages from the Executive.
12. NOTICES
All notices shall be deemed to have been properly provided if they
shall be sent by registered mail, return receipt requested, to the
last known address of either party as set out in the records of the
Company.
13. HEADINGS
All headings in this agreement are set out for convenience and shall
not in any manner impact upon the interpretation of this agreement.
Page 6 of 8
<PAGE>
14. AMENDMENTS
This agreement sets out the entire agreement between the parties,
which relate to the Executive's employment and other matters set out
in this agreement. Both parties acknowledge that all other prior or
contemporaneous agreements and understandings, whether written or
oral, are void and of no effect. A waiver on one or more occasions of
any of the provisions contained herein shall not be construed as an
amendment to this agreement. This agreement may be amended only by a
document signed by the party against whom the provisions of such
amendment are sought to be enforced.
15. GOVERNING LAW AND JURISDICTION
This agreement shall be interpreted and enforced in accordance with
the internal laws of the State of Delaware without reference to rules
regarding conflict of laws. All disputes arising under this agreement
shall be referred to arbitration under the procedures and auspices of
the American Arbitration Association. The venue for such arbitration
shall be in New York City.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
Page 7 of 8
<PAGE>
In witness whereof, the Company and the Executive have executed this
agreement on the date first above written.
THE COMPANY
By: /s/ Aziz Hirji
---------------------------
Aziz Hirji Director
THE EXECUTIVE
/s/ Anna Petinova
------------------------------
Anna Petinova
Page 8 of 8
<PAGE>
EXHIBIT NO. 6.11
EMPLOYMENT AGREEMENT WITH HENRY MIDDEN
DATED MAY 1, 1999
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made the 1st day of May, 1999 by and between Timber
Resources International, Inc. (the "Company"), a Delaware corporation having a
place of business at 570 Lexington Avenue, New York, New York, and Henry Midden
(the "Executive"), having a place of residence at 220 South Clyde, Kissimee,
Florida, 34741.
WITNESSETH
Whereas, the Company is willing to employ the Executive upon the
terms and conditions set out below; and
Whereas, the Executive has had an opportunity to consider and
evaluate the terms of employment offered to him;
Now, therefore, in consideration of their mutual promises as
hereinafter set forth, the parties hereto agree as follows:
1. DESIGNATION AND DUTIES
The Executive shall be employed as Vice President (Operations) of the
Company. The Executive shall perform all duties and undertake all
responsibilities as would be customary and appropriate for an executive in
charge of procurement of equipment and raw material, maintenance and repair of
machinery and equipment, production and quality control, and recruitment,
training and supervision of production personnel, of a company engaged in the
procurement of lumber and processing such lumber into finished finished
products. In addition to such responsibilities, the Executive shall also be
responsible for preparing timely reports with respect to procurement and
production functions as may be entrusted to him, and as requested by the
Chairman or President of the Company.
2. TERM OF EMPLOYMENT
The Executive shall be employed for a term commencing on May 9, 1999
and ending four years thereafter. At least 60 days prior to the end of the term
as set herein, the Company shall either make an offer to renew the Executive's
employment contract on mutually agreed upon terms or decline to do so in
writing.
3. NO RESTRICTIONS ON EMPLOYMENT WITH COMPANY
The Executive represents and warrants that he is not a party to any
agreement and otherwise is not subject to any restriction, whether voluntary or
involuntary, which would in any manner prohibit or limit him from entering into
this agreement and performing his
1
<PAGE>
duties as set out herewith. In the event the Executive has, in any position held
by him prior to the execution of this agreement, executed any agreement
restricting his subsequent employment, the Executive represents that copies of
any such agreement have been furnished to the Company prior to the execution of
this agreement.
4. COMPANY'S OWNERSHIP OF WORK PRODUCT
The Executive acknowledges that all work product initiated, developed
and created by him while in the employment of the Company shall be the sole and
exclusive property of the Company irrespective of whether or not any special,
unique or proprietary knowledge or technique of the Executive was utilized to
develop or create such work product. The Executive shall, in accordance with
standard Company policy or otherwise in any manner at the Company's request,
execute all other necessary documents and instruments of assignment to establish
and protect the Company's ownership of work product developed or created by the
Executive during the course of his employment.
