FORM 10-SB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
VIRILITEC INDUSTRIES, INC.
(Name of Small Business Issuer in its charter)
Delaware
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11-3447894
100 Cedarhurst ave., Suite 201, Cedarhurst, New York 11516
(Address of principal executive offices) (Zip Code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of Class)
<PAGE>
PART I.
Item 1. Description of Business.
(a) Business Development
Virilitec Industries, Inc. ("Virilitec", or the "Company"), a Delaware
corporation, was organized on August 11, 1998. The Company has not been involved
with any bankruptcy, receivership or similar proceedings. The Company has not
had any material reclassification, merger, consolidation, or purchase or sale of
a significant amount of assets not in the ordinary course of business.
(b) Business of Issuer
The Company was formed to license and distribute a line of
bioengineered virility nutritional supplements, designed to enhance human male
sperm count and potency (the "Product"). The Company has not nor does it intend
to make any claims as to the effectiveness (if any) of the Product. There are
other nutritional supplements that claim to have similar effectiveness as the
Company's Product. However, to the Company's knowledge, none of them have
demonstrated recognized clinical effectiveness.
Management believes that the current success and widespread coverage
generated by Pfizer's Viagra(R) has positioned the market to be receptive to the
introduction of a naturally derived nutritional supplement that is cheaper and
may produce a positive effect upon male potency. As such, the Company entered
discussions with Vitahealth Scientific, Inc., a New York corporation
("Vitahealth"), regarding the distribution of its nutritional supplement geared
toward enhancing male potency and sperm count. Management believes that it can
be successful in capitalizing on the market awareness of concerns over male
potency by introducing the Product into worldwide markets.
Due to the nature of the Product, and the high cost of qualifying for
US FDA approval, management determined that the best way to market the Product
initially was to pursue sales internationally where (management believes)
regulation regarding the distribution of nutritional supplements is less severe
than that in the US. As such, the Company is actively in the process of
interviewing independent sales agents in England, Israel and any other country
where it could, in the opinion of management, successfully introduce the Product
with little or no regulatory approval needed.
Vitahealth has sold a nutritional supplement designed to enhance male
potency and sperm count in the past. However, Vitahealth recently reformulated
its product to produce what it believes will be a Product with greater efficacy
in producing the desired results. Vitahealth is in the process of opening a new
manufacturing facility in Jerusalem, Israel where the Product will be
manufactured. In conjunction with the reformulation of the Product, Vitahealth
also revamped its production line, and is in the process of purchasing all new
commercial grade production and encapsulation equipment intended to allow it to
produce the Product at a high volume. The facility will have full certification
from the Israeli Department of Health.
Licensing and Distribution Agreement
The Company has entered into a 50 year Licensing and Distribution
Agreement with Vitahealth, whereby the Company was granted exclusive rights to
distribute the Product. Under terms of the agreement, the Company's independent
sales agents will place sales orders directly with Vitahealth, which will fill
such orders. The sales agents will pay Vitahealth upon order placement, and
Vitahealth, acting as collections agent for the Company, will forward the
Company's portion of the sales proceeds to the Company. Vitahealth has agreed to
periodic
<PAGE>
reviews of its order receipts in order to ensure that the Company is receiving
its appropriate revenue.
The Company has paid an initial non-refundable one time $8,500
licensing fee to Vitahealth. The Company will also pay Vitahealth an annual fee
of $10,000, beginning 90 days after the Product is manufactured and ready for
delivery to the Company's agents and then annually thereafter on the anniversary
of the first payment's due date, as long as the Licensing and Distribution
Agreement has not been terminated for any reason before the date such payment is
due. The agreement also calls for Vitahealth to be paid $1.45 per capsule of the
product - to be sold in thirty day supplies (the Product's expected minimum
usage period before a user would potentially achieve positive results). The
Company expects to distribute the Product to its sales agents for $1.85 per
capsule (thereby making $0.45 per capsule), and the Company's independent sales
agents are projected to sell them for approximately $2.15 to $2.25 per capsule.
