Robert A. Forrester, Attorney at Law
1215 Executive Drive West, Suite 102
Richardson, TX 75081
(972) 438-9898
Fax (972) 480-8406
November 24, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Massimo Enterprises, Inc. (the "Company")
Registration Statement on Form SB-2
Commissioners:
On behalf of the Company I transmit herewith a Registration Statement on Form
SB-2. The Registration Statement covers a proposed offering of 500,000 Units
with each Unit comprised of two shares of Common Stock and two warrants to
purchase Common Stock. Should the Staff have any comments or questions or desire
any additional information, please telephone the undersigned at the above
telephone number.
Very truly yours,
/s/ Robert A. Forrester
Robert A. Forrester
<PAGE>
As filed with the Securities and Exchange Commission on ___________, 1998
Registration No.________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM SB-2
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933
MASSIMO ENTERPRISES, INC.
(Name of small business issuer in its charter)
Texas 2844 72-1269331
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number)
Identification Number)
Massimo Enterprises, Inc.
8643 Grenadier Drive
Dallas, TX 75238
(214) 340-3506
(Address and telephone number of principal
executive offices and principal place of business)
----------------------------------------
Jason J. Romano
Massimo Enterprises, Inc.
8643 Grenadier Drive
Dallas, TX 75238
(214) 340-3506
(Name, address and telephone number of agent for service)
Copies of all communications to:
Robert A. Forrester, Esq. Company2
1215 Executive Drive West Address
Suite 102
Richardson, TX 75081
Phone (972) 437-9898 Phone ( )
Fax (972) 480-8406 Fax ( )
Approximate date of proposed sale to public: As soon as practicable
after the effective date of the Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462
(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If delivery of the prospectus is expected to be make pursuant to Rule
434, please check the following box.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Maximum Proposed
Title of Each Class Amount to Offering Maximum Amount of
Of be Price Aggregate Registration
Securities to be Registered Per Unit Offering Fee
Registered Price (1)
<S> <C> <C> <C> <C>
Units, each
consisting of
2 shares of Common
Stock and 575,000 $8.50 $4,887,500 $1,527.34
2 Redeemable Common
Stock
Purchase Warrants
(2)
Common Stock, $0.01 575,000 (2) (2) (2)
par value (2)
Redeemable Series A
Common 575,000 (2) (2) (2)
Stock Purchase
Warrants (2)
Common Stock, $0.01 575,000 $10.20 $5,865,000 $1,832.81
par value (3)
Underwriter's 100,000 $.001 100.00 --
Warrants (4)
Units Underlying the
Underwriter's 50,000 $10.20 $510,000 $159.37
Warrants
Common Stock, $0.01 100,000 (5) (5) (5)
par value (5)
Redeemable Series A
Common 100,000 (5) (5) (5)
Stock purchase
Warrants
Common Stock, $0.01 100,000 $5.10 $510,000 $159.37
par value (6)
Total $3,678.89
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457 (a) under the Securities Act of 1933 (the "Act").
(2)Included in the Units. No additional registration fee is required.
(3)Issuable upon exercise of Redeemable series A Common Stock Purchase Warrants.
Pursuant to Rule 416 there are also registered an indeterminate number of
shares of Common Stock, which may be issued pursuant to the anti-dilution
provisions applicable to the Redeemable Series A Common Stock Purchase
Warrants, the Underwriter's Warrants and the Redeemable Series A Common
Stock Purchase Warrants issuable under the Underwriters' Warrants.
(4)Underwriters' Warrants to purchase up to 50,000 Units, consisting of an
aggregate of 100,000 shares of Common Stock and 100,000 Redeemable Series A
Common Stock Purchase Warrants.
(5)Included in the Units Underlying the Underwriter's Warrants. No additional
registration fee is required.
(6)Issuable upon exercise of Redeemable Series A Common Stock Purchase Warrants
underlying the Underwriters' Units.
<PAGE>
Massimo Enterprises, Inc.
500,000 Units
Each Unit consisting of Two Shares of Common Stock and
Two Redeemable Series A Common Stock Purchase Warrants
Massimo Enterprises, Inc. has developed a line of hair care products and
patented an applicator for applying relaxer to hair. The products are to
marketed primarily to African-Americans. We have not yet begun to market these
products.
Each warrant sold with the unit entitles the holder to purchase one share of
common stock for 60% of the price of the unit. The holder may no t exercise this
right until ______________(thirteen months from the dated of this offering).
This right ceases on _________ (five years after the date of this prospectus).
We may purchase the warrants at a price of $0.05 per warrant at any time
beginning _________(18 months form the dated of this prospectus) provided that
the closing sale price per share of common stock equals or exceeds the offering
price per unit for twenty consecutive days. The common stock and warrants must
trade as a unit for six months following the date of this prospectus unless the
Representative permits them to trade separately at an earlier date.
Prior to this offering, there has been no public market for any of these
securities, but we have applied to the Nasdaq Small-Cap Market and the Boston
Stock Exchange to list them for trading. We expect the units to be offered at a
price of ______to _______.
See "Risk Factors" beginning on page six for a discussion of certain factors
that you should consider before you invest in the units being sold with this
prospectus.
----------------------------
The Offering:
Per Unit Total
Public Price $8.50 $4,250,000
Underwriting
Discounts $0.85 $425,000
Proceeds to Us $7.65 $3,825,000
For a period of 45 days form the date of this prospectus, the underwriters may
purchase up to 75,000 units at the public offering price less the
underwriting discount.
Proposed Trading Symbols:
Boston
Units
Common Stock
Warrants
Nasdaq Small-Cap
Units
Common Stock
Warrants
-----------------------------
Neither the Securities and Exchange Commission nor any State securities
commission have approved nor disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is
_________________, 1998.
<PAGE>
ADDITIONAL INFORMATION
Massimo has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended ( the "Exchange Act"). We
have filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form SB-2, (including any amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
Massimo and the Securities, reference is made to the Registration Statement and
the exhibits and schedules thereto. Statements made in this Prospectus regarding
the contents of any contract or document filed as an exhibit to the Registration
Statement are not necessarily complete and, in each instance, reference is
hereby made to the copy of such contract or document so filed. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits and the schedules thereto filed with the Commission
may be inspected, without charge, at the office of the Commission at Judiciary
Plaza, 450 fifth Street, NW, Washington, D.C. 20549. Copies of such materials
may also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, NW, Washington, D.C. 20549, at prescribed rates. The commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the commission
at http:/www.sec.gov.
As a result of this offering, Massimo will become subject to the
reporting requirements of the Exchange Act, and in accordance therewith will
file periodic reports, proxy statements and other information with the
Commission. Massimo will furnish our shareholders with annual reports containing
audited consolidated financial statements certified by independent public
accountants following the end of each fiscal year, proxy statements and
quarterly reports containing unaudited consolidated financial information for
the first three quarters of each fiscal year following the end of such fiscal
quarter.
Massimo has applied to the NASDAQ Small-Cap and Boston Stock Exchange.
If the Company's application is accepted, then reports, proxy statements and
other information concerning Massimo will be available for inspection at the
Boston Stock Exchange, One Boston Place, Boston, Mass 02108.
Certain persons participating in this offering may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock, including exercising the over-allotment option, effecting
syndicate covering transactions or imposing penalty bids. For a description of
these activities, see "Underwriting."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including notes thereto) appearing
elsewhere in this Prospectus. The Securities offered hereby involve a high
degree of risk. Investors should carefully consider the information set forth
under "Risk Factors."
Prospective investors should note that this Prospectus contains certain
"forward-looking" statements, including without limitation, statements
containing the words "believes," "anticipates," "expects," "intends," "plans,"
"should," "seeks to," and similar words. Prospective investors are cautioned
that such forward-looking statements are not guarantees of future performance
and involve risks and uncertainties. Actual results may differ materially from
those in the forward-looking statements as a result of various factors,
including but not limited to, the risk factors set forth in this Prospectus. The
accompanying information contained in this Prospectus identifies certain
important factors that could cause such differences. See "Risk Factors."
The Company
Massimo is a development stage company which was formed in May 1994 as
a Louisiana corporation and reorganized as a Texas corporation in 1998. We have
developed and patented an applicator for applying hair relaxer and a line of
hair care products to be marketed primarily to African Americans. Our principal
product is the patented applicator which applies hair relaxer with accuracy and
significantly faster than existing application methods. In addition to the
applicator and hair relaxer product, Massimo has also developed:
Hair spray to hold styled hair
Conditioners that repair hair damaged by chemical treatment
and over processing Conditioning shampoo that cleans
without affecting color-treated or relaxed hair
All of these products are marketed under the trademark Smooth & Easy (R).
We have designed our patented applicator to apply hair straighteners in
five to ten minutes. Users of hair straighteners typically apply hair relaxer
ever five to six weeks and we believe it takes 30 to 40 minutes to apply.
Between major applications, one will apply hair relaxer to roots, and we believe
the process is cumbersome, imprecise, time consuming and often modifies the
effect of an earlier application. Our applicator not only shortens the time it
takes to apply hair relaxer, it is convenient and applies hair relaxer
accurately.
Massimo has not commenced significant operations. Nonetheless, we have
completed the design of our applicator and assembled 50,000 units, each
consisting of five products, which we hold in inventory. We have two patents on
the applicator and a registered trademark on Smooth & Easy(R). Massimo has
contracted with RAANI Corporation to assemble, package and ship our products.
Massimo plans to market our products primarily through television and
print advertising where consumers are asked to call a toll free number to obtain
more information and place orders for our products. The products will be shipped
directly to the consumer. We plan to engage a direct response multi-media
marketing firm to develop information and handle order processing.
Our headquarters are located at 8643 Grenadier Drive, Dallas Texas
75238. The telephone number is (214) 340-3506 and our fax number is (214)
340-1134.
3
<PAGE>
The Offering
Securities offered hereby 500,000
Units, each Unit consisting
of two shares of Common
Stock and two Series A
Warrants, each Series A
Warrant entitles the holder
to purchase one share of
Common Stock at a price of
120% of the offering price
per share until 2003. (See
"Description of
Securities.")
Series A Warrants The Warrants are
not immediately exercisable
and are not transferable
separately from Shares
until _____, 1999. The
Series A Warrants are
redeemable by Massimo any
at $0.05 per Warrant under
certain conditions. (See
"Description of
Securities.")
Offering Price $8.50 Per Unit
Common Stock to be outstanding
after the offering 1,700,033 Shares (1)(2)
--------------------------- --
Warrants to be Outstanding
after the Offering 1,000,000 Warrants (2)(3)
----------------------------------------
Use of Proceeds To provide additional funds for marketing and
product development and for working capital and other
general corporate purposes. (See "Use of Proceeds.")
Risk Factors The Securities offered hereby are
speculative and involve a high degree of risk and should not
be purchased by investors who cannot afford the loss of
their entire investment. (See "Risk Factors.")
Boston Stock Exchange Symbols
Units
Common Stock
Series A Warrants
NASDAQ Small-Cap Market Symbols
Units
Common Stock
Series A Warrants
---------------------
(1) Excludes 170,000 shares of Common Stock reserved for issuance under
Massimo's 1998 Stock Option Plan (the "Stock Option Plan"). To date,
170,000 options have been granted under the Stock Option Plan, none of
which are immediately exercisable. See "Management - Stock Option Plan."
(2) Excludes an aggregate of up to 1,420,000 shares issuable upon exercise of
(i) the Warrants, (ii) the over-allotment option and (iii) the
Underwriters' Warrants.
(3) Excludes up to 150,000 Series A Warrant issuable upon exercise of the
over-allotment option or the 100,000 Series A Warrants underlying the
Underwriters' Warrants.
4
<PAGE>
Summary Financial Information
<TABLE>
<CAPTION>
Year Ended May 24, 1994 Nine Months Ended
December 31 (Inception) Through September 30,
Operating Data: 1996 1997 December 31, 1997 1997 1998
---- ---- ----------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 6,127 - $ 6,127 - -
Gross profit 1,951 - 1,951 - -
Operating income (loss) (124,226) (93,788) (483,680) (36,027) (85,405)
Net income (loss) (125,585) (93,296) (484,547) (36,295) (82,498)
Net income (loss) per share $(0.25) $(0.18) $(0.96) $(0.07) $(0.13)
</TABLE>
<TABLE>
<CAPTION>
December 31 September 30
--------------------------
Balance Sheet Data: 1997 1998 As Adjusted (1)
------------- ----------- ---------------
<S> <C> <C> <C>
Working capital $149,149 213,289 $3,778,289
Total assets 171,668 275,239 3,840,239
Long-term liabilities - - -
Shareholders' equity (deficit) 171,668 274,970 3,839,970
</TABLE>
(1) As adjusted to give effect to the sale of 500,000 Units at an assumed
offering price of $8.50 per Unit and the application of the net proceeds
therefrom of approximately $3,565,000. (See "Use of Proceeds" and
"Capitalization.")
5
<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high degree of risk.
Prospective investors should consider the following factors in addition to the
other information set forth in the prospectus before purchasing the securities
offered hereby.
Limited Operating History; Recent Losses; Accumulated Deficit; Potential
Inability to Maintain Profitability
Massimo was founded in May, 1994 and anticipates marketing products
approximately two months following the close of this offering. We are subject to
numerous risks, expenses, problems and difficulties typically encountered in
establishing a new business and the commercialization of new products. We intend
to establish our production, marketing and sales activities immediately
following the completion of this offering and will incur increased associated
expenditures. We anticipate that additional losses may occur from time to time
until revenue is sufficient to offset the increased level of sales, marketing
and production costs.
In particular, Massimo has only recently entered into an agreement for
the assembly of our products and has no experience with this manufacturer.
Although one of our future officers does have multimedia marketing experience,
we do not have significant experience with multimedia marketing and product
distribution. Furthermore, we have allocated $1,750,000 from the proceeds of
this offering for marketing and advertising expenses and it is unlikely that our
gross profit margins will be sufficiently large to absorb the initial marketing
expense in the first several months following completion of this offering. See
"Business"
Neither Massimo nor any independent third party has formally studied the
feasibility, management or marketing of our present and future business
prospects and capital requirements. In addition, there can be no assurance that
our products and services will find sufficient commercial acceptance in the
marketplace to enable us to fulfill our objectives, even if adequate financing
is available. See "Business."
Possible need for Additional Financing
Massimo expects that cash flow from operations, together with the net
proceeds of this offering, will fund our cash requirements for at least twelve
months following the completion of this offering. However, additional financing
may be required if: we incur operating losses in the future; or operations do
not generate sufficient funds.
Because there can be no assurance that adequate additional financing will be
available on terms acceptable to Massimo, we may be forced to limit our
operations. Any future financing that involve the sale of Massimo's equity
securities may result in dilution to the then current stockholders. See "Use of
Proceeds."
Uncertainty of Market Acceptance of Products' Dependence on Market Efforts
Massimo has not yet commenced significant marketing activities, and we
will need the proceeds from this offering to begin that effort. The market for
our products is sensitive to changing consumer preferences and demand. Achieving
successful market acceptance for our products will require substantial marketing
efforts and expenditure of significant funds to create consumer awareness and
demand. There can be no assurance that we will have sufficient funds or other
resources to achieve successful market acceptance of our products or make
sufficient sales to achieve profitability. See "Use of Proceeds."
Competition
Seven domestic manufacturers presently control the ethnic hair care
market. Each manufacture and sell similar products in similar packaging. There
can be no assurance that competitors will not succeed in developing technologies
and products that are more effective than any which have been or are being
developed by Massimo. There can be no assurance that our product will be
successful and the profitability of certain products and services may be
reduced, possibly substantially, so that we can effectively compete in the
market. These reductions could have a material adverse effect on the business
and our financial condition. See "Business-Competition."
Dependence on Suppliers and Others
Massimo does not produce our own products but plans to purchase our raw
materials and packaging components from a variety of sources. We also plan to
rely upon third parties to market and distribute our products. Presently, we
have agreements with only one entity, RAANI Corporation, for the production of
our products and no formal agreements for pre-assembly, sales or distribution of
our products. Massimo believes that there are several such suppliers, marketers
and distributors, but there can be no assurance that those entities would be
available to us on an immediate basis if needed, or at prices that we have based
our planning. The failure of Massimo to successfully obtain suppliers,
assemblers, marketers or distributors could have a material adverse effect on
the operations of Massimo. See "Business-Contractual Status."
Key Employees
Massimo's business is substantially dependent on the efforts of Jason
Romano, Joseph Romano and Charles Haag. Massimo lacks employment agreements with
any of these individuals, and the loss of services to Massimo of these
individuals, could have a material adverse effect on Massimo. Massimo has agreed
to obtain key man insurance in the amount of $1,000,000 on the lives of Jason
Romano and Joseph Romano, and there can be no assurance that the amount will be
sufficient to compensate Massimo for the loss of their services. See "
Management."
Personnel And Management Risks
Our success depends upon our ability in a competitive environment to
attract and retain qualified personnel. Also, we may need to fill important
executive positions in the future. While we hope that qualified personnel can be
hired, the market for such individuals is highly competitive, and there is no
assurance that these critical positions can be filled on a timely or
economically basis, it at all.
Market And Business Risks
A considerable portion of our strategic plans are predicated on our
belief and market research that the market for our hair care products will grow
rapidly. However, there can be no assurance that such growth will occur or that
our products will find market acceptance if such growth occurs.
Regulations
Massimo is subject to a variety of Federal and State Regulations
relating to the content, production and sale of our products. The Food and Drug
Administration ("FDA") regulates the manufacture of products through its "Good
Manufacturing Practices" and regulates the contents of cosmetics their labeling
and claims about the products. The Federal Trade Commissions ("FTC") also
regulates product claims. These regulations subject us to the possibility of
repurchasing or recalling products found to be defective as well as fines and
penalties. See "Business - Regulations."
Arbitrary Determination of Offering Price
The public offering price for the Common Stock offered hereby was
determined by negotiation between Massimo and the Representative. The factors
considered in determining the public offering price include:
Massimo's potential for revenue growth, the industry in which we operate,
our business potential and earning prospects and the general condition of the
securities markets at the time of the offering.
Prices for the shares of Common Stock after this offering will be determined in
the market and may be influenced by many factors, including:
the depth and liquidity of the market for the Common Stock, investor
perception of Massimo and the mortgage banking industry as a whole. See
"Underwriting." Dilution
The principal shareholders of Massimo have acquired Common Stock at a
cost per share substantially less than that at which Massimo intends to sell the
Common Stock included in the Units to investors in this offering. Therefore, an
investment in the Units offered hereby will result in the investors experiencing
substantial immediate dilution in net tangible book value of 47.5% in their
ownership of Common Stock. (See "Dilution", "Certain Relationships and Related
Transactions" and "Description of Securities.")
Control by Principal Shareholders
Upon completion of the offering, the principal shareholders will own
approximately 29% of the Common Stock, assuming no exercise of the Underwriters'
over-allotment option. As a result, the principal shareholders will have the
ability to exert significant influence over the business affairs of Massimo,
including the election of directors and other matters requiring shareholder
approval. (See "Principal and Selling Shareholders" and "Management.")