5. CONFIDENTIALITY
Unless available in the public domain other than by reason of a breach
of the provisions of this paragraph or other misconduct on the part of the
Executive, all data and data bases, information, research, business strategy,
business contacts, and any written or printed material as well as material
recorded and accessed by electronic media produced or generated by the Executive
or any other employee or professional consultant engaged by the Company shall be
the property of the Company, and shall be kept secret and confidential by the
Executive during the term of his employment and for a period of five years
thereafter. The Executive agrees that a breach of this provision can cause
irreparable injury to the Company, and further agrees that the Company shall be
entitled to seek injunctive relief from an appropriate court of law.
6. COMPENSATION
The Executive shall be paid a salary of $7,500/month per annum during
the term of his employment. Such amount shall be pro rated and paid on a
periodic basis in accordance with the Company's customary payroll practices.
Salary increases during the term of employment shall be entirely within the
discretion of the Board Directors provided however that there shall be no
increase in salary until such time as the Company shall have operated profitably
in four successive calendar quarters.
2
<PAGE>
7. VACATIONS/SICK LEAVE
The Executive shall be entitled to vacations from work for an
aggregate of four calendar weeks per annum. Vacations shall be taken by the
Executive in such manner as to avoid or minimize any disruption in the Company's
work, and the timing of vacations taken by the Executive shall be approved by
the Chairman. Based upon consent by the Company, vacation time may be
accumulated for a maximum of six weeks. The Executive shall be entitled to avail
of four weeks of absence with full salary on account of documented injury or
illness during each year of his employment. Sick leave shall not be cumulated.
The Company may in its discretion grant the Executive additional periods of sick
leave with full or part salary.
8. TERMINATION
The Executive's employment may be terminated solely by the Chairman of
the Company prior to the expiration of the term provided herein in accordance
with the following:
(A) Upon 60 days written notice by the Company.
(B) With immediate effect and upon written notice, if the Company
shall have reason to believe that the Executive has engaged in one
or more acts or omissions involving fraud, dishonesty, violations
of law, or breach of confidentiality undertakings which have
resulted in material injury to the Company. Materiality shall be
defined in the context of the size and scope of the Company's
operations. The Company's notice shall furnish the Executive with
a reasonably detailed statement of the causes for termination. If
the Execute shall dispute the Company's findings, his sole remedy
and recourse shall be a claim in arbitration proceedings against
the Company as provided in Paragraph 6 below.
(C) The Executive shall become physically or mentally disabled and be
unable to perform his duties fir a continous period of six weeks
during intermittent periods which in the aggregate shall exceed
eight weeks in any twelve month period.
9. RESTRICTIVE COVENANT
The Executive agrees that if he shall choose to leave the Company's
employment, he shall not directly or indirectly accept employment with or
provide advice or consultancy services to any company or business entity which
is then or within two years thereafter becomes engaged in sales of wood products
to any customer of the Company which accounted for more than 10% of aggregate
revenues earned by to Company. In the event, under applicable law, the
provisions of this paragraph shall be deemed
3
<PAGE>
unenforceable, the provisions set out herein shall be deemed amended to comply
with the requirements of applicable law, and as so amended shall be binding and
effective.
10. RESIGNATION
In the event the Executive chooses to resign from the Company's
employment, he shall provide the Company with at least sixty days written notice
failing which the Company shall be entitled to claim damages from the Executive.
11. AMENDMENT TO AGREEMENT
The parties hereto agree that written 90 days from the date hereof,
this Agreement shall be amended to include provisions relating to bonus, stock
options, health insurance and other benefits, if any.
12. NOTICES
All notices shall be deemed to have been properly provided if they
shall be sent by registered mail, return receipt requested, to the last known
address of either party as set out in the records of the Company.
13. HEADINGS
All headings in this agreement are set out for convenience and shall
not in any manner impact upon the interpretation of this agreement.
14. GOVERNING LAW AND JURISDICTION
This agreement shall be interpreted and enforced in accordance with
the laws of the State of New York.. All disputes between the parties shall be
settled exclusively by arbitration in New York City under the applicable rules
of the American Arbitration Association.
4
<PAGE>
In witness whereof, the Company and the Executive have executed this
agreement on the date first above written.