Because the Product is in the final stages of reformulation and
Vitahealth has not yet completed construction of its manufacturing facility, the
Company has allowed Vitahealth a 95 day period from the signing of the Licensing
agreement before the Product shall be ready for production and sale. Should the
Product not be ready at such time, the Company has the right to either terminate
the agreement within the next 30 days or extend the production deadline. As of
this date, the production facility has not yet been completed. The Company and
Vitahealth have agreed to push off the end of the 95 day production deadline
until July 31, 1999.
Vitahealth and the Company have agreed upon certain minimal sales
quotas to be maintained for the agreement to remain in effect. Should the sales
levels fall below the sales quotas, the Company shall have the right to
terminate the Licensing and Distribution Agreement. The sales quotas follow the
following schedule; a) within the 2nd month of production and sales - a minimum
of 22,500 capsules, b) within the 3rd month of production and sales - a minimum
of 55,000 capsules, c) within the 6th month of production and sales - a minimum
of 150,000 capsules, d) a minimum of 200,000 capsules for every month following
the end of the 6th month of production and sales of the product. There is also a
10% increase in the sales quota effective annually on January 1, beginning
January 1, 2000.
Marketing and Growth
With the broad based recognition of products such as Pfizer's
Viagra(R), Management believes the market is ready for the introduction of
nutritional supplements designed to enhance human male potency and sperm count
on a long term basis. Should the Company begin distribution of this Product
domestically, it will be subject to regulation by the U.S. Food and Drug
Administration ("FDA") and most likely also by the Federal Trade Commission
("FTC") but possibly under similar circumstances as standards applied to other
mainstream food company product lines. However, certain more stringent
regulations can be applied by the FDA and FTC to companies making health and/or
nutritional claims beyond those approved by existing regulations. While the
Company does not believe the more stringent regulations will apply, it cannot be
certain. Therefore, the Company intends to distribute the Product
internationally, at least initially.
The Product will be subject to regulation by the presiding
jurisdictional drug and/or food regulatory commissions of the countries in which
the Company intends to distribute the Product. While the Company does not
believe that any regulations will apply to the distribution of the Product
within the various countries in which it intends to initiate distribution, it
cannot be certain. At this time the Company has selected the countries of
Israel, England, Germany and France as its initial markets. Management believes
that the regulatory requirements of those countries to be such that the Company
will be able to launch sales in those countries without concern of violating
food and/or drug regulations. The Company intends to increase its distribution
to such additional countries as allow for the sale of the Product without
expensive regulatory approval.
<PAGE>
The Company is presently in the process of selecting qualified sales
agents to be its direct representatives in the countries the Company will market
the Product. The Company intends to support its sales agents with focused media
(magazine, local newspaper) advertisements introducing the Product designed to
heighten awareness of the availability of alternative products to enhance human
male sperm count and potency such as the Product. The Company will also endeavor
to provide its sales agents with promotional materials containing testimonials
(when available) from users of the Company's products.
Acquisitions
The Company has no specific acquisition plans at this time.
Compensation of Officers
The only officer to receive any cash compensation will be the President
who will receive an annual salary of $40,000, which has been waived until July
1999, at which time the Company expects full production of the Product.
Compensation of Directors
Each Director of the Company will receive 5,000 restricted Shares of
the Common Stock of the Company per year, provided they attend no less than 50%
of the Board of Directors meeting in that year.
Employees
Mrs. Bella Roth, the Company's President, is the Company's only full
time employee. The Company intends to retain marketing and public relations
consultants as necessary.
<PAGE>
Item 2. Plan of Operation.
Plan of Operation
As noted in Item 1 above, the Company is currently waiting for the initial
production date ofthe Product. Until the production facilities of its supplier,
Vitahealth Scientific, Inc. are operational, the Company cannot begin to market
the Product with an expectation to be able to deliver goods within a reasonable
amount of time. Until then, the Company does not intend to complete selection of
its international independent sales agents, nor does the Company intend to
become operational.
Once the production of the nutritional supplement has begun, and the Company can
expect in good faith to fulfill orders within a reasonable amount of time, it
expects to follow the business plan outlined in "Item 1. Description of Business
- -- Business of Issuer", and to fund its operations from revenues generated by
the sale of the nutritional supplement.