Boston Stock Exchange and NASDAQ Small-Cap Market
Massimo has applied for listing of the Units, the Common Stock and the
Warrants on the Boston Stock Exchange and for quotation on the NASDAQ Small-Cap
Market and anticipates that it will meet the initial inclusion requirements at
the time of the closing of this offering. There can be no assurance however that
the listing application will be approved. If the Units, the Common Stock and the
Warrants are listed, we may substantially fail to meet the maintenance
requirements of the Boston Stock Exchange and/or the NASDAQ Small-Cap Market
could result in Massimo's Common Stock and Warrants being delisted from the
Boston Stock Exchange and/or the NASDAQ Small-Cap Market, could then delist our
Common Stock and Warrants and they would trade on the OTC Electronic Bulletin
Board or in the "pink sheets" maintained by the National Quotation Bureau, Inc.
These trading markets are generally considered to be less efficient markets.
Under this the Penny Stock Regulation
Among other consequences, delisting from the Boston Stock Exchange
and/or the NASDAQ Small-Cap Market may cause a decline in the trading price of
the Securities, difficulty in conducting trades and difficulty in obtaining
future financing. If at any time, the Units, the Common Stock or the Warrants
are not quoted on the Boston Stock Exchange or the NASDAQ Small-Cap Market, the
Units, the Common Stock or the Warrants could become subject to the "penny stock
rules" adopted pursuant to Section 15(g) of the Securities Exchange Act of 1934,
as amended. The penny stock rules apply to companies, the common stock of which
trades at less than $5.00 per share or which have tangible net worth of less
than $5,000,000 ($2,000,000 if Massimo has been operating for three or more
years). Such rules require, among other things, that brokers who trade "penny
stock" to persons other than "established customers":
complete certain documentation, make suitability inquiries of investors,
provide investors with certain information concerning trading in the security,
including a risk disclosure document and quote information under certain
circumstances.
Many brokers have decided not to trade "penny stock" because of the
requirements of the penny stock rules and, as a result, the number of
broker-dealers willing to act as market makers in such securities is limited.
(See "Underwriting.")
Absence of Public Market for Common Stock and Warrants and Volatility
Before the offering, there has been no public market for the
Securities, and there can be no assurance that an active trading market will
develop or be sustained. The market prices for the Common Stock may be volatile
depending on a number of factors, including the operating results of Massimo,
the United States and global economic or political conditions and various other
factors generally affecting the stock market. Additionally, the stock market has
from time to time experienced extreme price and volume fluctuations which have
particularly affected the market price for emerging growth companies. These
extreme fluctuations, which often have been unrelated to the operating
performance of any particular company or to any group of companies, may
adversely affect the market price of the Securities.
Lack of Dividends on the Common Stock
Massimo does not anticipate paying dividends on the Common Stock at any
time in the foreseeable future. Massimo's Board of Directors currently plans to
retain earnings for the development and expansion of our business. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors of Massimo and will depend on a number of factors including
future earnings, capital requirements, financial conditions and such other
factors as the Board of Directors may deem relevant.
Shares Eligible for Future Sale
Upon the completion of this offering, Massimo will have outstanding
1,700,033 shares of Common Stock.
Of these shares, the shares included in the Units will be tradable
after separation of the Units without restriction, unless they are purchased by
affiliates of Massimo. Shares outstanding before the completion of this offering
are "restricted securities" under the Securities Act. These shares, and any
shares purchased by affiliates of Massimo in this offering, may be sold only if
they are registered under the Securities Act or sold pursuant to an applicable
exemption from the registration requirements of the Securities Act, including
Rules 144 and 701 thereunder. Certain principal shareholders, officers and
directors have agreed not to sell or dispose of shares of Common Stock for one
year after the date of this Prospectus. Massimo's majority shareholder and
director has agreed not to dispose of shares of Common Stock for a period of 365
days after the date of this Prospectus. However, after such period, this
shareholder will still be subject to certain restrictions contained in Rule 144
under the Securities Act on the sale of his shares. (See "Underwriting.")
We cannot predict the effect, if any, that market sales of such shares
or availability of such shares for future sales will have on the market price of
the Common Stock from time to time. Future sales of substantial amounts of
Common Stock by existing shareholders could adversely affect the prevailing
market price of the Common Stock and Massimo's ability to raise additional
capital.
Ability to Exercise Warrants
For the term of the Warrants, we will use our best efforts to maintain
a current effective registration statement with the Securities and Exchange
Commission (the "Commission") relating to the shares of Common Stock issuable
upon exercise of the Warrants. If Massimo is unable to maintain a current
registration statement the Warrant holders would be unable to exercise the
Warrants and the Warrants would become valueless. Although the Underwriters have
agreed to not knowingly sell the Warrants in any jurisdiction in which the
Common Stock issuable upon exercise of the Warrants is not registered or
otherwise qualified, a purchaser of the Warrants may relocate to a jurisdiction
in which the shares of Common Stock underlying the Warrants are not so
registered or qualified. In addition, a purchaser of the Warrants in the open
market may reside in a jurisdiction in which the shares of the Common Stock
underlying the Warrants are not registered or qualified. If Massimo is unable or
chooses not to register or qualify or maintain the registration or qualification
of the shares of Common Stock underlying the Warrants for sale in all of the
states in which the Warrant holders reside, Massimo would not permit such
warrants to be exercised, and Warrant holders in those states would have no
choice but to sell their Warrants or let them expire. Prospective investors and
other interested persons who wish to know whether or not shares of Common Stock
may be issued upon the exercise of Warrants by Warrant holders in a particular
state should consult with the securities department of the state in question or
send a written inquiry to Massimo.
(See "Description of Securities-Warrants.")
Year 2000 Compliance
Massimo's computer systems may not comply with year 2000 issues. Over
the next few years, Massimo may incur additional expenditures to modify our
software to operate correctly for the year 2000. While considered to be
immaterial by management, we have not yet quantified such costs, which will be
expensed as incurred. If we do not address this issue successfully, our business
could be materially and adversely affected.
Risk of Redemption of Warrants
Commencing 180 days from the date of this Prospectus, Massimo may
redeem the Warrants for $0.05 per Warrant at any time commencing eighteen months
after the date of this Prospectus, on thirty (30) days prior written notice,
provided that the closing sale price per share for the Common Stock has equaled
or exceeded the offering price per Unit 20 consecutive trading days. Notice of
redemption could force the holders to:
exercise their Warrants and pay the exercise price at a time when it might
be disadvantageous or difficult for the holder to do so, sell the Warrants at
current market price when they might otherwise wish to hold the Warrants, or
accept the redemption price, which is likely to be less than the market price of
the Warrants at the time of redemption.
Underwriters' Warrants; Risk of Further Dilution
Massimo has agreed to sell to the Underwriters, for nominal
consideration, warrants to purchase up to 50,000 Units at an exercise price of
120% of the price at which the Units are initially offered to the public.
Massimo has agreed to register under the Securities Act, and applicable state
securities laws, the Securities issuable upon exercise of the Underwriters'
Warrants at the expense of Massimo. The Underwriters' Warrants and any profits
realized by the Underwriter on the sale of the Securities underlying the
Underwriters' Warrants could be considered additional underwriting compensation.
For the term of the Underwriters' Warrants, the holders are given, at nominal
cost, the opportunity to profit from the difference, if any, between the
exercise price of the Underwriters' Warrants and the value of or market price
(if any) for the Securities, with a resulting dilution in the interest of
existing shareholders. The Underwriters' Warrants may be exercised at a time
when in all likelihood, Massimo would be able to obtain any needed capital by a
new placement of securities on terms more favorable than those provided for by
the Underwriters' Warrants. (See "Underwriting.")
DIVIDEND POLICY
Massimo does not anticipate paying dividends on the Common Stock at any time in
the foreseeable future. Massimo's Board of Directors currently plans to retain
earnings for the development and expansion of Massimo's business. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors of Massimo and will depend on a number of factors including
future earnings, capital requirements, financial conditions and such other
factors as the Board of Directors may deem relevant.
<PAGE>
USE OF PROCEEDS
The net proceeds of this offering to Massimo are anticipated to be
$3,565,000 after deducting the Underwriters discount and estimated offering
expenses. We will not receive any proceeds upon exercise of the Underwriters'
over-allotment option, since the shares of Common Stock included in the Units
will be sold by selling Shareholders, and no value has been assigned to the
Warrants included in the Units. (See "Principal and Selling Shareholders.")
Massimo intends to use the net proceeds as follows:
<TABLE>
<CAPTION>
Approximate Approximate
Application of Net Proceeds Amount Percent
<S> <C> <C>
Product Development And Inventory $1,200,000 33.7%
--------------------------------------
Advertising and Marketing 1,750,000 49.1
-----------------------------------------------
General Corporate Purposes,
Including Working Capital 615,000 17.3
-----------------------------------------------------
Total $3,565,000 100.0%
--========== ======
</TABLE>
Massimo may also use a portion of the proceeds from this offering to
take advantage of future business opportunities as a part of our expansion
plans, although we have not identified any specific businesses it intends to
acquire and has not entered into negotiations with respect to any acquisitions.
Pending application of the net proceeds of this offering, Massimo may
invest the net proceeds from this offering in interest-bearing savings accounts,
United States Government obligations, certificates of deposit or short-term
interest-bearing securities.
<PAGE>
DILUTION
As of September 30, 1998, the pro forma net tangible book value of
Massimo was $219,355 or $0.31 per share of Common Stock. The net tangible book
value of Massimo is the aggregate amount of our tangible assets less our total
liabilities. The net tangible book value per share represents the total tangible
assets of Massimo, less total liabilities of Massimo, divided by the number of
shares of Common Stock outstanding. After giving effect to the sale of 500,000
Units at an assumed offering price per Unit of $8.50 and the application of the
estimated net proceeds therefrom, the pro forma net tangible book value per
share would increase from $0.31 to $2.23. This represents an immediate increase
in net tangible book value of $1.92 per share to current shareholders and an
immediate dilution of $2.02 per share to new investors or 47.5%, as illustrated
in the following table:
<TABLE>
<S> <C> <C>
Public offering price per share $ 4.25
Net tangible book value per share before this offering $ 0.31
--------
Increase per share attributable to new investors $ 1.92
------
Adjusted net tangible book value per share after this offering $ 2.23
------
Dilution per share to new investors $ 2.02
======
Percentage dilution 47.5%
</TABLE>
The following table sets forth (i) the number of shares of Common Stock
purchased from Massimo, the total consideration paid to Massimo and the average
price per share paid by the current shareholders, and (ii) the number of shares
of Common Stock to be purchased from Massimo and total consideration to be paid
by new investors at an assumed offering price of $8.50 per Unit.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Current shareholders (1) 700,033 41% $ 842,015 17% $1.20
New investors 1,000,000 59% $4,250,000 83% $4.25
------------------- --------------------
Total 1,700,033 100% $5,092,015 100%
================== ====================
</TABLE>
Adjusted to give effect to the sale of 500,000 Units at an assumed offering
price of $8.50 per Unit and the application of the net proceeds therefrom of
approximately $3,565,000.
(1) Excludes a total of 1,420,000 shares of Common Stock issuable upon the
exercise of: (i) the Warrants or the Underwriters' Warrants, (ii) the
Underwriters' over-allotment option, or (iii) Shareholders' Stock Option.
<PAGE>
CAPITALIZATION
The following table sets forth the long-term debt and capitalization of
Massimo as of September 30, 1998 and as adjusted to give effect to the sale of
500,000 Units offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
September 30, 1998
Actual As Adjusted
<S> <C> <C>
Long-term debt:
Notes payable $ 0 $ 0
========== ==========
Shareholders' equity (deficit):
Common Stock, $.01 par value, 10,000,000
shares authorized, 500,000, 576,166
and 700,033 shares issued and outstanding,
1,700,033 as adjusted (1) (2) 7,000 17,000
---------------
Additional paid in capital (1) 835,015 4,390,015
-----------------------
Accumulated deficit (567,045) (567,045)
--------------------------------- ------------ -----------
Total capitalization $ 274,970 $3,839,970
------------------------ =========== ==========
</TABLE>
(1) Reflects issuance and sale by Massimo of 1,000,000 of the shares of
Common Stock included in the Units offered hereby.
(2) Excludes 1,000,000 shares issuable upon the exercise of the Series A
Warrants, 100,000 shares underlying the 50,000 Units issuable upon
exercise of the Underwriters' Warrants, 150,000 shares underlying the
75,000 Units issuable upon the exercise of the Underwriters'
over-allotment option and 170,000 shares issuable upon exercise of
shareholders' Stock Option. (See "Underwriting.")
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Since Massimo's inception in May, 1994, we have focused on the
development of our products and planning for our marketing. From Massimo's
inception through December 31, 1997, Massimo had lost $484,547, incurring
$125,585 of those losses in 1996 and $93,296 in 1997. The balance, $265,666, was
incurred before January, 1996. The majority of the loss reflects expenses
incurred before January, 1996, for the development of marketing and advertising
material. Massimo also expensed $81,224 in general and administrative costs
during the same period reflecting management's expense in developing contacts
and organizing our activities.
In 1996, we completed our development of marketing plans and materials,
incurring $64,813 of advertising and marketing expense while not incurring any
marketing expense in 1997. In 1996, Massimo sold some product through a broker
but realized that sustained selling and distribution of our products would
require additional capital. We also concluded that distributing our products
through traditional marketing channels of cosmetic products was not efficient.
Accordingly, we stopped our selling activities and concentrated on developing
the strategy it is now pursuing.
For the nine months ended September 30, 1998, Massimo incurred a loss
of $82,498 compared to a loss of $36,293 for the same period in 1997. The
increased loss reflects management's activities, begun in the latter half of
1997, to complete our plans for the manufacture, sale and distribution of our
products through mass media and organize our effort for this offering.
Liquidity and Capital Resources
At September 30, 1998, Massimo had $125,063 in cash, sufficient cash,
in the opinion of management, to complete this offering. The purpose of this
offering is to obtain sufficient funds to begin marketing and distribution of
our products through mass media. See "Use of Proceeds." Management of Massimo
believes that the proceeds from this offering are sufficient to commence selling
activity and enable us to become self sustaining.
Massimo does have $88,226 of product in inventory, an amount it has
held since 1997. This inventory, which includes some marketing materials, will
partially mitigate the cash required for product for sale after the completion
of this offering. In addition, Massimo has completed production of equipment
necessary to manufacture the applicator for hair relaxer. This equipment is
almost fully depreciated but will be adequate for our initial production needs
following the completion of this offering.
Year 2000 Compliance
Massimo's computer systems may not comply with year 2000 issues. Over
the next few years, Massimo may incur additional expenditures to modify our
software to operate correctly for the year 2000. While considered to be
immaterial by management, we have not yet quantified such costs, which will be
expensed as incurred. If we do not address this issue successfully, our business
could be materially and adversely affected.
<PAGE>
BUSINESS
General
Massimo plans to market several hair care products for African
Americans, the most important of which is a patented applicator for applying
relaxer to the hair. Massimo intends to market the products under the trademark
Smooth & Easy(R).
Massimo was founded in 1994 as a Louisiana corporation and in 1998 was
reorganized as a Texas corporation which acquired all of the issued and
outstanding shares of the Louisiana corporation's capital stock. Since Massimo's
founding in 1994, we have:
developed our products, obtained trademarks for those products, obtained
patents for our applicator, produced and tested prototypes of our products, and
developed operating and marketing plans.
Massimo's patented applicator is designed to apply hair straighteners
in five to ten minutes. A hair relaxer is frequently applied every five to six
weeks and competitor's products, management believes, take approximately 30 to
40 minutes to apply. Management believes that this process is particularly
cumbersome unless performed by a hair stylist. Between major applications of
hair relaxers, one will apply hair relaxers to roots, a process that we believe
is cumbersome, imprecise, time consuming, and often modifies the effect of
earlier application. We believe that our applicator applies hair relaxers
quicker, with more convenience and accuracy.
Background
Massimo's primary market is in the United States to those of African
descent and our primary product is a hair relaxer applied with our patented
applicator. Relaxed hair enables one to fashion hair as one pleases. Once hair
is relaxed, it must be redone every four to six weeks with occasional interim
applications of relaxer at the roots of hair as the hair grows.
In the 1940's a sodium hydroxide or lye based chemical relaxer became
widely used to relax hair. Lye based relaxers had a risk of hair damage and skin
irritation. In the 1970's, relaxers that were not lye based were introduced and
required mixing immediately before use. Although the newer products have
distinctive advantage over lye based products, particularly since they are less
irritating to the skin, the mixing process can result in mixing errors and
generally takes 30 to 40 minutes to apply. In addition, the standard
applications cause the mixed chemicals to be applied with difficulty and
unevenly.
Massimo's patented applicator has been developed to speed the
application of the relaxer, to assure successful mixing of the active ingredient
in the hair relaxer compound and to permit the even, precise application of hair
relaxer onto the hair. The applicator can be used to apply hair relaxer to newly
grown hair because the applicator can dispense relaxer on the newly grown hair
without applying the relaxer to previously treated hair.
We plan to rely on third parties for much of our operations. Formulas
for hair care products can be readily obtained from third parties and the
formulas for those of Massimo are not unique. Massimo's applicator for the
relaxer is, however, unique, and the process for mixing the hair relaxer for use
in Massimo's patented applicator assures even mixture before use. We will sell
in our package the applicator and relaxer together with materials with which the
relaxer is mixed. A customer cannot readily clean the applicator so that each
subsequent application of relaxer will necessitate the purchase of a new kit.
Massimo plans to out-source all of the manufacturing, marketing and
distribution functions. The utilization of existing resources will save Massimo
from the investing in manufacturing and assembly facilities and developing
efficient processes with which our management lacks experience.
Massimo has developed several products that are oriented toward the
African American hair care market. In addition, to Massimo's hair relaxer
product, which is sold with the applicator, we have developed a shampoo that
cleans hair without affecting relaxed hair. One of our conditioners protects
hair from bleach and relaxer compounds and another enhances, repairs and
eliminates damage to over processed and chemically treated hair.
Another product is a hair spray that holds styled hair.
Marketing Plan
Of the approximately 32,000,000 African Americans in the United States,
over 20,000,000 African Americans relax or straighten their hair every four to
six weeks. Growth rates for the African American population are expected to be
larger than those for the Caucasian population of the United States. African
American adults typically spend 34% more for personal care services than the
average U.S. household and African American women spend 41% more for personal
care services than American women as a whole. Relaxers constitute more than 20%
of the money spent by African Americans on hair care products. Massimo
anticipates that our initial marketing will be directed to the eight
metropolitan areas of the United States where the African American population
exceeds 25% of the metropolitan area's population.
We plan to market our products through direct response marketing in
which a third party will assist in developing mass marketing and advertising
materials and provide support services in which one desiring to purchase
Massimo's products will call a toll free number to order products. Although
Massimo anticipates that we will market principally through television
advertising, we will, through the marketing agent, develop print advertising for
inclusion in newspapers and direct mail.
Massimo anticipates that immediately following the completion of this
offering, we will commence television marketing. Massimo anticipates that we
will take 30 to 60 days to develop an infomercial for direct response
advertising and develop a regional test market.
Regardless of the media through which Massimo's products are
advertised, the advertisements will provide a toll free telephone number whereby
a customer can obtain more information and place orders. This service will be
provided by the marketing entity engaged by Massimo and not by our personnel. A
purchaser will receive products within two or three days of contacting the
marketing company.