THE COMPANY
By: /s/ Aziz Hirji
-------------------------
Aziz Hirji, Chairman
THE EXECUTIVE
By: /s/ Henry Midden
-------------------------
Henry Midden
5
<PAGE>
EXHIBIT NO. 6.12
EMPLOYMENT AGREEMENT WITH PETER MAHARAJ
DATED SEPTEMBER 1, 1999
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made the 1st day of September, 1999 by and between
Timber Resources International, Inc. (the "Company"), a Delaware corporation
having a place of business at 570 Lexington Avenue, New York, New York, and
Peter Maharaj (the "Executive"), having a place of residence at 117-05 105th
Avenue, South Ozone Park, NY 11420.
WITNESSETH
Whereas, the Company is willing to employ the Executive upon the terms
and conditions set out below; and
Whereas, the Executive has had an opportunity to consider and evaluate
the terms of employment offered to him;
Now, therefore, in consideration of their mutual promises as
hereinafter set forth, the parties hereto agree as follows:
SECTION I
DESIGNATION AND DUTIES
The Executive shall be employed as Vice President (Marketing) of the
Company. The Executive shall perform all duties and undertake all
responsibilities as would be customary and appropriate for an executive in
charge of marketing and sales and recruitment, training and supervision of sales
personnel, of a company engaged in the procurement of lumber and processing such
lumber into finished products. In addition to such responsibilities, the
Executive shall also be responsible for preparing timely reports with respect to
marketing plan as may be entrusted to him, and as requested by the Chairman or
President of the Company.
SECTION II
TERM OF EMPLOYEMENT
The Executive shall be employed for a term commencing on September 1,
1999 and ending five (5) years thereafter. At least sixty (60) days prior to the
end of the term as set herein, the Company shall either make an offer to renew
the Executive's employment contract on mutually agreed upon terms or decline to
do so in writing.
1
<PAGE>
SECTION III
NO RESTRICTIONS ON EMPLOYMENT WITH COMPANY
The Executive represents and warrants that he is not a party to any
agreement and otherwise is not subject to any restriction, whether voluntary or
involuntary, which would in any manner prohibit or limit him from entering into
this agreement and performing his duties as set out herewith. In the event the
Executive has, in any position held by him prior to the execution of this
agreement, executed any agreement restricting his subsequent employment, the
Executive represents that copies of any such agreement have been furnished to
the Company prior to the execution of this agreement.
SECTION IV
COMPANY'S OWNERSHIP OF WORK PRODUCT
The Executive acknowledges that all work product initiated, developed
and created by him while in the employment of the Company shall be the sole and
exclusive property of the Company irrespective of whether or not any special,
unique or proprietary knowledge or technique of the Executive was utilized to
develop or create such work product. The Executive shall, in accordance with
standard Company policy or otherwise in any manner at the Company's request,
execute all other necessary documents and instruments of assignment to establish
and protect the Company's ownership of work product developed or created by the
Executive during the course of his employment.
SECTION V
CONFIDENTIALITY
Unless available in the public domain other than by reason of a breach
of the provisions of this paragraph or other misconduct on the part of the
Executive, all data and data bases, information, research, business strategy,
business contacts, and any written or printed material as well as material
recorded and accessed by electronic media produced or generated by the Executive
or any other employee or professional consultant engaged by the Company shall be
the property of the Company, and shall be kept secret and confidential by the
Executive during the term of his employment and for a period of five years
thereafter. The Executive agrees that a breach of this provision can cause
irreparable injury to the Company, and further agrees that the Company shall be
entitled to seek injunctive relief from an appropriate court of law.
2
<PAGE>
SECTION VI
COMPENSATION
The Executive shall be paid a salary of sixty thousand dollars
($60,000) per annum during the term of his employment. Such amount shall be pro
rated and paid on a periodic basis at the rate of five thousand dollars ($5,000)
per month in accordance with the Company's customary payroll practices. Salary
increases during the term of employment shall be entirely within the discretion
of the Board Directors provided however that there shall be no increase in
salary until such time as the Company shall have operated profitably in four
successive calendar quarters.