At present the only cash outlay of the Company is in banking fees and in legal
and accounting fees incurred by the Company as it prepares filings associated
with being a reporting company (quarterly unaudited reports, annual reports,
etc.). Management believes there is enough cash on hand to fund such activities
for the next 12 months. When the Company becomes operational, further costs
(such as salary for Mrs. Roth) are expected to be covered by revenue generated
by the Company's sales. As such, the Company does not forsee the need to raise
additional funds in the next 12 months.
The Company does not expect to conduct any product research and development or
to purchase or sell a plant or significant equipment. The Company intends to
retain marketing and public relations consultants as necessary, and to hire
support staff for its President only if warranted by its sales volume on an as
needed basis.
Item 3. Description of Property.
The Company maintains its corporate offices rent free through April 30, 1999 at
an office of one of its shareholders at 100 Cedarhurst Ave, Suite 201,
Cedarhurst, NY 11516. The Company has agreed to either sublet the space it is
currently using at a cost of $150 monthly, or to relocate its office to another
location on May 1, 1999.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners
None.
<PAGE>
(b) Security Ownership of Management
<TABLE>
<S> <C> <C> <C>
Name and Address Amount and Nature
Title of Class of Beneficial Owner of Beneficial Owner Percent of Class
Common Stock Bella Roth 3,825,000(1) 82.96%
543 Bedford Ave.
Brooklyn, NY
Common Stock Moshe Laufer 175,000(2) 3.8%
172 Rodney Street
Brooklyn, NY
Common Stock Arnold Lipton, M.D. 100,000(3) 2.17%
225 West 86 Street
New York, NY
Common Stock All Directors and 4,100,000(4) 88.93%
Executive Officers
as a Group
</TABLE>
(1) Includes underlying securities for 325,000 options to purchase additional
shares of common stock.
(2) Includes underlying securities for 75,000 options to purchase additional
shares of common.
(3) Includes underlying securities for 75,000 options to purchase additional
shares of common.
(4) Includes underlying securities for an aggregate of 475,000 options to
purchase additional shares of common stock.
(c) Changes in Control
None.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a) Directors and Executive Officers.
Name Age Position
Bella Roth 48 President & Chairman of the Board
Arnold A. Lipton, M.D. 68 VP - Scientific Advisor & Director
Moshe Laufer 39 Secretary/Treasurer & Director
Directors serve for five year terms.
Bella Roth - President & Chairman of the Board of Directors - Mrs. Roth founded
the Company in August 1998, and has been its President and Chairman of the Board
since inception. From 1988 to 1995 Mrs. Roth was Treasurer, Secretary and a
Director of J.R. Consulting Incorporated, a publicly traded holding company.
From 1983 to 1987 she was an officer and Director of Innovative Medical
Technologies, a company involved with the development and marketing of
electronic medical devices. Since 1995 she has been pursuing various personal
interests.
Arnold A. Lipton, M.D. - Vice President & Director - has been a Vice
President, the scientific advisor and a Director of the Company since August 17,
1998. Dr. Lipton is a physician in private practice in Brooklyn, NY since 1970,
with a specialty in Obstetrics and Gynecology. Dr. Lipton holds an M.D. from
Lausanne Medical School, a Masters in Science from the Philadelphia College of
Science, and a Bachelors of Science from the Brooklyn College of Pharmacy. Dr.
Lipton is a member of the New York State Medical Society and the Kings County
Medical Society.
<PAGE>
Moshe Laufer - Secretary/Treasurer & Director - Mr. Laufer has been the
Secretary/Treasurer and a director of the Company since its inception. From 1995
to the present he has been pursuing various personal and professional interests.
From 1986 to 1995 Mr. Laufer was a licensed distributer of NY Bottling, Inc. a
company engaged in the bottling and distribution of soft drinks in the
Northeastern United States. Mr. Laufer is the brother-in-law of Mrs. Roth.
(b) Significant Employees
None
(c) Family Relationships
Mr. Laufer is the brother in law of Mrs. Roth. There are no other
family relationships among directors or executive officers of the Company.