As part of Massimo's marketing program, we will encourage customers to
regularly receive our products. The purpose of this program is to reduce
advertising costs through the establishment of formal programs for repeat
purchasers.
Although Massimo's immediate market is to African Americans, we plan to
market our products outside of the United States. There are approximately
900,000,000 people of African descent outside of the United States, of which
750,000,000 reside in Africa. Approximately 100,000,000 people of African
descent reside in Brazil and the balance, or approximately 50,000,000 people of
African descent reside in Europe, Central America and the Caribbean.
Production and Distribution
Although Massimo has developed the tooling to manufacture our products,
we have entered into a contract with RAANI Corporation to manufacture the
products. We believe that using a third party to manufacture the products will
minimize our requirement to invest in property and equipment, employ
manufacturing personnel and provide working capital to support manufacturing
operations.
RAANI Corporation is registered as a drug and cosmetic manufacturer as
well as a labeler with the United States Food and Drug Administration (the
"FDA"). RAANI is fully capable of complying with applicable current Good
Manufacturing Practices specified by the FDA.
Massimo is obligated to provide to RAANI Corporation required packaging
materials which consist of plastic bottles, jars, closures, sprayers, shipping
cartons, instructions and gloves. All of these products will be manufactured by
third parties and shipped to RAANI Corporation.
Following assembly by RAANI Corporation, which is located in Bedford,
Illinois, the products will be shipped to a distribution center, or "Fulfillment
Center," which Massimo anticipates being located near Chicago. The "Fulfillment
Center," also operated by a third party, will physically ship products based
upon orders from the organization taking orders.
Contractual Status
While Massimo has entered into a formal agreement with RAANI
Corporation for the production of our products, we have not formally entered
into contracts with a marketing company, a "Fulfillment Center," or entities
that produce components that must be assembled by RAANI Corporation. Massimo
has, however, identified and held discussions with several of each such entities
and believes that it can complete contractual arrangements with these entities
within 30 to 60 days following completion of this offering.
African American Retail Hair Care Background
The retail market segments of the ethnic hair care market in which
Massimo will compete are described below:
Relaxers and Texturizers. Chemical hair relaxing is the process of
permanently straightening curly hair. Texturizers generally work in a similar
manner as relaxers to loosen curly hair, but do not straighten the hair
completely. Relaxed hair serves as the foundation for and facilitator of daily
hair styling. Consequently, its popularity is not significantly related to
current fashion trends. For the person with relaxed hair, relaxers represent a
basic personal care product, similar to shampoos and conditioners for the
general market. Further, the continual need for "touch-ups" approximately every
six weeks requires the relaxer user to frequently purchase relaxers and related
products. Over 50% of African-American women use chemical relaxers in their
hair.
For persons of African descent, chemical relaxation became popular in
the 1940's with the introduction of sodium hydroxide or "lye" relaxer which was
the sole product available until a competitor invented and patented "no-lye,"
relaxers in 1978. In the retail market, no-lye relaxers are generally sold in
kits which include a cream base component and a chemical activator component,
which are mixed together to create the requisite chemical reaction. One of the
most significant sources of consumer complaints in the industry is inconsistent
results caused by mixing errors. Our new packaging process eliminates such
mixing problems. Although lye relaxers do not require mixing and tend to work
faster than no-lye relaxers, they have a much higher risk of hair damage and
skin irritation than no-lye relaxers. Until a competitor invented no-lye
relaxers, relaxing hair was relegated primarily to salons where it was applied
by trained technicians for safety reasons. We believe that the introduction of
Smooth & Easy(R) no-lye relaxers and the patented applicator by Massimo will
offer the most an effective and fastest in-home method alternative which should
significantly changed the industry. In 1995, the U.S. retail ethnic relaxer and
texturizer segment was the largest category of U.S. retail ethnic hair care
products, representing approximately 31% of the U.S. retail ethnic hair care
market, according to the Towne-Oller Report.
Hair Care Maintenance Products. The physiological differences between
the hair of individuals of African descent and Caucasian hair create the need
for a variety of products to treat or "maintain" the hair and scalp. Hair is
lubricated by the sebaceous gland which excretes oil that flows down and
lubricates the hair shaft. While this generally happens in straight hair and in
wavy hair, it is very difficult for oils to follow the curves and undulations of
increasingly curly hair. The lack of oil causes curly hair and particular
tightly curled hair to become very dry and brittle, leaving the hair with a
matte, almost dull finish. This condition is the major reason that hair care
maintenance products such as oil sheens, hair dress conditioners,
comb-outs/detanglers and wave products are popular among individuals of African
descent.
Women, children and men of African descent use a variety of products to
permanently change the structure of their hair. In most instances, chemical
processes (e.g., relaxing and color treating hair) leave the hair more dry and
brittle than it would be otherwise and can significantly damage hair if used
improperly. Thus there is an even greater need to condition, replenish and
protect hair before, after and in between treatments. To protect the hair,
strengthen it and return it to a soft, shiny condition with a healthy looking
appearance, the consumer in this market has an even greater need for hair care
maintenance products than her or his general market counterpart.
Numerous ethnic hair care companies and several general market health
and beauty aids companies sell hair care maintenance products to consumers of
African descent.
Massimo is reviewing the development and marketing of hair coloring
products and shaving products and the possible further development of these
products is contingent upon the successful introduction of the applicator.
Patents and Trademarks
Massimo owns the trademark rights of "Smooth & Easy(R)" which is used
in connection with our principal brands both in the United States and in the
other countries in which the products will be marketed. We secured this
trademark on February 25, 1997. Massimo obtained a United States Patent on an
earlier model of the "Applicator" which was issued on May 14, 1996 and a utility
patent issued on September 8, 1998. Massimo utilizes certain proprietary or
patented technologies in the formulation or manufacture of a number of its
products: however, the loss of such proprietary rights would not have a material
adverse effect on the business, results of operations or financial condition of
Massimo.
Research and Development
Massimo's research and development
expenses in 1994 and 1995 totaled approximately $181,000. Research and
development activities are expensed as incurred, since the majority of Massimo's
research and development activities consist of developing technically feasible
products and processes. Massimo will continue development activities as required
by the niche market needs.
Competition
The U.S. retail hair care market is competitive and highly fragmented
with a number of market participants that focus specifically on this market.
Seven companies generated approximately 63% of industry sales in 1996 with the
remainder being generated by a number of smaller companies. Some of the larger
companies, such as Soft Sheen, Luster Products and Pro-Line Corp., are privately
owned and compete only in the ethnic market, as does the Johnson Products
subsidiary of IVAX, Inc., a New York Stock Exchange traded company. However, a
few general market companies, such as Revlon and Alberto-Culver Company, also
produce a limited line of specialized products for the ethnic consumer. In
certain product categories, such as shampoos and hair color, competition also
arises from general market manufacturers such as the Procter & Gamble Company
and Bristol-Myers Squibb Company's Clairol division. Such general market
companies are larger and have substantially greater financial and other
resources than Massimo. Massimo's competitors use very similar marketing
strategies, packaging, products and relaxer application processes.
Internationally, Massimo's competitors differ from market to market and include
Revlon, Soft Sheen and several regionally based foreign companies.
Massimo will compete with several other companies that market relaxers
and hair care products to African Americans. These enterprises have several
competitive advantages over Massimo. One Company, Carson, Inc. claims ethnic
market leadership through established brand names, including the most widely
recognized ethnic brand name in the United States, Dark & Lovely, has an
experienced direct sales force which broadly distributes its products, a
vigorous research and development program and an experienced management team.
While Massimo's management team has extensive experience in entrepreneurial
endeavors, it lacks operational experience in the production on ethnic hair care
products, and generally, Massimo lacks resources on which Carson, Inc. asserts
its leadership.
Regulation
Massimo is subject to a variety of Federal and State product safety
laws including the Food, Drug and Cosmetics Act, the Consumer Product Safety Act
and the Federal Hazardous Substance Act. Massimo is also subject to the Consumer
Product Safety Commission. The FDA has promulgated certain regulations
concerning product ingredients, product labeling and product claims, and the
Federal Trade Commission also regulates product claims. These regulations
subject Massimo to the possibility of repurchasing or recalling products found
to be defective as well as fines and penalties.
The FDA has promulgated certain regulations concerning product
ingredients and the manufacture of those products. To the extent that Massimo's
products are deemed cosmetics, the products do not require pre-market approval
by the FDA. The FDA also enforces regulations regarding the quality of
manufacturing called "Good Manufacturing Practices." Massimo believes that RAANI
Corporation complies with these manufacturing regulations and that its products
are "cosmetics" as defined by FDA regulations.
Employees
Because we rely on third parties for manufacturing, assembly, marketing
and distribution, Massimo is not a labor intense business. It will utilize a
fulfillment center for receiving and shipping orders. As of September 30, 1998,
Massimo's staff consisted of three full time employees. Massimo believes that
some additional staff will be required for increased marketing, sales,
development and support functions.
Legal Proceedings
As of September 30, 1998, Massimo was not a party to any legal
proceedings.
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following list sets forth certain information regarding Massimo's executive
officers and directors:
Jason J. Romano (Chairman of the Board, CEO, Co-Founder and Director)
Joseph L. Romano (Vice President, Secretary, Co-Founder and Director)
Charles R. Haag (CFO and Director)
Kenneth B. Caldcleugh (Director)
Mr. Jason J. Romano has served as Chairman of the Board since March 1997
and Chief Executive Officer since Massimo's inception in May of 1994. Mr. Romano
will be responsible for overseeing the overall operations of Massimo. Mr. Romano
will also work on strategic distribution and the development of innovative
products. For the past five years, Mr. Romano has worked extensively in the
ethnic hair care industry on product development, manufacturing, shipping and
marketing. Mr. Romano received a Bachelor of Arts in International Business from
Southern Methodist University.
Mr. Joseph L. Romano has served as Vice President, Treasurer and Secretary
since Massimo's inception in May of 1994. Mr. Romano has 35 years of business
experience focusing primarily on sales and public relations. Mr. Romano is a
Co-Founder of Spartan Supply Co., River Parish Maintenance and Louisiana
Maintenance Services, Inc. Presently, Mr. Romano serves on the board of
directors of River Parish Maintenance and Louisiana Maintenance Services, Inc.
Mr. Romano received a Bachelor of Science in Electrical Engineering from the
University of Southwestern Louisiana.
Mr. Charles R. Haag has been a Director of Massimo since March of 1997. Mr.
Haag is a business "generalist" with 26 years of experience, 13 in major
corporations and 13 in small businesses. Mr. Haag has "specialized," over the
past 13 years, in turnaround and rollout situations. Mr. Haag has served as Vice
President/CFO of Sesame Street General Stores, Vice President/CFO of A Pea In
The Pod, President/CEO of Performance Asset Management and Executive Vice
President/COO of Gibson Distributing Company. Presently, Mr. Haag is engaged in
various consulting projects. Mr. Haag received a Bachelor of Science in Business
and a Master of Science in Marketing from Kansas State College-Ft. Hays, Hays,
Kansas.
Mr. Kenneth B. Caldcluegh has been a director of Massimo since June of
1998. Mr. Caldcleugh has 23 years of business experience focusing primarily on
sales, distribution and acquisitional growth. Mr. Caldcleugh has served as
Assistant Regional Manager of Glazer Companies for the State of Texas from 1979
to 1981 and as Corporate Vice President / Louisiana Regional Manager until 1996.
During his tenure, the company grew from a $48 million dollar to a $120 million
dollar company. Presently, Mr. Caldcleugh owns a successful full service concept
retail store, "The Cellars of river Ridge" and is also a member of the Board of
Directors of the Christian Brothers Foundation, Guaranty Savings and Loan, and
the National Board of Directors of the Wine & Spirit Wholesalers of America. Mr.
Caldcleugh received a Bachelor of Science from Texas Tech University.
Directors of Massimo are elected at each annual meeting of
shareholders. The officers of Massimo are elected annually by the Board of
Directors. Officers and directors hold office until their respective successors
are elected and qualified or until their earlier resignation or removal.
Compensation of Directors
All directors of Massimo will receive
$500 per meeting attended and related travel expenses following the initial
public offering.
Indemnification and Limitation on Liability
If available at a reasonable cost, Massimo intends to maintain
insurance against any liability incurred by our officers and directors in
defense of any actions to which we are made parties by any reason of our
positions as officers and directors.
<PAGE>
Executive Compensation
The following table sets forth the compensation paid to Massimo's
President Jason J. Romano and Vice President Joseph L. Romano (the "Named
Executive Officers") for services rendered to Massimo in all capacities for the
fiscal years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
<S> <C> <C> <C> <C>
Name and Annual Compensation All Other
Principal Position Fiscal Year Salary Bonus Compensation
Jason J. Romano 1997 $36,000 -0- -
1996 36,000 -0- -
1995 36,000 -0- -
Joseph L. Romano 1997 -0- -0- -
1996 -0- -0- -
1995 -0- -0- -
</TABLE>
Before this offering, Massimo was a privately held corporation and
minimum compensation was paid to Jason Romano. In the future, Massimo intends to
compensate our officers in accordance with the recommendations of a compensation
committee.
Employment Agreements
Massimo has no employment agreements.
Stock Option Plan
The 1998 Stock Option Plan, as amended (the "Stock Option Plan")
provides for the grant to employees, officers, directors, and consultants to
Massimo or any parent, subsidiary or affiliate of Massimo of up to 170,000
shares of Massimo's Common Stock, subject to adjustment in the event of any
subdivision, combination, or reclassification of shares. The Stock Option Plan
will terminate in 2007. The Stock Option Plan provides for the grant of
incentive stock options ("ISO's") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and non-qualified options at the
discretion of the Board of Directors or a committee of the Board of Directors
(the "Committee"). The options granted are exercisable within the times or upon
the events determined by the Board or Committee set forth in the grant, but no
option is exercisable beyond ten years from the date of the grant. The Board of
Directors or Committee administering the Stock Option Plan will determine
whether each option is to be an ISO or non-qualified stock option, the number of
shares, the exercise price, the period during which the option maybe exercised
and any other terms and conditions of the option. The holder of an option may
pay the option price in:
(1) cash,
(2) check,
(3) other shares of Massimo,
(4) authorization for Massimo to retain from the total number of shares to be
issued that number of shares having a fair market value on the date of
exercise equal to the exercise price for the total number of shares,
(5) irrevocable instructions to a broker to deliver to Massimo the amount of
sale or loan proceeds required to pay the exercise price,
(6) delivery of an irrevocable subscription agreement of the shares which
irrevocably obligates the option holder to take and pay for shares not more
than 12 months after the date of the delivery of the subscription
agreement,
(7) any combination of the foregoing methods of payment, or
(8) other consideration or method of payment for the issuance of shares as
may be permitted under applicable law.
The options are nontransferable except by will or by the laws of descent and
distribution. Upon dissolution, liquidation, merger, sale of stock or sale of
substantially all assets, outstanding options, notwithstanding the terms of the
grant, will become exercisable in full at least 10 days before the transaction.
The Stock Option Plan is subject to amendment or termination at any time and
from time to time, subject to certain limitations.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership as of September 30, 1998, of the Common Stock by (a) each person known
by Massimo to be a beneficial owner of more than 5% of the outstanding shares of
Common Stock and by each selling shareholder, (b) each director of Massimo, (c)
each Named Executive Officer, and (d) all directors and executive officers of
Massimo as a group. Unless otherwise noted, each beneficial owner named below
has sole investment and voting power with respect to the Common Stock shown
below as beneficially owned by him.
<TABLE>
<CAPTION>
Shares Owned Shares Owned
Before offering After offering
Name and Address of Number of Percent Number of Percent
Beneficial Owner Shares Owned Owned Shares Owned Owned
<S> <C> <C> <C> <C>
Jason J. Romano (1).................. 225,000 32.1% 225,000 13.2 %
8643 Grenadier Dr.
Dallas, Texas 75238
Joseph L. Romano (1)................ 225,000 32.1 225,000 13.2
328 Celeste Ave.
River Ridge, Louisiana 70121
Charles R. Haag...................... 50,000 7.1 50,000 2.9
17200 Westgrove Dr.
#2421 Dallas, Texas 75248
Total (all executive officers 516,700 73.8% 516,700 30.4%
and directors as a group)
- ---------
</TABLE>
(1) Excludes options to purchase 66,300 shares each.
<PAGE>
DESCRIPTION OF SECURITIES
Units
Each Unit consists of two shares of Common Stock and two Series A
Warrants. The Shares and the Warrants included in the Units may not be
separately traded for six months after the date of this Prospectus, unless
earlier separated upon three days' written notice from the Representative to
Massimo.
Common Stock
Massimo is authorized to issue 10,000,000 shares of Common Stock, $.01 par
value. As of September 30, 1998 there were 700,033 shares of Common Stock.
The holders of outstanding shares of all classes of common stock are
entitled to share ratably in any dividends paid on the common stock when, as and
if declared by the Board of Directors out of funds legally available. Each
holder of common stock is entitled to one vote for each share held of record.
The common stock is not entitled to cumulative voting or preemptive rights and
is not subject to redemption. Upon liquidation, dissolution or winding up of
Massimo, the holders of common stock are entitled to share ratably in the net
assets legally available for distribution. All outstanding shares of common
stock are fully paid and non assessable.
Warrants
The Warrants will be issued in registered form under, governed by, and
subject to the terms of a warrant agreement (the "Warrant Agreement") between
Massimo and ________Transfer Agent______ as warrant agent (the "Warrant Agent").
The following statements are brief summaries of certain provisions of the
Warrant Agreement. Copies of the Warrant Agreement may be obtained from Massimo
or the Warrant Agent and have been filed with the Commission as an exhibit to
the Registration Statement of which this Prospectus is a part.
Each Warrant entitles the holder thereof to purchase at any time one
share of Common Stock at an exercise price of $_.__ per share at any time after
the Common Stock and Warrants become separately tradable until [five years from
the date of this Prospectus]. The right to exercise Warrants will terminate at
the close of business on [five years from the date of this Prospectus]. The
Warrants contain provisions that protect the Warrant holders against dilution by
adjustment of the exercise price in certain events, including but not limited to
stock dividends, stock splits, reclassification or mergers. A Warrantholder will
not possess any rights as a shareholder of Massimo. Shares of Common Stock, when
issued upon the exercise of the Warrants in accordance with the terms thereof,
will be fully paid and non-assessable.
Commencing six months after the date of this Prospectus, Massimo may
redeem some or all of the Warrants at a call price of $0.05 per Warrant, upon
thirty (30) days' prior written notice if the closing bid quotation of the
Common Stock on the Boston Stock Exchange and/or the NASDAQ Small-Cap Market has
equaled or exceeded 200% of the offering price per Unit for twenty consecutive
trading days within the thirty-day period immediately preceding such notice.