SECTION VII
VACATIONS/SICK LEAVE
The Executive shall be entitled to vacations from work for an
aggregate of four (4) calendar weeks per annum. Vacations shall be taken by the
Executive in such manner as to avoid or minimize any disruption in the Company's
work, and the timing of vacations taken by the Executive shall be approved by
the Chairman. Based upon consent by the Company, vacation time may be
accumulated for a maximum of six (6) weeks. The Executive shall be entitled to
avail of four (4) weeks of absence with full salary on account of documented
injury or illness during each year of his employment. Sick leave shall not be
cumulated. The Company may in its discretion grant the Executive additional
periods of sick leave with full or part salary.
SECTION VIII
TERMINATION
The Executive's employment may be terminated solely by the Chairman of
the Company prior to the expiration of the term provided herein in accordance
with the following:
(A) Upon sixty (60) days written notice by the Company.
(B) With immediate effect and upon written notice, if the Company
shall have reason to believe that the Executive has engaged in one
or more acts or omissions involving fraud, dishonesty, violations
of law, or breach of confidentiality undertakings which have
resulted in material injury to the Company. Materiality shall be
defined in the context of the size and scope of the Company's
operations. The Company's notice shall furnish the Executive with
a reasonably detailed statement of the causes for termination. If
the Execute shall dispute the Company's findings, his sole remedy
and recourse
3
<PAGE>
shall be a claim in arbitration proceedings against the Company as
provided in Paragraph 6 below.
(C) The Executive shall become physically or mentally disabled and be
unable to perform his duties fir a continous period of six (6)
weeks during intermittent periods which in the aggregate shall
exceed eight weeks in any twelve month period.
SECTION IX
RESTRICTIVE COVENANT
The Executive agrees that if he shall choose to leave the
Company's employment, he shall not directly or indirectly accept employment with
or provide advice or consultancy services to any company or business entity
which is then or within two years thereafter becomes engaged in sales of wood
products to any customer of the Company which accounted for more than ten
percent (10%) of aggregate revenues earned by the Company. In the event, under
applicable law, the provisions of this paragraph shall be deemed unenforceable,
the provisions set out herein shall be deemed amended to comply with the
requirements of applicable law, and as so amended shall be binding and
effective.
SECTION X
RESIGNATION
In the event the Executive chooses to resign from the Company's
employment, he shall provide the Company with at least sixty (60) days written
notice failing which the Company shall be entitled to claim damages from the
Executive.
SECTION XI
AMENDMENT TO AGREEMENT
The parties hereto agree that written ninety (90) days from the
date hereof, this Agreement shall be amended to include provisions relating to
bonus, stock options, health insurance and other benefits, if any.
SECTION XII
NOTICES
All notices shall be deemed to have been properly provided if they
shall be sent by registered mail, return receipt requested, to the last known
address of either party as set out in the records of the Company.
4
<PAGE>
SECTION XIII
HEADINGS
All headings in this agreement are set out for convenience and
shall not in any manner impact upon the interpretation of this agreement.
SECTION IV
GOVERNING LAW AND JURISDICTION
This agreement shall be interpreted and enforced in accordance
with the laws of the State of New York. All disputes between the parties shall
be settled exclusively by arbitration in New York City under the applicable
rules of the American Arbitration Association.
IN WITNESS WHEREOF, the Company and the Executive have executed
this agreement on the date first above written.
THE COMPANY
By: /s/ Aziz Hirji
---------------------------
Aziz Hirji, Chairman
THE EXECUTIVE
By: /s/ Peter Maharaj
----------------------------
Peter Maharaj
5
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<PAGE>
<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 63377
<SECURITIES> 0
<RECEIVABLES> 214225
<ALLOWANCES> 213225
<INVENTORY> 0
<CURRENT-ASSETS> 168346
<PP&E> 86120
<DEPRECIATION> 718
<TOTAL-ASSETS> 852425
<CURRENT-LIABILITIES> 1075894
<BONDS> 400000
0
0
<COMMON> 16500
<OTHER-SE> (639969)
<TOTAL-LIABILITY-AND-EQUITY> 852425
<SALES> 0
<TOTAL-REVENUES> 5225
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 707391
<LOSS-PROVISION> 323225
<INTEREST-EXPENSE> 12948
<INCOME-PRETAX> (1038339)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1038339)
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<CHANGES> 0
<NET-INCOME> (1038339)
<EPS-BASIC> (2.04)
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