(d) Involvement in Certain Legal Proceedings.
None.
Item 6. Executive Compensation.
(a) General
Commencing November 12, 1998, the Company has agreed to pay Mrs. Bella
Roth, its President & Chairman of the Board of Directors, an annual salary of
$40,000. Mrs. Roth's compensation has been waived until July 1999. Mrs. Roth
provides her services on a full-time basis. For the period ending December 31,
1998, Mrs. Roth has earned -0-. No executive officer or employee of the Company
is paid more than $100,000 per year in salary and benefits.
(b) Summary Compensation Table
<TABLE>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C>
Name and Other Long-term
Principal Position Year SalaryBonus Compensation Compensation: Options (1)
- ------------------ ---- ------------- ------------ -------------------------
Bella Roth 1998 -0- 0 325,000 options worth $0
President &
Chairman
Arnold Lipton, M.D. 1998 0 0 75,000 options worth $0
V.P.-Scientific
Advisor &
Director
Moshe Laufer 1998 0 0 75,000 options worth $0
Secretary,
Treasurer &
Director
</TABLE>
(1) Based on the Company's Offering Memorandum dated September 25, 1998, in
which the Shares of the Company's stock was sold for an arbitrarily
determined price of $1.00 per share for unrestricted shares of the
Company's of common stock, the relatively high exercise price and the
limited time before the Options expire, the options are essentially
valueless.
(c) Options/SAR Grants Table
OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<S> <C> <C> <C> <C>
Exercise Price
Name Number of OptionsGranted (1998) % of Options (per share) Expiration
- ------------------------------------------------------------------------------------------------------------------
Bella Roth 175,000 36.84 $2.50 11/12/01
150,000 31.58 $4.00 11/12/01
--------------------------------------
Total 325,000 68. 42
======================================
Arnold Lipton, M.D.
25,000 5.26 $2.00 11/12/01
50,000 10.53 $3.00 11/12/01
--------------------------------------
Total 75,000 15.79
======================================
Moshe Laufer
25,000 5.26 $2.50 11/12/01
50,000 10.53 $4.00 11/12/01
--------------------------------------
Total 75,000 15.79
======================================
</TABLE>
(d) Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Value Table
None
(e) Long Term Incentive Plan ("LTIP") Awards Table
None
(f) Compensation of Directors
Commencing January 1, 1999 each Director shall receive 5,000 restricted shares
annually. Said compensation is contingent upon attendance at no less than 50% of
that year's Board of Director's meetings.
(g) Employment Contracts and Termination of Employment, and Change-in-Control
Arrangements
The Company has no employment contracts with any of its executive officers. Mrs.
Bella Roth serves as President of the Company for $40,000 annually, and will
continue to serve under such terms without the benefit of an employment
contract. There are no provisions for compensation to be paid to any executive
officer or director of the Company upon the termination of their services by
either party or by the actions of a third party.
(h) Report on Repricings of Options/SARs
None.
Item 7. Certain Relationships and Related Transactions.
None.
Item 8. Legal Proceedings
None
Item 9. Market Price for Common Equity and Related Stockholder Matters.
<PAGE>
(a) Market Information
There is no public trading market for the Company's securities.
The Company currently has 40,600 class A warrants issued and outstanding. Each
Warrant entitles the holder to purchase one Share of restricted Common Stock at
an exercise price of $10.00, subject to adjustment, through the first
anniversary of the date the Company's Shares are initially approved for trading
in any public market.
Under the terms of the Company's licensing agreement, the Company has agreed to
grant Vitahealth stock options to purchase up to 300,000 additional restricted
shares of the Common Stock of the Company for a period of 5 years beginning
October 30, 1999 according to the following schedule:
<PAGE>
Date Option to be Effective Amount of Options Exercise Price (per Share)
- --------------------------------------------------------------------------------
10/30/1999 100,000 $10.00
2/29/2000 100,000 $10.00
10/30/2000 100,000 $10.00
These options shall become effective only in the event the Licensing and
Distribution agreement between the Company and Vitahealth is still in effect on
the date the options are due to be effective. The options have no registration
rights. See "DESCRIPTION OF BUSINESS - Licensing And Distribution Agreement."