The Warrants may be exercised only if a current prospectus relating to
the underlying Common Stock is then in effect and only if the shares are
qualified for sale under the securities laws of the state or states in which the
purchaser resides. So long as the Warrants are outstanding, Massimo has
undertaken to file all post-effective amendments to the Registration Statement
required to be filed under the Securities Act, and to take appropriate action
under federal law and the securities laws of those states where the Warrants
were initially offered to permit the issuance and resale of the Common Stock
issuable upon exercise of the Warrants. However, there can be no assurance that
Massimo will be in a position to effect such action, and the failure to do so
may cause the exercise of the Warrants and the resale or other disposition of
the Common Stock issued upon such exercise to become unlawful. Although Massimo
does seek to qualify the shares of Common Stock underlying Warrants for the sale
in those states in which the Units are to be offered, no assurance can be given
that such qualification will occur. The Warrants may be deprived of any value if
a current prospectus covering the underlying shares are not, or cannot be,
registered in the applicable states. Massimo may amend the terms of the
Warrants, but only by extending the termination date or lowering the exercise
price thereof. Massimo has no present intention of amending such terms. However,
there can be no assurances that Massimo will not alter our position in the
future with respect to this matter.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Shares of the Common Stock is
__________________________.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, Massimo will have 1,700,033 shares of
Common Stock outstanding. Of these shares, 1,000,000 shares sold in this
offering (1,150,000 if the Underwriters' over-allotment option is exercised in
full) will be freely tradable in the public market without restriction under the
Securities Act, except shares purchased by an "affiliate" (as defined in the
Securities Act) of Massimo. The remaining 700,033 shares (the "Restricted
Shares") will be "restricted shares" within the meaning of the Securities Act
and may be publicly sold only if registered under the Securities Act or sold in
accordance with an applicable exemption from registration, such as those
provided by Rules 144 and 701 promulgated under the Securities Act.
In general, under Rule 144, as currently in effect, a person (or
persons whose shares are aggregated) is entitled to sell Restricted Shares if at
least two years have passed since the later of the date such shares were
acquired from Massimo or any affiliate of Massimo. Rule 144 provides, however
that within any three-month period such person may only sell up to the greater
of 1% of the then outstanding shares of Massimo's Common Stock (approximately
14,000 shares following the completion of this offering) or the average weekly
trading volume in Massimo's Common Stock during the four calendar weeks
immediately preceding the date on which the notice of the sale is filed with the
Commission. Sales pursuant to Rule 144 also are subject to certain other
requirements relating to manner of sale, notice of sale and availability of
current public information. Any person who has not been an affiliate of Massimo
for a period of 90 days preceding a sale of Restricted Shares is entitled to
sell such shares under Rule 144 without regard to such limitations if at least
three years have passed since the later of the date such shares were acquired
from Massimo or any affiliate of Massimo. Shares held by persons who are deemed
to be affiliated with Massimo are subject to such volume limitations regardless
of how long they have been owned or how they were acquired.
Any employee, officer or director of Massimo who purchases his or her
shares pursuant to a written compensatory plan or contract is entitled to rely
on the resale provision of Rule 701 under the Securities Act, which permits
non-affiliates to sell their Rule 701 shares without having to comply with the
public information, holding period, volume limitations or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with the holding period restrictions of Rule 144, in each case commencing
90 days from the date of this Prospectus.
Without consideration of contractual restrictions described below, an
aggregate of 516,700 shares of Common Stock, representing 29% of the outstanding
shares of the Common Stock are subject to Rule 144 after the completion of this
offering. Massimo is unable to estimate the number of shares that may be sold
from time to time under Rule 144, since such number will depend upon the market
price and trading volume for the Common Stock, the personal circumstances of the
sellers and other factors.
After this offering, executive officers, directors and senior
management will own 516,700 shares of the Common Stock. Massimo's largest
shareholder and director has entered into an agreement with the Underwriters
providing that he will not sell or otherwise dispose of any shares of Common
Stock held by him for a period of 180 days after the date of this Prospectus
without the prior written consent of the Underwriters. Massimo's executive
officers, other directors, and management have entered into separate agreements
with the Underwriters providing that each will not sell or otherwise dispose of
any shares of Common Stock held by them for a period of 180 days after the date
of this Prospectus without the prior written consent of the Underwriters, except
for shares sold upon exercise of the Underwriters' over-allotment option.
<PAGE>
UNDERWRITING
Pursuant to the terms and subject to the conditions contained in the
Underwriting Agreement, Massimo has agreed to sell on a firm commitment basis to
the Underwriters named below, and each of the Underwriters, for whom
__________________ (the "Representative") is acting as Representative, have
severally agreed to purchase the number of Units set forth opposite their
respective names in the following table:
Underwriters Number of Units
Total 500,000
The Representative has advised Massimo that the Underwriters propose to
offer the Shares to the public at the initial public offering price per share
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession of not more than $_.__ per Share, of which $ __.__ may
be reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
Representative. No such reduction shall change the amount of proceeds to be
received by Massimo as set forth on the cover page of this Prospectus.
Massimo and the Selling Shareholders have granted to the Underwriters
an option, exercisable during the 45-day period after the date of this
Prospectus, to purchase up to 75,000 additional Units to cover over-allotments,
if any, at the same price per Unit as Massimo will receive for the 500,000 Units
that the Underwriters have agreed to purchase. To the extent that the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage of such additional
Units that the number of Units to be purchased by it shown in the above table
represents as a percentage of the 500,000 Units offered hereby. If purchased,
such additional Units will be sold by the Underwriters on the same terms as
those on which the 500,000 Units are being sold. All of the shares of Common
Stock included in these Units will be sold to the Underwriters by Selling
Shareholders, and Massimo will not receive any proceeds from the sale of such
shares. The Warrants included in these Units will be issued by Massimo. See
"Principal and Selling Shareholders."
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, Massimo and selling holders against certain civil liabilities,
including liabilities under the Securities Act.
The holders of approximately 700,033 shares of the Common Stock after
the offering have agreed with the Representative that, until one year after the
date of this Prospectus, subject to certain limited exceptions, they will not
sell, contract to sell, or otherwise dispose of any shares of Common Stock, any
options to purchase shares of Common Stock, or any securities convertible into,
exercisable for or exchangeable for shares of Common Stock, owned directly by
such holders or with respect to which they have the power of disposition,
without the prior written consent of the Representative, except for shares sold
upon exercise of the Underwriters' over-allotment option. Substantially all of
such shares will be eligible for immediate public sale following expiration of
the lock-up periods, subject to the provisions of Rule 144. In addition, Massimo
has agreed that until 365 days after the date of this Prospectus, Massimo will
not, without the prior written consent of the Representative, subject to certain
limited exceptions, issue, sell, contract to sell, or otherwise dispose of, any
shares of Common Stock, any options to purchase any shares of Common Stock or
any securities convertible into, exercisable for or exchangeable for shares of
Common Stock other than Massimo's sales of shares in this offering, the issuance
of Common Stock upon the exercise of outstanding options or warrants or the
<PAGE>
issuance of options under our employee stock option plan.
See "Shares Eligible for Future Sale."
The Underwriters have the right to offer the Securities offered hereby
only through licensed securities dealers in the United States who are members of
the National Association of Securities Dealers, Inc. and may allow such dealers
such portion of its ten (10%) percent commission as the Underwriter may
determine.
The Underwriters will not confirm sales to any discretionary accounts
without the prior written consent of their customers.
Massimo has agreed to pay the Representative a non-accountable expense
allowance of 2.5% of the gross amount of the Units sold ($106,250 upon the sale
of the Units offered) at the closing of the offering. The Underwriters' expenses
in excess thereof will be paid by the Representative. To the extent that the
expenses of the underwriting are less than that amount, such excess shall be
deemed to be additional compensation to the Underwriter. In the event this
offering is terminated before its successful completion, Massimo may be
obligated to pay the Underwriter a maximum of $25,000 on an accountable basis
for expenses incurred by the Underwriter in connection with this offering.
Massimo has agreed to enter into a consulting agreement with the
Representative at a rate of $1,000 per month, commencing 90 days after the
closing and extending for a period of twenty-four (24) months.
The Underwriting Agreement provides for indemnification among Massimo
and the Underwriters against certain civil liabilities, including liabilities
under the Securities Act. In addition, the Underwriters' Warrants provide for
indemnification among Massimo and the holders of the Underwriters' Warrants and
underlying shares against certain civil liabilities, including liabilities under
the Securities Act and the Exchange Act.
Underwriters' Warrants
Upon the closing of this offering, Massimo has agreed to sell to the
Underwriters for nominal consideration, the Underwriters' Warrants. The
Underwriters' Warrants are exercisable at 120% of the public offering price for
a four-year period commencing one year from the effective date of this offering.
The Underwriters' Warrants may not be sold, transferred, assigned or
hypothecated for a period of one year from the date of this offering except to
the officers of the Underwriter and their successors and dealers participating
in the offering and/or their partners or officers. The Underwriters' Warrants
will contain anti-dilution provisions providing for appropriate adjustment of
the number of shares subject to the Warrants under certain circumstances. The
holders of the Underwriters' Warrants have no voting, dividend or other rights
as shareholders of Massimo with respect to shares underlying the Underwriters'
Warrants until the Underwriters' Warrants have been exercised.
Massimo has agreed, during the four year period commencing one year
from the date of this offering, to give advance notice to the holders of the
Underwriters' Warrants or underlying securities of our intention to file a
registration statement, other than in connection with employee stock options,
mergers, or acquisitions, and in such case the holders of the Underwriters'
Warrants and underlying securities shall have the right to require Massimo to
include their securities in such registration statement at Massimo's expense
("Piggyback" Rights).
For the term of the Underwriters' Warrants, the holders thereof will be
given the opportunity to profit from a rise in the market value of Massimo's
shares, with a resulting dilution in the interest of other shareholders. The
holders of the Underwriters' Warrants can be expected to exercise the
Underwriters' Warrants at a time when Massimo would, in all likelihood, be able
to obtain needed capital by an offering of our unissued shares on terms more
favorable to Massimo than those provided by the Underwriters' Warrants. Such
facts may adversely affect the terms on which Massimo can obtain additional
financing. Any profit realized by the Underwriter on the sale of the
Underwriters' Warrants or shares issuable upon exercise of the Underwriters'
Warrants may be deemed additional underwriting compensation.
Determination of Offering Price
The private placement offering price will be determined by negotiations
between Massimo and the Representative. The factors considered in determining
the private placement offering price include Massimo's initial investment since
our organization, the industry in which it operates, Massimo's business
potential and earning prospects and the general condition of the securities
markets at the time of the offering. The offering price does not bear any
relationship to Massimo's assets, book value, net worth or other recognized
objective criteria of value.
Before this offering, there has been no public market for the
securities of Massimo, and there can be no assurance than an active market will
develop. Although the Representative has informed Massimo that it currently
intends to make a market in the Securities subsequent to the effectiveness of
the offering, there can be no assurance that the Representative will take any
action to make such a market thereafter.
NASDAQ Small-Cap Market System and Boston Stock Exchange
It is anticipated that after the offering, the Securities will be
quoted on the NASDAQ Small-Cap Market System and listed on the Boston Stock
Exchange. However, there can be no assurance that the Securities will be listed,
that a market for the Securities will develop or if it does develop that it will
be maintained.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for Massimo by Robert A. Forrester, Attorney at Law. Mr. Forrester
owns 3,500 shares of Common Stock.
EXPERTS
The financial statements as of September 30, 1998 have been so included
in reliance on the report of Killman, Murrell & Company, P.C., independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
<PAGE>
MASSIMO ENTERPRISES, INC.
TABLE OF CONTENTS
Page
Report of Independent Certified Public Accountant F-2
Financial Statements
Balance Sheets as of December 31, 1996 and 1997 and
September 30, 1998 (Unaudited) F-3
Statements of Operations for the Years Ended
December 31, 1996 and 1997 for the Period May 24, 1994 (Inception)
Through December 31, 1997 and the Nine Months Ended
September 30, 1997 and 1998(Unaudited) F-4
Statements of Stockholders' Equity for the Period
May 24, 1994 (Inception) to December 31, 1994 and for
Each of the Years Ended December 31, 1995, 1996 and 1997 and
the Nine Months Ended September 30, 1998 (Unaudited)
F-5
Statements of Cash Flows for the Years Ended December
31, 1996 and 1997, the period May 24, 1994 (Inception) through
December 31, 1997 and the Nine Months Ended September 30, 1997
and 1998 (Unaudited) F-6
Notes to Financial Statements F-8
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Massimo Enterprises, Inc.
We have audited the accompanying balance sheets of Massimo Enterprises, Inc. (a
development stage company) as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1996 and 1997, and for the period from May 24, 1994
(inception) to December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Massimo Enterprises, Inc. (a
development stage company) as of December 31, 1996 and 1997, and the results of
its operations and its cash flows for the years ended December 31, 1996 and
1997, and from May 24, 1994 (inception), to December 31, 1997, in conformity
with generally accepted accounting principles.
Killman, Murrell & Company, P.C.
Dallas, Texas
July 16, 1998
F-2
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
-------------------------------------- ----------------
1996 1997 1998
---------- ---------- -------------
<S> <C> <C> <C>
(Unaudited)
CURRENT ASSETS
Cash $ 3,803 $ 60,923 $ 125,063
Inventory 88,226 88,226 88,226
---------- ---------- --------------------------
TOTAL CURRENT ASSETS 92,029 149,149 213,289
EQUIPMENT, net of accumulated
depreciation of $9,337, $14,045 and
$17,576, respectively 15,213 9,497 5,966
OTHER ASSETS
Intangible assets, net of accumulated
amortization of $2,148, $3,563 and
$4,802, respectively 12,021 12,922 11,683
Deferred Offering Costs - - 44,255
Other Assets 100 100 100
----------- ----------- --------------------------
$ 119,363 $ 171,668 $ 275,293
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ - $ - $ 323
Bank overdraft 6,414 - -
Note payable - Note 2 44,084 - -
---------- ------------ --------------------------
TOTAL CURRENT LIABILITIES 50,498 - 323
---------- ------------ --------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
10,000,000 shares authorized;
500,000, 576,166 and 700,033 issued
and outstanding, respectively 5,000 5,762 7,000
Additional paid-in capital 455,116 650,453 835,015
Deficit accumulated during the development
stage (391,251) (484,547) (567,045)
--------- --------- --------------------------
TOTAL STOCKHOLDERS' EQUITY 68,865 171,668 274,970
---------- --------- --------------------------
$ 119,363 $ 171,668 $ 275,293
========= ========= =========
</TABLE>
The accompanying notes are
an integral part of these financial statements.
F-3
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended May 24, 1994 Nine Months Ended
December 31, (Inception) Through September 30,
1996 1997 December 31, 1997 1997 1998
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
SALES $ 6,127 $ - $ 6,127 $ $ -
COST OF SALES 4,176 - 4,176 -
--------- ------------------------------------------ -----------------------
GROSS PROFIT 1,951 - 1,951 -
OPERATING EXPENSES
General and administrative 55,351 87,665 224,240 31,985 80,635
Advertising and marketing 64,813 - 243,783 - -
Depreciation and amortization 6,013 6,123 17,608 4,042 4,770
--------- --------- --------- --------- -----------------
126,177 93,788 485,631 36,027 85,405
-------- -------- ------- -------- -----------------
LOSS FROM OPERATIONS (124,226) (93,788) (483,680) (36,027) (85,405)
OTHER INCOME (EXPENSE)
Interest income 10 760 770 - 2,907
Interest expense (1,369) ( 268) (1,637) (268) -
------ ---------- --------- --------- -----------------
(1,359) 492 (867) (268) 2,907
------ --------- ------ --------- -----------------
NET LOSS $(125,585) $(93,296) $(484,547) $(36,295) $(82,498)
========= ======= ========= ====== ========
NET LOSS PER COMMON SHARE $ (.25) $ (.18) $ (.96) $ (.07) $ (.13)
========= ========= ======== ========= =========
WEIGHTED AVERAGE OUTSTANDING
COMMON SHARES 500,000 520,013 505,003 500,000 625,713
======= ======== ====== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
F-4
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
Number Par Paid-In Retained
of Shares Value Capital (Deficit) Total
<S> <C> <C> <C> <C> <C>
Initial common stock sale,
May 24, 1994 (inception) 500,000 $5,000 $ 72,000 $ - $77,000
Net loss (40,285) (40,285)
--------------------------------------------------------- -------------------------
Balance, December 31, 1994 500,000 5,000 72,000 (40,285) 36,715
Cash contributions from stockholder - 269,000 - 269,000
Net loss - - (225,381) (225,381)
------ --------- ----------- --------- -------
Balance, December 31, 1995 500,000 5,000 341,000 (265,666) 80,334
Cash contributions from stockholder - 114,116 - 114,116
Net loss - - (125,585) (125,585)
------- --------- ----------- --------- --------
Balance, December 31, 1996 500,000 5,000 455,116 (391,251) 68,865
Cash contributions from stockholder - - 81,849 - 81,849
Sale of common stock, September and
October 1997 76,166 762 113,488 - 114,250
Net loss - - - (93,296) (93,296)
----- -------- ----------- ---------- -------
Balance, December 31, 1997 576,166 5,762 650,453 (484,547) 171,668
Sale of common stock, June 1998 123,867 1,238 184,562 - 185,800
Net loss - - - (82,498) (82,498)
----- -------- ----------- ---------- -------
Balance, September 30,1998 (unaudited) 700,033 $7,000 $835,015 $(567,045) $274,970
==================== ======== ========= ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
F-5
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended May 24, 1994 Nine Months Ended
December 31, (Inception) Through September 30,
1996 1997 December 31, 1997 1997 1998
------------------------------------------------------------ -------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(125,585) $(93,296) $(484,547) $(36,295) $(82,498)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 6,013 6,123 17,608 4,042 4,770
Changes in current assets and liabilities:
Accounts receivable - - - - -
Inventory (38,769) - (88,226) - -
Other assets (100) 1,008 (100) - -
Accounts payable - - - - 323
------------ ----------- ------------ ------------
NET CASH USED BY
OPERATING ACTIVITIES (158,441) (86,165) (555,265) (32,253) (77,405)
--------- -------- ------- -------- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (3,450) - (23,542) - -
Purchase of intangible assets (2,680) (2,316) (16,485) (2,295) -
---------- --------- -- -- -----------
NET CASH USED BY
INVESTING ACTIVITIES (6,130) (2,316) (40,027) (2,295) -
---------- --------- ---------
</TABLE>
(Continued)
F-6
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Years Ended May 24, 1994 Nine Months Ended
December 31, (Inception) Through September 30,
1996 1997 December 31,1997 1997 1998
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on note payable $ 44,084 $(44,084) $ - $(44,084) $ -
Proceeds from sale of common stock - 114,250 114,250 - 185,800
Proceeds from stockholder contributions 114,116 81,849 541,965 82,018 -
Net increase (decrease) in bank overdraft 6,414 (6,414) - (6,416) -
Deferred offering costs - - - - (44,255)
----------- ----------- - - --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 164,614 145,601 656,215 31,518 141,545
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH 43 57,120 60,923 (3,030) 64,140
CASH BALANCE AT BEGINNING OF PERIOD 3,760 3,803 - 3,803 60,923
--------- --------- ------------ ---------
CASH BALANCE AT END OF PERIOD $ 3,803 $ 60,923 $ 60,923 $ 773 $125,063
======== ======== ========= ==== ========
SUPPLEMENTAL INFORMATION
Interest paid $ 1,369 $ 268 $ 1,637 $ 268 $ -
======== ========= ======= ======== ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
F-7
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(Unaudited with respect to September 30, 1997 and 1998
and the nine months ended September 30, 1997 and 1998)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Massimo Enterprises, Inc. (a development stage company) (Company) was
incorporated in the state of Louisiana on May 24, 1994 to develop and distribute
ethnic hair-care products. On June 23, 1998, the Company was reincorporated
under the laws of the State of Texas. The Company has been in the development
stage since inception and is devoting substantially all of its efforts to
financial planning, raising capital, research, and development and marketing.
The Company plans to launch its product line in the United States and in many
areas of South America.
Cash equivalents
For purposes of determining cash flows, cash includes cash-on-hand and in bank
accounts.
Inventory
Inventory consists of finished goods (hair care products) and is carried at the
lower of cost (first-in, first-out) or market. There have been no sales of
inventory since June of 1996.
Equipment
Equipment is recorded at cost. Depreciation of equipment is provided using the
straight-line method over the assets' estimated useful lives of five years.
Maintenance and repairs of a routine nature are charged to operations as
incurred. Renewals and betterments which substantially extend the useful life of
an existing asset are capitalized and depreciated over its estimated useful
life. Upon retirement or sale of the asset, the cost of the asset and the
related accumulated depreciation are removed from the respective accounts and
any resulting gain or loss is included in operations.
Intangible Assets
Included in intangible assets are a trademark and a patent, recorded at cost and
amortized on the straight-line method over ten years.
Federal Income Taxes
The Company has elected S Corporation status under the Internal Revenue Code.
Accordingly, the Company is not a taxable entity for federal income tax purposes
and its net income (loss) is included in the federal income tax returns of its
stockholders. No pro forma tax provision is reflected in these financial
statements since the realization of any portion of the deferred tax assets
resulting from the Company's net operating loss carryforward is not considered
more likely than not.
(Continued)
F-8
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(Unaudited with respect to September 30, 1997 and 1998
and the nine months ended September 30, 1997 and 1998)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Management Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses
during the reporting period. Actual results could differ from management's
estimates.
Advertising
Advertising expenses are charged to operations as incurred. Advertising expenses
for the year ended December 31, 1996 was approximately $64,813. There was no
advertising cost for the year ended December 31, 1997 or the nine months ended
September 30, 1998.
Net Loss Per Common Share
Net (loss) per common share is based on the weighted average number of common
shares outstanding during the respective periods. At December 31, 1997 and
September 30, 1998 the Company had issued options to purchase 170,000 shares of
common stock at $1.50; however, the net loss per share computation did not
include the exercise of the options since the effect would have been
antidilutive.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(Statement No. 128), which is required to be adopted for financial statements
issued for annual or interim periods after December 15, 1997. The adoption of
Statement No. 128 required a change in the presentation of earnings per share
(EPS) to replace primary and fully diluted EPS with a presentation of basic and
diluted EPS and to restate EPS for all periods presented. The adoption of
Statement No. 128 did not have a material impact on the Company's financial
statements.
In February 1997, the FASB also issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure"
(Statement No. 129). Statement No. 129 establishes standards for disclosing
information about an entity's capital structure and applies to all entities.
Statement No. 129 continues the previous requirements to disclose certain
information about an entity's capital structure found in APB Opinions No. 10,
"Omnibus Opinion -- 1966", and 15, "Earnings per Share", and FASB Statements of
Financial Accounting Standards No. 47, "Disclosure of Long-Term Obligations",
for entities that were subject to the requirements of APB Opinions 10 and 15 and
Statement No. 47 and consolidates them for ease of retrieval and for greater
visibility to non-public entities. Statement No. 129 is effective for financial
statements for periods ending after December 15, 1997. The Company experienced
no material revision in its disclosures when Statement No.
129 was adopted.
(Continued)
F-9
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(Unaudited with respect to September 30, 1997 and 1998
and the nine months ended September 30, 1997 and 1998)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Standards (Continued)
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (Statement No. 130). Statement No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. Statement No. 130 requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It does not require a
specific format for that financial statement but requires that an entity display
an amount representing total comprehensive income for the period in that
financial statement. Statement No. 130 is effective for fiscal years beginning
after December 15, 1997. The Company does not expect Statement No. 130 to have
any effect on the Company's financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 (Statement No. 131), "Disclosures About Segments of an Enterprise and
Related Information." Statement No. 131 establishes standards for disclosures
related to business operating segments. The Company anticipates that Statement
No. 131 will have no significant effect on the disclosures set forth in its
consolidated financial statements.
NOTE 2: NOTE PAYABLE
At December 31, 1996, the Company had a note payable to a bank of $44,084. The
note accrued interest at 10.5% and was due on demand. The note was paid in full
in January 1997.
NOTE 3: INTERIM FINANCIAL INFORMATION
The balance sheet as of September 30, 1998 and the statements of operations,
stockholders' equity and cash flows for the nine months ended September 30, 1998
and 1996 have been prepared by the Company without audit. In the opinion of
management, such statements include all adjustments (consisting solely of normal
recurring adjustments) necessary to a fair presentation of the financial
position, results of operations and cash flows of the Company for all periods
presented. The results of operations for interim periods are not necessarily
indicative of the results to be obtained for the full fiscal year.
F-10
<PAGE>
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus in connection with
the Offering and, if given or made, such information or representation must not
be relied upon as having been authorized by Massimo. This Prospectus does not
constitute an offer to sell, or solicitation of an offer to buy, to any person
in any jurisdiction in which such offer to sell or solicitation is not
authorized, or in which the person making such offer of solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any offer,
solicitation or sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct at any time subsequent to the
date of this Prospectus.
-----------------
TABLE OF CONTENTS
Page
Additional Information ............... 2
Prospectus Summary.................. 3
The Offering........................... 4
Summary Financial Information..... 5
Risk Factors.......................... 6
Dividend Policy........................ 10
Use of Proceeds........................ 11
Dilution............................... 12
Capitalization........................... 13
Management's Discussion and
Analysis of Results of Operations.. 14
Business ................................ 15
Management ............................ 20
Principal Shareholders................ 22
Description of Securities............... 23
Shares Eligible for Future Sale........ 24
Underwriting ........................... 25
Legal Matters ........................... 27
Experts ................................ 27
Index to Financial Statements F-1
500,000 Units
Each Unit Consisting of
Two Shares of Common Stock
And
Two Redeemable Series A
Common Stock
Purchase Warrant
OFFERING PRICE
$8.50
PER UNIT
Prospectus
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
Article Eleven of the Registrant's Articles of Incorporation provide as follows:
A director of Massimo shall not be personally liable to Massimo or its
shareholders for monetary damages for any act or omission in his capacity as a
director, except to the extent otherwise expressly provided by a statute of the
State of Texas. Massimo shall be obligated to indemnify its officers and
directors against any and all judgments, penalties (including excise and similar
taxes), fines, settlements and reasonable expenses incurred by that person to
the full extent permitted under Texas law. Any repeal or modification of this
Article shall be prospective only, and shall not adversely affect any limitation
of the personal liability or rights to indemnification of a director of Massimo
existing at the time of the repeal or modification.
The Bylaws of the Registrant provide as follows:
Massimo may indemnify any person (and the heirs, executor and administrators of
such person) who is or was a director, officer or employee of Massimo, or of any
other corporation of which Massimo is directly or indirectly a shareholder or
creditor or in which it is in any way interested, and for which he served in the
capacity of director, officer or employee at the request of Massimo against any
and all liability and reasonable expense that may be incurred by him in
connection with or resulting from any civil or criminal claim, action, suit or
proceeding (whether brought by or in the right of Massimo or otherwise) or in
connection with an appeal relating thereto in which he may have become involved
as a party or otherwise by reason of being such director, officer or employee.
The rights of indemnification provided for in this Article shall be in addition
to any right to which any such director, officer or employee may be entitled
under any agreement, vote of shareholders, Articles of Incorporation or as a
matter of law or otherwise.
Reference is also made to the Form of Underwriting Agreement filed as Exhibit
1.1 to this Registration Statement for provisions relating to the
indemnification of directors, officers and controlling persons against certain
liabilities including liabilities under the Securities Act of 1933, as amended.
Item 25. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the public offering by Massimo of the
securities offered hereunder are as follows:
Securities and Exchange Commission Filing Fee $ 3,473
NASD Filing Fee 2,000
Blue Sky Fees and expenses 10,000
Boston Stock Exchange Application and Listing Fee* 30,000
Accounting Fees and Expenses 25,000
Legal Fees and Expenses 40,000
Printing* 25,000
Fees of Transfer Agents and Registrar* 5,000
Underwriters' Non-Accountable Expense Allowance 106,250
Miscellaneous* 13,277
----------
Total $260,000
- ------------
*Estimated
Item 26. Recent Sales of Unregistered Securities
In September and October, 1997, Massimo issued an aggregate of 76,166 shares of
Common Stock to twelve individuals for $114,249 cash. In June, 1998 Massimo
issued an additional 123, 867 shares to 17 individuals for an aggregate of
$185,800.50 cash. The sale of those securities was exempt form registration
under the Securities Act of 1933, or amended pursuant to Rule 504 of Regulation
D promulgated thereunder and Section 4(2) thereof.
Item 27. Exhibits
Exhibit No. Item
Exhibit 1.1 Form of Underwriting Agreement (2)
Exhibit 1.2 Form of Underwriters' Warrant Agreement (2)
Exhibit 3.1 Articles of Incorporation (1)
Exhibit 3.2 Bylaws (1)
Exhibit 5.1 Opinion of Robert A. Forrester (2)
Exhibit 10.1 Contract with RAANI Corporation (1)
Exhibit 10.2 1998 Stock Option Plan (1)
Exhibit 23.1 Consent of Killman Murrell & Co. P.C.(1)
Exhibit 23.2 Consent of Robert A. Forrester is contained in his
opinion filed as Exhibit 5.1 to this
registration statement. (2)
Exhibit 27.1 Financial Data Schedule (1)
- ------------
(1) Filed herewith
(2) To be filed by amendment
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows;
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. If a claim for indemnification against
such liabilities (other than the payment by the small business issuer
of expenses incurred or paid by a director, officer or controlling
person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the shares of the securities
being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a citst of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue.
(3) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it
effective.
(4) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, Texas on November 24, 1998.
Massimo Enterprises, Inc.
By:/s/ Jason J. Ramano
Jason J. Romano, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL. MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Jason Romano and Joseph L Romano, and
each for them, his true and lawful attorney's-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (until revoked in writing), to sign any and all
further amendments to this Registration Statement (including post-effective
amendments or registration statements filed pursuant to Rule 462(b) relating to
this Registration Statement), and to file same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person thereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or
their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Director, Chief Executive Officer
/s/ Jason J. Ramano November 24 , 1998
Jason J. Romano
Director, VicePresident
/s/ Joseph L. Romano November 24 , 1998
Joseph L. Romano
Director, Chief Financial Officer
/s/ Charles R. Haag November 24 , 1998
Charles R. Haag
Director
/s/ Kenneth B. Caldcleugh November 24 , 1998
Kenneth B. Caldcleugh
ARTICLES OF INCORPORATION
OF
MASSIMO ENTERPRISES, INC.
ARTICLE ONE
The name of the Corporation
is MASSIMO ENTERPRISES, INC.
ARTICLE TWO
The period of its
duration is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is to transact any
and all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have authority to
issue is 10,000,000 shares Common Stock having a par value of one cent ($0.01)
per share. All shares of Common Stock shall have identical rights and privileges
in every respect.
ARTICLE FIVE
The Board of Directors may issue shares of any class of stock of the
Corporation, or any notes, debentures, bonds or other securities convertible
into or carrying rights, options or warrants to purchase shares of any class. No
shareholder of the Corporation shall by reason of his holding shares of any
class of stock of the Corporation have any preemptive or preferential right to
purchase or subscribe to any shares of any class of the Corporation, now or
hereafter to be authorized, or to any notes, debentures, bonds or other
securities convertible into or carrying rights, options or warrants to purchase
shares of any class, now or hereafter to be authorized whether or not the
issuance of any such shares, notes, debentures, bonds or other securities would
adversely affect the dividend or voting rights of such shareholder. The Board of
Directors, however, may, in its discretion, and at such price as it may fix,
grant such rights to shareholders of the Corporation.
ARTICLE SIX
The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done or property actually
received.
<PAGE>
ARTICLE SEVEN
In all elections for directors, each shareholder shall have the right
to vote, in person or by proxy, the number of shares owned by him, for as many
persons as there are directors to be elected, and for whose election he has the
right to vote. It is expressly prohibited for any shareholder to cumulate his
votes in any election of directors.
ARTICLE EIGHT
The Board of Directors shall adopt the initial Bylaws. The power to
alter, amend or repeal the Bylaws of the Corporation, or to adopt new Bylaws, is
hereby delegated to the Board of Directors, except that such power is subject to
ultimate control of the shareholders.
ARTICLE NINE
The post office address of its initial registered office is 8643 Grenadier
Drive, Dallas, Texas 75238 and the name of its initial registered agent at such
address is Jason J. Romano.
ARTICLE TEN
The number of directors constituting the initial Board of Directors
shall be one (1) and the name and address of those who are to serve as directors
until the first annual meeting of shareholders, or until their respective
successors be elected and qualified are:
Jason J. Romano
8643 Grenadier Drive
Dallas, Texas 75238
ARTICLE ELEVEN
A director of the corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for any act or omission in
his capacity as a director, except to the extent otherwise expressly provided by
a statute of the State of Texas. The Corporation shall be obligated to indemnify
its officers and directors against any and all judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses incurred
by that person to the full extent permitted under Texas law. Any repeal or
modification of this Article shall be prospective only, and shall not adversely
affect any limitation of the personal liability or rights to indemnification of
a director of the Corporation existing at the time of the repeal or
modification.
ARTICLE TWELVE
The Articles may be altered, amended or repealed or new Articles may be
adopted by the shareholders by the affirmative vote of a majority of the shares
of Capital Stock of the Corporation entitled to vote thereon. The shareholders
of this Corporation may (i) adopt a plan of merger or consolidation and/or (ii)
authorize a sale, lease, exchange or other disposition of all or substantially
all of the property and assets of the Corporation by the affirmative vote of a
majority of the shares of Capital Stock of the Corporation entitled to vote
thereon.
ARTICLE THIRTEEN
Any action required by the Texas Business Corporation to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed and dated by the
holder or holders of shares having not less than the minimum number of votes
that would be necessary to take such action at a meeting at which the holders of
shares entitled to vote on the action were present and voted.
The Articles may be altered, amended or repealed or new Articles may be
adopted by the shareholders by the affirmative vote of a majority of the shares
of Capital Stock of the Corporation entitled to vote thereon. The shareholders
of this Corporation may (i) adopt a plan of merger or consolidation and/or (ii)
authorize a sale, lease, exchange or other disposition of all or substantially
all of the property and assets of the Corporation by the affirmative vote of a
majority of the shares of Capital Stock of the Corporation entitled to vote
thereon.
ARTICLE FOURTEEN
The name and address of the incorporator, who is more than 18 years of
age, is:
Robert A. Forrester
1215 Executive Dr. W., Ste. 102
Richardson, Texas 75081
--------------------------------------
Incorporator
STATE OF TEXAS
COUNTY OF DALLAS
Before me, a notary public, on this day personally appeared , known to
me to be the person whose name is subscribed to the foregoing document and,
being by me first duly sworn, declared that the statements therein contained are
true and correct.
Given under my hand and seal of office this _____ day of ________,
1998.
(Notarial Seal)
______________________________
(Printed or
stamped name)
Notary Public,
State of Texas My
Commission
expires:
BYLAWS
OF
MASSIMO ENTERPRISES, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation
shall be at 8643 Grenadier Dr., Dallas, Texas 75238.
----------------
Section 2. Other Offices. The Corporation shall have offices at such
other places both within and without the State of Texas, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
SHAREHOLDERS
Section 1. Time and Place of Meeting. All meetings of the shareholders
shall be held at such time and at such place within or without the State of
Texas as shall be determined by the Board of Directors.
Section 2. Annual Meeting. Annual meetings of shareholders shall be
held on the third Monday of June, if not a legal holiday, and if a legal holiday
then on the next business day following, or at such other date and time as shall
be designated from time to time by the Board of Directors and stated in the
notice of the meeting. At such annual meeting the shareholders shall elect by a
plurality vote a Board of Directors and transact such other business as may be
properly brought before the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may
be called by the President, any Vice-President or the Board of Directors and
shall be called by the President, any Vice-President or the Secretary at the
request in writing of the holders of at least 10% of the shares issued,
outstanding and entitled to vote at the meeting. Such request shall state the
purpose or purposes of the proposed meeting. Business transacted at special
meetings shall be confined to the purposes stated in the notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, day and
hour of any shareholder's meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than 10 nor more than 50 days before the date of the meeting, either personally
or by mail, by or at the direction of the President, any Vice-President,
Secretary or the officer or person calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, postage prepaid and
addressed to the shareholder at his address as it appears on the stock transfer
books of the Corporation.
Section 5. Record Date. For the purpose of determining shareholders
entitled to receive notice of or to vote at a meeting of shareholders, the Board
of Directors may fix in advance a record date to be not less than 10 days nor
more than 50 days prior to such meeting, or the Board of Directors may close the
stock transfer books for a period of not less than 10 days nor more than 50 days
prior to such meeting. In the absence of any action by the Board of Directors,
the date upon which the notice of the meeting is mailed shall be the record
date.
Section 6. List of Shareholders. At least 10 days before each meeting
of the shareholders, the officer or agent of the Corporation having charge of
the stock transfer books for shares of the Corporation shall make a complete
list, arranged in alphabetical order, of the shareholders entitled to vote at
such meeting or any adjournment thereof, including the address of and the number
of voting shares held by each. Such list shall be kept on file at the registered
office of the Corporation for a period of 10 days prior to such meeting and
shall be subject to inspection by any shareholder at any time during the usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to inspection by any shareholder
during the meeting. The original stock transfer books shall be prima facie
evidence as to which shareholders may examine such list of transfer books or
vote at any meetings of shareholders.
Section 7. Quorum. The holders of a majority of the issued and
outstanding shares entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at all meetings
of the shareholders, except as otherwise provided by the Texas Business
Corporation Act (hereinafter called the "Act"). If a quorum is not present or
represented at any meeting of the shareholders, the shareholders entitled to
vote, present in person or represented by proxy, shall have the power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented, at which time any
business which might have been transacted at the meeting as originally notified
may then be transacted. One a quorum is constituted, the shareholders present or
represented by proxy at a meeting may continue to transact business until
adjournment, notwithstanding the subsequent withdrawal therefrom of such number
of shareholders as to leave less than a quorum.
Section 8. Voting. When a quorum is present at any meeting of
shareholders, the vote of the holders of majority of the shares present or
represented by proxy at such meeting and entitled to vote shall be the act of
the shareholders, unless the vote of a different number is required by the Act,
the Articles of Incorporation or these Bylaws.
Each shareholder shall at every meeting of the shareholders be entitled
to one vote in person or by proxy for each share having voting power held by
such shareholder. Every proxy must be executed in writing by the shareholder or
by his duly authorized attorney-in-fact and shall be filed with the Secretary of
the Corporation prior to or at the time of the meeting. Each proxy shall be
revocable unless expressly provided therein to be irrevocable, and in no event
shall it remain irrevocable for a period of more than 11 months.
Section 9. Action by Unanimous Consent. Any action required to be taken
at a meeting of the 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 with respect to the subject matter thereof.
Such consent shall have the same force and effect as a unanimous vote of the
shareholders.
Section 10. Telephone and Similar Meetings. Shareholders, directors and
committee members may participate in and hold a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such a
meeting shall constitute presence in person at the meeting, except where a
person participates in the meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not otherwise the
responsibility of the shareholders under the terms of the Act, the Articles of
Incorporation or these Bylaws.
Section 2. Number of Directors. The number of directors shall be not
less than one nor more than nine. At the time these Bylaws are adopted, the
number of directors shall be one. The number of directors may be increased or
decreased from time to time within these maximum and minimum numbers, but no
decrease shall have the effect of reducing the term of any incumbent directors.
Directors shall be elected at the annual meeting of shareholders, except as
provided in Section 3 of this Article, and each director shall hold office until
his successor is elected and qualified. Directors need not be residents of the
State of Texas nor shareholders of the Corporation.
Section 3. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors,
though the remaining directors may constitute less than a quorum of the Board of
Directors as fixed by Section 8 of this Article. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office. At
any annual meeting of shareholders or any special meeting called for such
purpose, any director may be removed from office, for or without cause, though
his term may not have expired.
Section 4. Place of Meeting. The directors of this Corporation
may hold their meetings, both regular and special, either within or without
the
----------------
State of Texas.
Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the shareholders at the same place, unless, by unanimous
consent of the directors then elected and serving, such time or place shall be
changed.
Section 6. Regular Meeting. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from
time to
time be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by the President, any Vice-President or the Secretary on one's
notice to each director, either personally (including telephone notice) or by
mail, telegram or other similar method of communication. Special meetings shall
be called by the President, any Vice-President or the Secretary in a like manner
and on like notice on the written request of at least 50% of the directors.
Section 8. Quorum and Voting. At all meetings of the Board of Directors
the presence of a majority of the number of directors at the time in office
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by the Act, the
Articles of Incorporation or these Bylaws. If a quorum is not present at any
meeting of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate an Executive
Committee, to consist of two or more directors, one of whom shall be designated
as Chairman and shall preside at all meetings of such Committee. The Executive
Committee shall have and may exercise all of the authority of the Board of
Directors in the management of the business and affairs of the Corporation,
including authority over the Corporate Seal, except as the Act or the Articles
of Incorporation require action by the Board of Directors. Any member of the
Executive Committee may be removed, for or without cause, by the affirmative
vote of a majority of the entire Board of Directors. Any vacancy or vacancies in
the Executive Committee shall be filled by the affirmative vote of a majority of
the entire Board of Directors.
The Board of Directors may, by resolution passed by entire board of
Directors, designate other committees, each to consist of two or more directors,
which shall have such power and authority and shall perform such functions as
may be provided in such resolution. Such committee or committees shall have such
name or names as may be designated by the Board of Directors.
The Executive Committee and all other such shall keep regular minutes
of their proceedings and report the same to the Board of Directors when
required.
Section 10. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services as directors. However, the Board of
Directors may, by resolution, allow a fixed sum and expenses of attendance, if
any, for attendance at each regular or special meeting of the Board of
Directors. Nothing herein shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of the Executive Committee may, by resolution of the Board of
Directors, be allowed compensation for attending Executive Committee meetings.
Section 11. Action by Unanimous Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of the
Executive Committee may be taken without a meeting if a written consent, setting
forth the action so taken, is signed by all members of the Board of Directors or
the Executive Committee, as the case may be. Such consent shall have the same
force and effect as an unanimous vote at a meeting.
Section 12. Telephone and Similar Meetings. Shareholders, directors and
committee members may participate in and hold a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such a
meeting shall constitute presence in person at the meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
<PAGE>
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the Act,
the Articles of Incorporation or these Bylaws, notice is required to be given to
any director or shareholder, and no provision is made as to how such notice
shall be given, notice may be personal notice (including telephone notice) or
written notice mail, telegram or other similar method of communication,
addressed to such director or shareholder at such address as appears on the
books of the Corporation. Any notice required or permitted to be given by mail
shall be deemed to be delivered when deposited in the United States mail,
postage prepaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or shareholder of the Corporation under the provisions of the Act, the
Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by
the person or persons entitled to such notice, whether before or after the time
stated in such notice, shall be deemed equivalent to the giving of such notice.
ARTICLE V
OFFICERS AND AGENTS
Section 1. General. The officers of the Corporation shall be elected by
the Board of Directors and shall include a Chairman of the Board, a President, a
Vice-President, a Secretary and a Treasurer. The Board of Directors may, in its
discretion, elect additional Vice-Presidents, one or more Assistant Secretaries
and one or more Assistant Treasurers, all of whom shall also be officers. Two or
more offices may be held by the same person, except the office of President and
Secretary shall not be held by the same person.
Section 2. Election. The Board of Directors, at its first meeting after
each annual meeting of the shareholders, shall elect a President, who shall be a
member of the Board of Directors, and the other officers, who need not be
members of the Board of Directors. The Board of Directors may appoint such other
officers and agents as it shall deem necessary and may determine the salaries of
all officers and agents from time to time. The officers shall hold office until
their respective successors are chosen and qualified. Any officer elected or
appointed by the Board of Directors may be removed, for or without cause, at any
time by a majority vote of the entire Board of Directors then in office.
Election or appointment of an officer or agent shall not of itself create
contract rights.
Section 3. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of shareholders and the Board of Directors.
Section 4. President. The President shall have the general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The President and
such other officers as the Board of Directors may determine shall execute all
contracts requiring a seal and shall also execute any mortgages, conveyances or
other legal instruments to be made in the name of and one behalf of the
Corporation. Nothing herein shall prohibit the delegation of such powers by the
Board of Directors to some other agent or attorney-in-fact of the Corporation.
<PAGE>
Section 5. Vice President. The Vice President or, if there be more than
one, the Vice Presidents in the order of their seniority or in any other order
determined by the Board of Directors shall, in the absence or disability of the
President, perform all duties and exercise the powers of the President. The Vice
President or Vice Presidents shall generally assist the President and perform
such other duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee and any other committees of the
Board of Directors when required. The Secretary shall give or cause to be given,
notice of meetings of the shareholders and special meetings of the Board of
Directors and shall perform such other duties as may be prescribed by the
President or the Board of Directors. He or she shall keep in safe custody the
seal of the Corporation.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the President or the Board of Directors.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities; shall keep full and accurate accounts of
receipts and disbursements of the Corporation; and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements; shall render to the President and the
Board of Directors, at the regular meetings of the Board of Directors or
whenever the Board of Directors may require it, an account of all his
transactions as Treasurer and of the financial condition of the Corporation; and
shall perform such other duties as may be prescribed by the President or the
Board of Directors.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the President or the Board of Directors.
Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors, for the faithful performance of the duties of their office and for
the restoration to the Corporation, in case of their death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in their possession or under their control
belonging to the Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class, and par value (or a statement that the shares are without par value) of
the shares. They shall be signed by the President or any Vice President and the
Secretary or any Assistant Secretary, and may be sealed with the seal of the
Corporation or a facsimile thereof. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any office or officers who
have been signed, or whose facsimile signature or signatures have been used on
such certificate or certificates, shall cease to be such officer or officers of
the Corporation, whether because of death, resignation or otherwise, before such
certificate of certificates have been delivered by the Corporation or its
agents, such certificate or certificates may nevertheless be adopted by the
Corporation and be issued and delivered as though the person or persons who
signed the certificate or certificates or whose facsimile signature or
signatures have been used thereon had not ceased to be such officer or officers
of the Corporation.
Should the Corporation be authorized to issue shares of more than one
class, each certificate shall set forth upon the face or back of such
certificate a statement of the designations, preferences, limitations and
relative rights of the shares of each class authorized to be issued, as required
by the Act.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation and alleged to have been lost or destroyed upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing the issue of a new certificate, the Board of
Directors may, in its discretion as a condition precedent to the issuance
thereof, require the owner of the lost or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such form, in such sum, and with such surety
or sureties as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost or destroyed.
Section 3. Transfer of Shares. The shares of Common Stock of the
Corporation shall be transferable only on the books of the Corporation by the
holder thereof in person or by his duly authorized attorney. Upon surrender to
the Corporation or to the transfer agent of the Corporation of a certificate
representing shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation or the transfer agent of the Corporation to issue a new certificate
to the person entitled thereto, to cancel the old certificate and to record the
transaction upon its books.
Section 4. Registered Shareholder. The Corporation shall be entitled to
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not the Corporation shall have express or other notice
thereof, except as otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of the Act, the
Articles of Incorporation and any agreements or obligation of the Corporation,
if any, dividends upon the outstanding shares of the Corporation may be declared
by the Board of Directors at any regular or special meeting. Dividends may be
declared and paid in cash, in property, or in shares of the Corporation,
provided that all such declarations and payments of dividends shall be in strict
compliance with al applicable laws and the Articles of Incorporation. The Board
of Directors may fix in advance a record date for the purposes of determining
shareholders entitled to receive payment of any dividend, such record date to be
not more than 50 days prior to the payment date of such dividend, or the Board
of Directors may close the stock transfer books for such purpose for a period of
not more than 50 days prior to the payment date of such dividend. In the absence
of any action by the Board of Directors, the date upon which the Board of
Directors adopts the resolution declaring such dividend shall be the record
date.
Section 2. Reserves. The Board of Directors may, by resolution, create
out of the earned surplus of the Corporation such reserve or reserves as the
Board of Directors from time to time, in its discretion shall deem proper to
provide for contingencies, or to equalize dividends, or to repair or maintain
any property of the Corporation or for such other purpose as the Board of
Directors may deem beneficial to the Corporation. The Board of Directors may, by
resolution, modify or abolish any reserve so created.
Section 3. Fiscal Year. The fiscal year shall be fixed by resolution
of the Board of Directors.
Section 4. Seal. The Corporation may have a seal which may be used by
causing it or a facsimile thereof to be impressed, affixed or in any manner
reproduced. Any officer of the Corporation shall have the authority to affix the
seal to any document requiring it.
Section 5. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the shareholders at any
special meeting of the shareholders, a full and clear statement of the business
and condition of the Corporation.
ARTICLE VIII
INDEMNITY
The Corporation may indemnify any person (and the heirs, executor and
administrators of such person) who is or was a director, officer or employee of
the Corporation, or of any other corporation of which the Corporation is
directly or indirectly a shareholder or creditor or in which it is in any way
interested, and for which he served in the capacity of director, officer or
employee at the request of the Corporation against any and all liability and
reasonable expense that may be incurred by him in connection with or resulting
from any civil or criminal claim, action, suit or proceeding (whether brought by
or in the right of the Corporation or otherwise) or in connection with an appeal
relating thereto in which he may have become involved as a party or otherwise by
reason of being such director, officer or employee. The rights of
indemnification provided for in this Article shall be in addition to any right
to which any such director, officer or employee may be entitled under any
agreement, vote of shareholders, Articles of Incorporation or as a matter of law
or otherwise.
ARTICLE IX
AMENDMENTS TO BYLAWS
Section 1. Amendment by Board of Directors. These Bylaws may be
altered, amended or repealed, except for this provision, at any meeting of the
Board of Directors at which a quorum is present, by the affirmative vote of a
majority of the directors present at such meeting, provided notice of the
proposed alteration, amendment or repeal is contained in the notice of the
meeting.
Section 2. Amendment by Shareholders. These Bylaws may also be altered,
amended, or repealed, including this provision, at any meeting of the
shareholders at which a quorum is present or represented, by the affirmative
vote of the holders of a majority of the share present or represented at the
meeting and entitled to vote thereat, provided notice of the proposed
alteration, amendment or repeal is contained in the notice of the meeting.
The foregoing Bylaws were duly adopted as the Bylaws of the Corporation
as of ___ June, 1998.
-----------------------------
Jason J. Romano
RAANI
Raani Corporation 5401 West 65th St. Bedford Park, Il 60638
(708) 496-8025 FAX: (708) 496-8906
This said agreement shall serve as a written confirmation that the
RAANI Corporation of Bedford Park, IL (an Illinois Corporation) agrees
to supply all chemicals, manufacturing, and filling labor for Massimo
Enterprises, Inc. of Dallas, Texas and their Smooth & Easy Hair Care
Product line at the following prices for a period of one year. All
products listed are formulated and produced exclusively for Massimo
Enterprises, Inc.
PRODUCT SIZE QTY PRICE/UNIT
Lite Conditioner Hairdress 4 oz. Jar 10M (minimum) $ 0.58
Shampoo 8 Fl.oz Bottle 10M (minimum) $ 0.61
Spray Mist 8 Fl. oz Bottle 10M (minimum) $ 0.46
Moisturizer Conditioner 8 Fl. oz Bottle 10M(minimum) $ 0.48
No-Lye Relaxer Kit Kit $ 2.16
Kit is Comprised Of:
1. No Lye Relaxer (6 oz. bottle)
2. Liquid Activator (1.5 fl. oz. bottle)
3. Color Action Neutralizing Shampoo
(3 Fl. oz bottle)
4. Moisturizer Conditioner (L2 Fl. oz. bottle)
5. Protective Gel (0.33 oz. packette)
6. Pre-Relaxer Treatment (0.5 fl. oz tube)
* FOB Bedford Park, IL
Pallets are $6.00 each
It shall be the sole responsibility of Massimo Enterprises, Inc. to supply RAANI
Corporation with all packaging componentry (i.e. bottles, jars, closures,
sprayers, shippers, instructions, gloves, etc.).
- -------------------- -------------------
Eugene M. Frank, Ph.D. Jason Romano
Sr. VP, Sales & Marketing CEO
RAANI Corporation Massimo Enterprises, Inc.
January 12, 1998 January 12, 1998
Research & Development / Private Label /
Contract Packaging of Cosmetics, Toiletries & Household Products
1
1998 STOCK COMPENSATION PLAN
of
MASSIMO ENTERPRISES, INC.
(a Texas corporation)
* * * * *
TABLE OF CONTENTS
* * *
1998 STOCK COMPENSATION PLAN
of
MASSIMO ENTERPRISES, INC.
<TABLE>
<S> <C> <C>
SECTION SUBJECT PAGE
1. Purpose of Plan 1
2. Stock Subject to the Plan 1
3. Administration of the Plan 1
(a) General 1
(b) Changes in Law Applicable 2
4. Types of Awards Under the Plan 2
5. Persons to Options Shall Be Granted 2
(a) Nonqualified Options 3
(b) Incentive Options 3
6. Factors to Be Considered in Granting Options 3
7. Time of Granting Option 3
8. Terms and Conditions of Options 3
(a) Number of Shares 3
(b) Type of Option 3
(c) Option Period 3
(1) General 3
(2) Termination of Employment 4
(3) Cessation of Service as Director
or Advisor 4
(4) Disability 4
(5) Death 4
(6) Acceleration and Exercise Upon Change
of Control 5
(d) Option Prices 6
(1) Nonqualified Options 6
(2) Incentive Options 6
(3) Determination of Fair Market Value 6
(e) Exercise of Options 6
(f) Nontransferability of Options 7
(g) Limitations on 10% Shareholders 7
(h) Limits on Vesting of Incentive Options 7
(i) Compliance with Securities Laws 7
(j) Additional Provisions 8
9. Medium and Time of Payment 8
10. Alternate Stock Appreciation Rights 8
(a) Award of Alternate Stock Rights 8
(b) Alternate Stock Rights Agreement 8
(c) Exercise 8
(d) Amount of Payment 9
(e) Form of Payment 9
(f) Termination of SAR 9
(g) Effect of Exercise of SAR 9
(h) Effect of Exercise of Related Option 9
(i) Nontransferability of SAR 9
11. Reload Options
(a) Authorization of Reload Options 10
(b) Reload Option Amendment 10
(c) Reload Option Price 10
(d) Term and Exercise 10
(e) Termination of Employment 10
(f) Applicability of Other Sections 10
12. Rights as a Shareholder 10
13 Optionee's Agreement to Serve 10
14. Adjustments on Changes in Capitalization 11
(a) Changes in Capitalization 11
(b) Reorganization, Dissolution or Liquidation 11
(c) Change in Par Value 11
(d) Notice of Adjustments 11
(e) Effect Upon Holder of Option 12
(f) Right of Company to Make Adjustments 12
15. Investment Purpose 13
16. No Obligation to Exercise Option or SAR 13
17. Modification, Extension, and Renewal of Options 13
18 Effective Date of the Plan 13
19. Termination of the Plan 13
20. Amendment of the Plan 13
21. Withholding 13
22. Indemnification of Committee 14
23. Application of Funds 14
24. Governing Law 14
</TABLE>
1998 STOCK COMPENSATION PLAN
OF
MASSIMO ENTERPRISES, INC.
1. Purpose of Plan. This 1998 Stock Compensation Plan ("Plan")
is intended to encourage ownership of the common stock of MASSIMO ENTERPRISES,
INC. ("Company") by certain officers, directors, employees and advisors of the
Company or any Subsidiary or Subsidiaries of the Company (as hereinafter
defined) in order to provide additional incentive for such persons to promote he
success and the business of the Company or its Subsidiaries and to encourage
them to remain in the employ of the Company or its Subsidiaries by providing
such persons an opportunity to benefit from any appreciation of the common stock
of the Company through the issuance of stock options and related stock
appreciation rights to such persons in accordance with the terms of the Plan. It
is further intended that options granted pursuant to this Plan shall constitute
either incentive stock options ("Incentive Options") within the meaning of
Section 422 (formerly Section 422A) of the Internal Revenue Code of 1986, as
amended ("Code"), or options which do not Incentive Options ("Nonqualified
Options") as determined by the Committee (as hereinafter defined) at the time of
issuance of such options. Incentive Options, Nonqualified Options and Reload
Options (as defined in Section 11 hereof) are herein sometimes referred to
collectively as "Options". As used herein, the term Subsidiary or Subsidiaries
shall mean any corporation (other than the employer corporation) in an unbroken
chain of corporations beginning with the employer corporation if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
2. Stock Subject to the Plan. Subject to adjustment as provided in
Section 14 hereof, there will be reserved for the use upon the exercise of
Options to be granted from time to time under the Plan, an aggregate of One
hundred seventy thousand (170,000) shares of the common stock, without par
value, of the Company ("Common Stock"), which shares in whole or in part shall
be authorized, but unissued, shares of the Common Stock or issued shares of
Common Stock which shall have been reacquired by the Company as determined from
time to time by the Board of Directors of the Company ("Board of Directors"). To
determine the number of shares of Common Stock available at any time for the
granting of Options under the Plan, there shall be deducted from the total
number of reserved shares of Common Stock, the number of shares of Common Stock
in respect of which Options have been granted pursuant to the Plan which remain
outstanding or which have been exercised. If and to the extent that any Option
to purchase reserved shares shall not be exercised by the optionee for any
reason or if such Option to purchase shall terminate as provided herein, such
shares which have not been so purchased hereunder shall again become available
for the purposes of the Plan unless the Plan shall have been terminated, but
such unpurchased shares shall not be deemed to increase the aggregate number of
shares specified above to be reserved for purposes of the Plan (subject to
adjustment as provided in Section 14 hereof).
3. Administration of the Plan.
(a) General. The Plan shall be administered by a Compensation
Committee ("Committee") appointed by the Board of Directors, which
Committee shall consist of not less than two (2) members of the Board
of Directors who are not eligible to participate in the Plan, and have
not, for a period of at least one (1) year prior thereto been eligible
to participate in the Plan, except that if at any time there shall be
less than two (2) who are qualified to serve on the Committee, then the
Plan shall be administered by the full Board of Directors. All
references in this Plan to the Committee shall be deemed to refer
instead to the full Board of Directors at any time there is not a
committee of two (2) members qualified to act hereunder. The Board of
Directors may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed and may
fill vacancies, however caused, in the Committee. If the Board of
Directors does not designate a Chairman of the Committee, the Committee
shall select one of its members as its Chairman. The Committee shall
hold its meetings at such times and places as it shall deem advisable.
A majority of its members shall constitute a quorum. Any action of the
Committee shall be taken by a majority vote of its members at a meeting
at which a quorum is present. Notwithstanding the preceding, any action
of the Committee may be taken without a meeting by a written consent
signed by all of the members, and any action so taken shall be deemed
fully as effective as if it had been taken by a vote of the members
present in person at the meeting duly called and held. The Committee
may appoint a Secretary, shall keep minutes of its meetings, and shall
make such rules and regulations for the conduct of its business as it
shall deem advisable.
The Committee shall have the sole authority and power, subject
to the express provisions and imitations of the Plan, to construe the
Plan and option agreements granted hereunder, and to adopt, prescribe,
amend, and rescind rules and regulations relating to the Plan, and to
make all determinations necessary or advisable for administering the
Plan, including, but not limited to, (i) who shall be granted Options
under the Plan, (ii) the term of each Option, (iii) the number of
shares covered by such Option, (iv) whether the Option shall constitute
an Incentive Option or a Nonqualified Option or a Reload Option, (v)
the exercise price for the purchase of the shares of the Common Stock
covered by the Option, (vi) the period during which the Option may be
exercised, (vii) whether the right to purchase the number of shares
covered by the Option shall be fully vested on issuance of the Option
so that such shares may be purchased in full at one time or whether the
right to purchase such shares shall become vested over a period of time
so that such shares may only be purchased in installments, and (viii)
the time or times at which Options shall be granted. The Committee's
determinations under the Plan, including the above enumerated
determinations, need not be uniform and may be made by it selectively
among the persons who receive, or are eligible to receive, Options
under the Plan, whether or not such persons are similarly situated.
The interpretation by the Committee of any provision of the
Plan or of any option agreement entered into hereunder with respect to
any Incentive Option shall be in accordance with Section 422 of the
Code and the regulations issued thereunder, as such section or
regulations may be amended from time to time, in order that the rights
granted hereunder and under said option agreements shall constitute
"Incentive Stock Options" within the meaning of such section. The
interpretation and construction by the Committee of any provision of
the Plan or of any Option granted hereunder shall be final and
conclusive, unless otherwise determined by the Board of Directors. No
member of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan
or any Option granted under it. Upon issuing an Option under the Plan,
the Committee shall report to the Board of Directors the name of the
person granted the Option, whether the Option is an Incentive Option or
a Nonqualified Option, the number of shares of Common Stock covered by
the Option, and the terms and conditions of such Option.
(b) Changes in Law Applicable. If the laws relating
to Incentive Options or Nonqualified Options are changed, altered or
amended during the term of the Plan, the Board of Directors shall have
full authority and power to alter or amend the Plan with respect to
Incentive Options or Nonqualified Options, respectively, to conform to
such changes in the law without the necessity of obtaining further
shareholder approval, unless the changes require such approval.
4. Types of Awards Under the Plan. Awards under the Plan may be in the form
of either Options, alternate stock appreciation rights (as described in Section
10 hereof), or a combination thereof.
5. Persons to Whom Options Shall be Granted.
(a) Nonqualified Options. Nonqualified Options shall be
granted only to officers, directors (other than "Outside Directors" of
the Company or a Subsidiary [as hereinafter defined]), employees and
advisors of the Company or a Subsidiary who, in the judgment of the
Committee, are responsible for or contribute to the management or
success of the Company or a Subsidiary and who, at the time of the
granting of the Nonqualified Options, are either officers, directors
(other than Outside Directors), employees or advisors of the Company or
a Subsidiary. As used herein, the term "Outside Director" shall mean
any director of the Company or a Subsidiary who is not an employee of
the Company or a Subsidiary.
(b) Incentive Options. Incentive Options shall be granted only
to employees of the Company or a Subsidiary who, in the judgment of the
Committee, are responsible for or contribute to the management or
success of the Company or a Subsidiary and who, at the time of the
granting of the Incentive Option are either an employee of the Company
or a Subsidiary. Subject to the provisions of Section 8(g) hereof, no
individual shall be granted an Incentive Option who, immediately before
such Incentive Option was granted, would own more than ten percent
(10%) of the total combined voting power or value of all classes of
stock of the Company ("10% Shareholder").
6. Factors to Be Considered in Granting Options. In making any
determination as to persons to whom Options shall be granted and as to the
number of shares to be covered by such Options, the Committee shall take into
account the duties and responsibilities of the respective officers, directors,
employees, or advisors, their current and potential contributions to the success
of the Company or a Subsidiary, and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
7. Time of Granting Options. Neither anything contained in the
Plan or in any resolution adopted or to be adopted by the Board of Directors or
the Shareholders of the Company or a Subsidiary nor any action taken by the
Committee shall constitute the granting of any Option. The granting of an Option
shall be effected only when a written Option Agreement acceptable in form and
substance to the Committee, subject to the terms and conditions hereof including
those set forth in Section 8 hereof, shall have been duly executed and delivered
by or on behalf of the Company and the person to whom such Option shall be
granted. No person shall have any rights under the Plan until such time, if any,
as a written Option Agreement shall have been duly executed and delivered as set
forth in this Section 7.
8. Terms and Conditions of Options. All Options granted pursuant to
this Plan must be granted within ten (10) years from the date the Plan is
adopted by the Board of Directors of the Company. Each Option Agreement
governing an Option granted hereunder shall be subject to at least the following
terms and conditions, and shall contain such other terms and conditions, not
inconsistent therewith, that the Committee shall deem appropriate:
(a) Number of Shares. Each Option shall state the number of
shares of Common Stock which it represents.
(b) Type of Option. Each Option shall state whether
it is intended to be an Incentive Option or a Nonqualified Option.
(c) Option Period.
(1) General. Each Option shall state the date upon
which it is granted. Each Option shall be exercisable
in whole or in part during such period as is provided under the
terms of the Option subject to any vesting period set forth in
the Option, but in no event shall an Option be exercisable
either in whole or in part after the expiration of ten (10)
years from the date of grant; provided, however, if an
Incentive Option is granted to a 10% Shareholder, such
Incentive Option shall not be exercisable more than five (5)
years from the date of grant thereof.
(2) Termination of Employment. Except as
otherwise provided in case of Disability (as hereinafter
defined), death Change of Control (as hereinafter defined), no
Option shall be exercisable after an optionee who is an
employee of the Company or a Subsidiary ceases to be employed
by the Company or a Subsidiary as an employee; provided,
however, that the Committee shall have the right in its sole
discretion, but not the obligation, to extend the exercise
period for not more than three (3) months following the date of
termination of such optionee's employment; provided further,
however, that no Option shall be exercisable after the
expiration of ten (10) years from the date it is granted and
provided further, no Incentive Option granted to a 10%
Shareholder shall be exercisable after the expiration of five
(5) years from the date it is granted.
(3) Cessation of Service as Director or
Advisor. In the event an optionee who was a director or advisor
of the Company or a Subsidiary ceases to be a director or
advisor of the Company or a Subsidiary for any reason, other
than Disability or death, prior to the full exercise of the
Option, such optionee may exercise his Option at any time
within ninety (90) days after such optionee's status as a
director or advisor of the Company or a Subsidiary is so
terminated to the extent he was entitled to exercise such
Option at the date such optionee's status as a director or
advisor of the Company or a Subsidiary terminated; provided,
however, that no Option shall be exercisable after the
expiration of ten (10) years from the date it is granted.
(4) Disability. If an optionee's
employment is terminated by reason of the permanent and total Disability of such
optionee or if an optionee who is a director or advisor of the
Company or a Subsidiary ceases to serve as a director or
advisor by reason of the permanent and total Disability of such
optionee, the Committee shall have the right in its sole
discretion, but not the obligation, to extend the exercise
period for not more than one (1) year following the date of
termination of the optionee's employment or the date such
optionee ceases to be a director or advisor of the Company or a
Subsidiary, as the case may be, subject to the condition that
no Option shall be exercisable after the expiration of ten (10)
years from the date it is granted and subject to the further
condition that no Incentive Option granted to a 10% Shareholder
shall be exercisable after the expiration of five (5) years
from the date it is granted. For purposes of this Plan, the
term "Disability" shall mean the inability of the optionee to
fulfill such optionee's obligations to the Company or a
Subsidiary by reason of any physical or mental impairment which
can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than
twelve (12) months as determined by a physician acceptable to
the Committee in its sole discretion.
(5) Death. If an optionee dies while in the employ of the
Company or a Subsidiary, or while serving as a director or
advisor of the Company or a Subsidiary, and shall not have
fully exercised Options granted pursuant to the Plan, such
Options may be exercised in whole or in part at any time within
one (1) year after the optionee's death, by the executors or
administrators of the optionee's estate or by any person or
persons who shall have acquired the Options directly from the
optionee by bequest or inheritance, but only to the extent that
the optionee was entitled to exercise such Option at the date
of such optionee's death, subject to the condition that no
Option shall be exercisable after the expiration of ten (10)
years from the date it is granted and subject to the further
condition that no Incentive Option granted to a 10% Shareholder
shall be exercisable after the expiration of five years from
the date it is granted.
(6) Acceleration and Exercise Upon Change of Control.
Notwithstanding the preceding provisions of this Section 8(c),
if any Option granted under the Plan provides for either (a) an
incremental vesting period whereby such Option may only be
exercised in installments as such incremental vesting period is
satisfied or (b) a delayed vesting period whereby such Option
may only be exercised after the lapse of a specified period of
time, such as after the expiration of one (1) year, such
vesting period shall be accelerated upon the occurrence of a
Change of Control (as hereinafter defined) of the Company, or a
threatened Change of Control of the Company as determined by
the Committee, so that such Option shall thereupon become
exercisable immediately in part or its entirety by the holder
thereof, as such holder shall elect. For the purposes of this
Plan, a "Change of Control" shall be deemed to have occurred
if:
(i) Any "person", including a
"group" as determined in accordance with Section
13(d)(3) of the Securities Exchange Act of 1934
("Exchange Act") and the Rules and Regulations
promulgated thereunder, is or becomes, through one or
a series of related transactions or through one or
more intermediaries, the beneficial owner, directly
or indirectly, of securities of the Company
representing 25% or more of the combined voting power
of the Company's then outstanding securities, other
than a person who is such a beneficial owner on the
effective date of the Plan and any affiliate of such
person;
(ii) As a result of, or in
connection with, any tender offer or exchange offer, merger or other business
combination, sale of assets or contested election, or
any combination of the foregoing transactions
("Transaction"), the persons who were Directors of
the Company before the Transaction shall cease to
constitute a majority of the Board of Directors of
the Company or any successor to the Company;
(iii) Following the
effective date of the Plan, the Company is merged or consolidated with another
corporation
and as a result of such merger or consolidation less
than 40% of the outstanding voting securities of the
surviving or resulting corporation shall then be
owned in the aggregate by the former stockholders of
the Company, other than (x) any party to such merger
or consolidation, or (y) any affiliates of any such
party;
(iv) A tender offer or exchange offer is made and consummated for the
ownership of securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding voting securities; or
(v) The Company transfers more than 50% of its assets, or the last of a
series of transfers result in the
transfer of more than 50% of the assets of the
Company, to another corporation that is not a
wholly-owned corporation of the Company. For purposes
of this subsection 8(c)(6)(v), the determination of
what constitutes more than 50% of the assets of the
Company shall be determined based on the sum of the
values attributed to (i) the Company's real property
as determined by an independent appraisal thereof,
and (ii) the net book value of all other assets of
the Company, each taken as of the date of the
Transaction involved.
In addition, upon a Change of
Control, any Options previously granted under the Plan to the extent not already
exercised
may be exercised in whole or in part either immediately or at
any time during the term of the Option as such holder shall elect.
(d) Option Prices.
(1) Nonqualified Options. The purchase price or prices of
the shares of the Common Stock which shall be offered to any
person under the Plan and covered by a Option shall be the
price determined by the Committee at the time of granting of
the Nonqualified Option, which price may be less than, equal to
or higher than one hundred percent (100%) of the fair market
value of the Common Stock at the time of granting the
Nonqualified Option.
(2) Incentive Options. The purchase price or prices of the
shares of the Common Stock which shall be offered to any
person under the Plan and covered by an Incentive Option shall
be one hundred percent (100%) of the fair market value of the
Common Stock at the time of granting the Incentive Option or
such higher purchase price as may be determined by the
Committee at the time of granting the Incentive Option;
provided, however, if an Incentive Option is granted to a 10%
Shareholder, the purchase price of the shares of the Common
Stock of the Company covered by such Incentive Option may not
be less than one hundred ten percent (110%) of the fair market
value of such shares on the day the Incentive Option is
granted.
(3) Determination of Fair Market Value. During such time
as the Common Stock of the Company is not listed upon an
established stock exchange, the fair market value per share
shall be deemed to be the closing sales price of the Common
Stock on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on the day the Option is
granted, as reported by NASDAQ, if the Common Stock is so
quoted, and if not so quoted, the mean between dealer "bid" and
"ask," prices of the Common Stock in the New York
over-the-counter market on the day the Option is granted, as
reported by the National Association of Securities Dealers,
Inc. If the Common Stock is listed upon an established stock
exchange or exchanges, such fair market value shall be deemed
to be the highest closing price of the Common Stock on such
stock exchange or exchanges on the day the Option is granted
or, if no sale of the Common Stock of the Company shall have
been made on established stock exchange on such day, on the
next preceding day on which there was a sale of such stock. If
there is no market price for the Common Stock, then the Board
of Directors and the Committee may, after taking all relevant
facts into consideration, determine the fair market value of
the Common Stock.
(e) Exercise of Options. To the extent that a holder
of an Option has a current right to exercise, the Option may be
exercised from time to time by written notice to the Company at its
principal place of business. Such notice shall state the election to
exercise the Option, the number of whole shares in respect of which it
is being exercised, shall be signed by the person or persons so
exercising the Option, and shall contain any investment representation
required by Section 8(i) hereof. Such notice shall be accompanied by
payment of the full purchase price of such shares and by the Option
Agreement evidencing the Option. In addition, if the Option shall be
exercised, pursuant to Section 8(c)(4) or Section 8(c)(5) hereof, by
any person or persons other than the optionee, such notice shall also
be accompanied by appropriate proof of the right of such person or
persons to exercise the Option. The Company shall deliver a certificate
or certificates representing such shares as soon as practicable after
the aforesaid notice and payment of such shares shall be received. The
certificate or certificates for the shares as to which the Option shall
have been so exercised shall be registered in the name of the person or
persons so exercising the Option. In the event the Option shall not be
exercised in full, the Secretary of the Company shall endorse or cause
to be endorsed on the Option the number of shares which has been
exercised thereunder and the number of shares that remain exercisable
under the Option and return such Option Agreement to the holder
thereof.
(f) Nontransferability of Options. An Option granted pursuant
to the Plan shall be exercisable only by the optionee or the optionee's
court appointed guardian as set forth in Section 8(c)(4) hereof during
the optionee's lifetime and not be assignable or transferable by the
optionee otherwise than by Will or the laws of descent and
distribution. An Option granted pursuant to the Plan shall not be
assigned, pledged or hypothecated in any way (whether by operation of
law or otherwise other than by Will or the laws of descent and
distribution) and shall not be subject to execution, attachment, or
similar process. Any attempted transfer, assignment, pledge,
hypothecation, or other disposition of any Option or of any rights
granted thereunder contrary to the foregoing provisions of this Section
8(f), or the levy of any attachment or similar process upon an Option
or such rights, shall be null and void.
(g) Limitations on 10% Shareholders. No Incentive Option may
be granted under the Plan to any 10% Shareholder unless (i) such
Incentive Option is granted at an option price not less than one
hundred ten percent (110%) of the fair market value of the shares on
the day the Incentive Option is granted and (ii) such Incentive Option
expires on a date not later than five (5) years from the date the
Incentive Option is granted.
(h) Limits on Vesting of Incentive Options. An
individual may be granted one or more Incentive Options, provided that
the aggregate fair market value (as determined at the time such
Incentive Option is granted) of the stock with respect to which
Incentive Options are exercisable for the first time by such individual
during any calendar year shall not exceed $100,000. To the extent the
$100,000 limitation in the preceding sentence is exceeded, such option
shall be treated as an option which is not an Incentive Option.
(i) Compliance with Securities Laws. The Plan and the grant
and exercise of the rights to purchase shares hereunder, and the
Company's obligations to sell and deliver shares upon the exercise of
rights to purchase shares, shall be subject to all applicable federal
and state laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may, in the opinion of counsel for
the Company, be required, and shall also be subject to all applicable
rules and regulations of any stock exchange upon which the Common Stock
of the Company may then be listed. At the time of exercise of any
Option, the Company may require the optionee to execute any documents
or take any action which may be then necessary to comply with the
Securities Act of 1933, as amended ("Securities Act"), and the rules
and regulations promulgated thereunder, or any other applicable federal
or state laws regulating the sale and issuance of securities, and the
Company may, if it deems necessary, include provisions in the stock
option agreements to assure such compliance. The Company may, from time
to time, change its requirements with respect to enforcing compliance
with federal and state securities laws, including the request for and
enforcement of letters of investment intent, such requirements to be
determined by the Company in its judgment as necessary to assure
compliance with said laws. Such changes may be made with respect to any
particular Option or stock issued upon exercise thereof. Without
limiting the generality of the foregoing, if the Common Stock issuable
upon exercise of an Option granted under the Plan is not registered
under the Securities Act, the Company at the time of exercise will
require that the registered owner execute and deliver an investment
representation agreement to the Company in form acceptable to the
Company and its counsel, and the Company will place a legend on the
certificate evidencing such Common Stock restricting the transfer
thereof, which legend shall be substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW
BUT HAVE BEEN ACQUIRED FOR THE PRIVATE INVESTMENT OF THE
HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED
UNTIL EITHER (i) A REGISTRATION STATEMENT UNDER SUCH
SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE COMPANY
SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY AND ITS COUNSEL THAT REGISTRATION UNDER SUCH
SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR
TRANSFER.
(j) Additional Provisions. The Option Agreements authorized
under the Plan shall contain such other provisions as the Committee
shall deem advisable, including, without limitation, restrictions upon
the exercise of the Option. Any such Option Agreement with respect to
an Incentive Option shall contain such limitations and restrictions
upon the exercise of the Incentive Option as shall be necessary in
order that the option will be an "Incentive Stock Option" as defined in
Section 422 of the Code.
9. Medium and Time of Payment. The purchase price of the
shares of the Common Stock as to which the Option shall be exercised shall be
paid in full either (i) in cash at the time of exercise of the Option, (ii) by
tendering to the Company shares of the Company's Common Stock having a fair
market value (as of the date of receipt of such shares by the Company) equal to
the purchase price for the number of shares of Common Stock purchased, or (iii)
partly in cash and partly in shares of the Company's Common Stock valued at fair
market value as of the date of receipt of such shares by the Company. Cash
payment for the shares of the Common Stock purchased upon exercise of the Option
shall be in the form of either a cashier's check, certified check or money
order. Personal checks may be submitted, but will not be considered as payment
for the shares of the Common Stock purchased and no certificate for such shares
will be issued until the personal check clears in normal banking channels. If a
personal check is not paid upon presentment by the Company, then the attempted
exercise of the Option will be null and void. In the event the optionee tenders
shares of the Company's Common Stock in full or partial payment for the shares
being purchased pursuant to the Option, the shares of Common Stock so tendered
shall be accompanied by fully executed stock powers endorsed in favor of the
Company with the signature on such stock power being guaranteed. If an optionee
tenders shares, such optionee assumes sole and full responsibility for the tax
consequences, if any, to such optionee arising therefrom, including the possible
application of Code Section 424(c), or its successor Code section, which negates
any nonrecognition of income rule with respect to such transferred shares, if
such transferred shares have not been held for the minimum statutory holding
period to receive preferential tax treatment.
10. Alternate Stock Appreciation Rights.
(a) Award of Alternate Stock Rights. Concurrently with or
subsequent to the award of any Option to purchase one or more shares of
Common Stock, the Committee may in its sole discretion, subject to the
provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the optionee with respect to each
share of Common Stock covered by an Option ("Related Option"), a
related alternate stock appreciation right ("SAR"), permitting the
optionee to be paid the appreciation on the Related Option in lieu of
exercising the Related Option. A SAR granted with respect to an
Incentive Option must be granted together with the Related Option. A
SAR granted with respect to a Nonqualified Option may be granted
together with or subsequent to the grant of such Related Option.
(b) Alternate Stock Rights Agreement. Each SAR shall be on
such terms and conditions not inconsistent with this Plan as the
Committee may determine and shall be evidenced by a written agreement
executed by the Company and the optionee receiving the Related Option.
(c) Exercise. An SAR may be exercised only if and to the
extent that its Related Option is eligible to be exercised on the date
of exercise of the SAR. To the extent that a holder of a SAR has a
current right to exercise, the SAR may be exercised from time to time
by written notice to the Company at its principal place of business.
Such notice shall state the election to exercise the SAR, the number of
shares in respect of which it is being exercised, shall be signed by
the person so exercising the SAR and shall be accompanied by the
agreement evidencing the SAR and the Related Option. In the event the
SAR shall not be exercised in full, the Secretary of the Company shall
endorse or cause to be endorsed on the SAR and the Related Option the
number of shares which have been exercised thereunder and the number of
shares that remain exercisable under the SAR and the Related Option and
return such SAR and Related Option to the holder thereof.
(d) Amount of Payment. The amount of payment to which
an optionee shall be entitled upon the exercise of each SAR shall be
equal to 100% of the amount, if any, by which the fair market value of
a share of Common Stock on the exercise date exceeds the fair market
value of a share of Common Stock on the date the Option related to said
SAR was granted or became effective, as the case may be; provided,
however, the Company may, in its sole discretion, withhold from such
cash payment any amount necessary to satisfy the Company's obligation
for withholding taxes with respect to such payment. For this purpose,
the fair market value of a share of Common Stock shall be determined as
set forth in Section 8(d) hereof.
(e) Form of Payment. The amount payable by the
Company to an optionee upon exercise of a SAR may be paid in shares of
Common Stock, cash or a combination thereof. The number of shares of
Common Stock to be paid to an optionee upon such optionee's exercise of
SAR shall be determined by dividing the amount of payment determined
pursuant to Section 10(d) hereof by the fair market value of a share of
Common Stock on the exercise date of such SAR. For purposes of this
Plan, the exercise date of a SAR shall be the date the Company receives
written notification from the optionee of the exercise of the SAR in
accordance with the provisions of Section 10(c) hereof. As soon as
practicable after exercise, the Company shall either deliver to the
optionee the amount of cash due such optionee or a certificate or
certificates for such shares of Common Stock. All such shares shall be
issued with the rights and restrictions specified herein.
(f) Termination of SAR. Except as otherwise provided
in case of Disability (as defined in Section 8(c)(4) hereof) or death,
no SAR shall be exercisable after an optionee ceases to be an employee,
director or advisor of the Company or Subsidiary; provided, however,
that the Committee shall have the right in its sole discretion, but not
the obligation, to extend the exercise period for not more than three
(3) months following the date such optionee ceases to be an employee,
director or advisor of the Company or a Subsidiary; provided further,
that the Committee may not extend the period during which an optionee
may exercise a SAR for a period greater than the period during which an
optionee may exercise the Related Option. If an optionee's position as
an employee, director or advisor of the Company is terminated due to
the Disability or death of such optionee, the Committee shall have the
right, in its sole discretion, but not the obligation, to extend the
exercise period applicable to the SAR for a period not to exceed the
period in which the optionee may exercise the Option related to said
SAR as set forth in Sections 8(c)(4) and 8(c)(5) hereof, respectively.
(g) Effect of Exercise of SAR. The exercise of any
SAR shall cancel and terminate the right to purchase an equal number
of shares covered by the Related Option.
(h) Effect of Exercise of Related Option. Upon the
exercise or termination of any Related Option, the SAR with respect to
such Related Option shall terminate to the extent of the number of
shares of Common Stock as to which the Related Option was exercised or
terminated.
(i) Nontransferability of SAR. A SAR granted pursuant
to this Plan shall be exercisable only by the optionee or the
optionee's court appointed guardian as set forth in Section 8(c)(4)
hereof during the optionee's lifetime and, subject to the provisions of
Section 10(f) hereof, shall not be assignable or transferable by the
optionee. A SAR granted pursuant to the Plan shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or
similar process. Any attempted transfer, assignment, pledge,
hypothecation, or other disposition of any SAR or of any rights granted
thereunder contrary to the foregoing provisions of this Section 10(i),
or the levy of any attachment or similar process upon a SAR or such
rights, shall be null and void.
11. Reload Options.
(a) Authorization of Reload Options. Concurrently
with the award of Nonqualified options and/or the award of Incentive
Options to any participant in the Plan, the Committee may authorize
reload options ("Reload Options") to purchase for cash or shares that
number of shares of Common Stock equal to the sum of:
(1) The number of shares of Common
Stock used to exercise the underlying Nonqualifying Option or Incentive Option;
and
(2) To the extent authorized by the Committee, the number of shares of Common
Stock used to satisfy any tax withholding requirement incident to the exercise
of the underlying Nonqualifying Option or Incentive Options.
The grant of a Reload Option will become effective upon the
exercise of the underlying Nonqualifying Option, Incentive Option or
Reload Option through the use of shares of Common Stock held by the
optionee for at least 12 months. Notwithstanding the fact that the
underlying option may be an Incentive Option, a Reload Option is not
intended to qualify as an "incentive stock option" under Section 422 of
the Code.
(b) Reload Option Amendment. Each Option Agreement
shall state whether the Committee has authorized Reload Options with
respect to the underlying Nonqualifying Option and/or Incentive Option.
Upon the exercise of an underlying Option or Incentive Option, the
Reload Option will be evidenced by an amendment to the underlying
Option Agreement.
(c) Reload Option Price. The option price per share
of Common Stock deliverable upon the exercise of a Reload Option shall
be the fair market value of a share of Common Stock on the date the
grant of the Reload Option becomes effective.
(d) Term and Exercise. Each Reload Option is fully
exercisable six months from the effective date of grant. The term of
each Reload Option shall be equal to the remaining option term of the
underlying Nonqualifying Option and/or Incentive Option.
(e) Termination of Employment. No additional Reload Options
shall be granted to optionees when Nonqualifying Options, Incentive
Option and/or Reload Options are exercised pursuant to the terms of
this Plan following termination of the optionee's employment.
(f) Applicability of Other Sections. To the extent
not inconsistent with the foregoing provisions of this Section, the
other Sections of this Plan pertaining to Options, including Sections
5, 8 and 9, are incorporated herein by this reference thereto as
through fully set forth herein.
12. Rights as a Shareholder. The holder of an Option or a SAR shall
have no rights as a shareholder with respect to the shares covered by the Option
or SAR until the due exercise of the Option, Related Option, or SAR and the date
of issuance of one or more stock certificates to such holder for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 14 hereof.
13. Optionee's Agreement to Serve. Each employee receiving an
Option shall, as one of the terms of the Option Agreement agree that such
employee will remain in the employ of the Company or Subsidiary for a period of
at least one (1) year from the date on which the Option shall be granted to such
employee; and that such employee will, during such employment, devote such
employee's entire time, energy, and skill to the service of the Company or a
Subsidiary as may be required by the management thereof, subject to vacations,
sick leaves, and military absences. Such employment, subject to the provisions
of any written contract between the Company or a Subsidiary and such employee,
shall be at the pleasure of the Board of Directors of the Company or a
Subsidiary, and at such compensation as the Company or a Subsidiary shall
reasonably determine. Any termination of such employee's employment during the
period which the employee has agreed pursuant to the foregoing provisions of
this Section 13 to remain in employment that is either for cause or voluntary on
the part of the employee shall be deemed a violation by the employee of such
employee's agreement. In the event of such violation, any Option or Options held
by such employee, to the extent not theretofore exercised, shall forthwith
terminate, unless otherwise determined by the Committee. Notwithstanding the
preceding, neither the action of the Company in establishing the Plan nor any
action taken by the Company, a Subsidiary or the Committee under the provisions
hereof shall be construed as granting the optionee the right to be retained in
the employ of the Company or a Subsidiary, or to limit or restrict the right of
the Company or a Subsidiary, as applicable, to terminate the employment of any
employee of the Company or a Subsidiary, with or without cause.
14. Adjustments on Changes in Capitalization.
(a) Changes in Capitalization. Subject to any
required action by the Shareholders of the Company, the number of
shares of Common Stock covered by the Plan, the number of shares of
Common Stock covered by each outstanding Option, and the exercise price
per share thereof specified in each such Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from a
subdivision or consolidation of shares or the payment of a stock
dividend (but only on the Common Stock) or any other increase or
decrease in the number of such shares effected without receipt of
consideration by the Company after the date the Option is granted, so
that upon exercise of the Option, the optionee shall receive the same
number of shares the optionee would have received had the optionee been
the holder of all shares subject to such optionee's outstanding Option
immediately before the effective date of such change in the number of
issued shares of the Common Stock of the Company.
(b) Reorganization, Dissolution or Liquidation.
Subject to any required action by the Shareholders of the Company, if
the Company shall be the surviving corporation in any merger or
consolidation, each outstanding Option shall pertain to and apply to
the securities to which a holder of the number of shares of Common
Stock subject to the Option would have been entitled. A dissolution or
liquidation of the Company or a merger or consolidation in which the
Company is not the surviving corporation, shall cause each outstanding
Option to terminate as of a date to be fixed by the Committee (which
date shall be as of or prior to the effective date of any such
dissolution or liquidation or merger or consolidation); provided, that
not less than thirty (30) days written notice of the date so fixed as
such termination date shall be given to each optionee, and each
optionee shall, in such event, have the right, during the said period
of thirty (30) days preceding such termination date, to exercise such
optionee's Option in whole or in part in the manner herein set forth.
(c) Change in Par Value. In the event of a change in
the Common Stock of the Company as presently constituted, which change
is limited to a change of all of its authorized shares with par value
into the same number of shares with a different par value or without
par value, the shares resulting from any change shall be deemed to be
the Common Stock within the meaning of the Plan.
(d) Notice of Adjustments. To the extent that the
adjustments set forth in the foregoing paragraphs of this Section 14
relate to stock or securities of the Company, such adjustments, if any,
shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive, provided that each Incentive
Option granted pursuant to this Plan shall not be adjusted in a manner
that causes the Incentive Option to fail to continue to qualify as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
The Company shall give timely notice of any adjustments made to each
holder of an Option under this Plan and such adjustments shall be
effective and binding on the optionee.
(e) Effect Upon Holder of Option. Except as
hereinbefore expressly provided in this Section 14, the holder of an
Option shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class by reason of any dissolution, liquidation,
merger, reorganization, or consolidation, or spin-off of assets or
stock of another corporation, and any issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to the Option. Without limiting the generality of the
foregoing, no adjustment shall be made with respect to the number or
price of shares subject to any Option granted hereunder upon the
occurrence of any of the following events:
(1) The grant or exercise of any other options which may be
granted or exercised under any qualified or nonqualified
stock option plan or under any other employee benefit plan of
the Company whether or not such options were outstanding on
the date of grant of the Option or thereafter granted;
(2) The sale of any shares of Common Stock in the Company's
initial or any subsequent public offering, including,
without limitation, shares sold upon the exercise of any
over-allotment option granted to the underwriter in connection
with such offering;
(3) The issuance, sale or exercise of any warrants to purchase shares of Common
Stock whether or not such warrants were outstanding on the date of grant of the
Option or thereafter issued;
(4) The issuance or sale of rights, promissory notes or other securities
convertible into shares of Common Stock in accordance with the terms of such
securities ("Convertible Securities") whether or not such Convertible Securities
were outstanding on the date of grant of the Option or were thereafter issued or
sold;
(5) The issuance or sale of Common Stock upon conversion or exchange of any
Convertible Securities, whether or not any adjustment in the purchase price was
made or required to be made upon the issuance or sale of such Convertible
Securities and whether or not such Convertible Securities were outstanding on
the date of grant of the Option or were thereafter issued or sold; or
(6) Upon any amendment to or change in the terms of any rights or warrants
to subscribe for or purchase, or options for the purchase of, Common Stock or
Convertible Securities or in the terms of any Convertible Securities, including,
but not limited to, any extension of any expiration date of any such right,
warrant or option, any change in any exercise or purchase price provided for in
any such right, warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable for Common Stock or
any change in the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock.
(f) Right of Company to Make Adjustments. The grant
of an Option pursuant to the Plan shall not affect in any way the right
or power of the Company to make adjustments, reclassification,
reorganizations, or changes of its capital or business structure or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
15. Investment Purpose. Each Option under the Plan shall be granted on
the condition that the purchase of the shares of stock thereunder shall be for
investment purposes, and not with a view to resale or distribution; provided,
however, that in the event the shares of stock subject to such Option are
registered under the Securities Act or in the event a resale of such shares of
stock without such registration would otherwise be permissible, such condition
shall be inoperative if in the opinion of counsel for the Company such condition
is not required under the Securities Act or any other applicable law,
regulation, or rule of any governmental agency.
16. No Obligation to Exercise Option or SAR. The granting of an
Option or SAR shall impose no obligation upon the optionee to exercise such
Option or SAR.
17. Modification, Extension, and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Committee and
the Board of Directors may modify, extend or renew outstanding Options granted
under the Plan, or accept the surrender of outstanding Options (to the extent
not theretofore exercised). Neither the Committee nor the Board of Directors
shall, however, modify any outstanding Options so as to specify a lower price or
accept the surrender of outstanding Options and authorize the granting of new
Options in substitution therefor specifying a lower price. Notwithstanding the
foregoing, however, no modification of an Option shall, without the consent of
the optionee, alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
18. Effective Date of the Plan. The Plan shall become effective on the
date of execution hereof, which date is the date the Board of Directors approved
and adopted the Plan ("Effective Date"); provided, however, if the Shareholders
of the Company shall not have approved the Plan by the requisite vote of the
Shareholders, within twelve (12) months after the Effective Date, then the Plan
shall terminate and all Options theretofore granted under the Plan shall
terminate and be null and void.
19. Termination of the Plan. This Plan shall terminate as of the
expiration of ten (10) years from the Effective Date. Options may be granted
under this Plan at any time and from time to time prior to its termination. Any
Option outstanding under the Plan at the time of its termination shall remain in
effect until the Option shall have been exercised or shall have expired.
20. Amendment of the Plan. The Plan may be terminated at any time by
the Board of Directors of the Company. The Board of Directors may at any time
and from time to time without obtaining the approval of the Shareholders of the
Company or a Subsidiary, modify or amend the Plan (including such form of Option
Agreement as hereinabove mentioned) in such respects as it shall deem advisable
in order that the Incentive Options granted under the Plan shall be "Incentive
Stock Options" as defined in Section 422 of the Code or to conform to any change
in the law, or in any other respect which shall not change: (a) the maximum
number of shares for which Options may be granted under the Plan, except as
provided in Section 14 hereof; or (b) the option prices other than to change the
manner of determining the fair market value of the Common Stock for the purpose
of Section 8(d) hereof to conform with any then applicable provisions of the
Code or regulations thereunder; or (c) the periods during which Options may be
granted or exercised; or (d) the provisions relating to the determination of
persons to whom Options shall be granted and the number of shares to be covered
by such Options; or (e) the provisions relating to adjustments to be made
uponchanges in capitalization. The termination or any modification or amendment
of the Plan shall not, without the consent of the person to whom any Option
shall theretofore have been granted, affect that person's rights under an Option
theretofore granted to such person. With the consent of the person to whom such
Option was granted, an outstanding Option may be modified or amended by the
Committee in such manner as it may deem appropriate and consistent with the
requirements of this Plan applicable to the grant of a new Option on the date of
modification or amendment.
21. Withholding. Whenever an optionee shall recognize
compensation income as a result of the exercise of any Option or SAR granted
under the Plan, the optionee shall remit in cash to the Company or Subsidiary
the minimum amount of federal income and employment tax withholding which the
Company or Subsidiary is required to remit to the Internal Revenue Service in
accordance with the then current provisions of the Code. The full amount of such
withholding shall be paid by the optionee simultaneously with the award or
exercise of an Option or SAR, as applicable.
22. Indemnification of Committee. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceedings, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his duties; provided that within sixty (60) days after institution of any such
action, suit or proceeding a Committee member shall in writing offer the Company
the opportunity, at its own expense, to pursue and defend the same.
23. Application of Funds. The proceeds received by the Company from
the sale of Common Stock pursuant to Options granted hereunder will be used for
general corporate purposes.
24. Governing Law. This Plan shall be governed and construed in
accordance with the laws of the state of incorporation of the Company.
EXECUTED this 23rd day of June, 1998.
MASSIMO ENTERPRISES, INC.
By: _________________________
Jason Romano,
President
ATTEST:
Joseph Romano,
Secretary
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form SB-2,
of Massimo Enterprises, Inc. (the "Company") of our report dated July 16, 1998
on the balance sheets of the Company as of December 31, 1997 and 1996 and the
related statements of operations, stockholders' equity and cash flows for the
years ended December 31, 1996 and 1997, and for the period from May 24, 1994
(inception) to December 31, 1997. We also consent to the reference to our Firm
under the caption "Experts" in the Prospectus which is part of the Registration
Statement.
KILLMAN, MURRELL & COMPANY, P.C.
Certified Public Accountants
Dallas, Texas
November 24, 1998
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