The Company has also granted stock options to the following officers to
purchase additional shares of common stock of the Company according to the
following schedule:
Name of Option Holder Amount of Options Exercise Price (per Share)
- --------------------------------------------------------------------------------
Bella Roth 175,000 $2.50
Bella Roth 150,000 $4.00
Arnold Lipton, M.D. 25,000 $2.00
Arnold Lipton, M.D. 50,000 $3.00
Moshe Laufer 25,000 $2.50
Moshe Laufer 50,000 $4.00
The shares underlying the options have no registration rights.
Of the 4,610,600 shares of common stock outstanding, 3,625,000 are currently
subject to the resale restrictions and limitations of Rule 144.
(b) Holders
Thereare approximately 117 holders of the Company's common stock, and
approximately 8 holders of the Company's Class A Warrants.
(c) Dividends
The Company has had no earnings to date, nor has the Company declared any
dividends to date. The payment by the Company of dividends, if any, in the
future, rests within the discretion of its Board of Directors and will depend,
among other things, upon the Company's earnings, its capital requirements and
its financial condition, as well as other relevant factors. The Company has not
declared any cash dividends since inception, and has no present intention of
paying any cash dividends on its Common Stock in the foreseeable future, as it
intends to use earnings, if any, to generate growth.
Item 10. Recent Sales of Unregistered Securities.
<PAGE>
On August 16, 1998, Bella Roth purchased 3,000,000 restricted shares of the
Company at par value as a founder of the Company. On August 16, 1998, Moshe
Laufer purchased 100,000 Shares at par value as a founder of the Company. On
August 17, 1998 the Company agreed to retain Dr. Arnold Lipton wherein he would
become a Vice President of Scientific Advisory to the Company and a Director of
the Company, in exchange for 25,000 restricted shares of the common stock of the
Company. On September 18, 1998, the Company retained Mr. Ulf Jacobson as
international counsel to the Company for a period of 1 year, in exchange for
50,000 restricted shares of the common stock of the Company.
On August 18, 1998, the company sold an aggregate of 1,370,000 Shares to
investors (including 500,000 shares to Bella Roth) for $0.001 (or an aggregate
of $1,370) pursuant to an exemption from registration under Rule 504 and
pursuant to appropriate State filings or exemption from State registrations as
applicable. On August 20, 1998 the Company sold an aggregate of 10,000 Shares to
investors for $.01 per share (or an aggregate of $100) pursuant to the same
exemption from Federal registration and appropriate State filings or exemption
from State registration noted above. From August 21, 1998 through August 25,
1998 the Company sold an aggregate of 15,000 Shares to investors for $0.10 per
Share (or an aggregate of $1,500) pursuant to the same exemption from Federal
registration and appropriate State filings or exemption from State registration
noted above.
On September 25, 1998 the Company offered to the public no less than 10,000 and
up to 460,000 Units (each Unit consisting of one Share of Common Stock and one
redeemable Class A Warrant. Each Warrant entitles the holder to purchase one
Share of restricted Common Stock at an exercise price of $10.00, subject to
adjustment, through the first anniversary of the date the Company's Shares are
initially approved for trading in any public market), at a price of $1.00 per
Unit, for an aggregate of no less than $10,000 and up to a maximum of $460,000,
pursuant to the same exemption from Federal registration and appropriate State
filings or exemption from State registration noted above. On November 11, 1998
the Company had an initial closing on the offering for 38,100 units or an
aggregate of $38,100. The Company held subsequent closings 2,500 additional
units or an aggregate of $2,500. The total amount of units sold under the
September 25, 1998 offering were 40,600 units for an aggregate total of $40,600.
No commissions or discounts were paid or given to any person or entity in any of
the Company's sales of securities. There were no underwriters or securities
brokers or securities dealers involved in the offering in any way; the shares
were sold by management on a best efforts basis.
Item 11. Description of Securities.
(a) Common or Preferred Stock
The Company is authorized to issue 20,000,000 shares of Common Stock,
$0.0001 par value, of which 4,610,600 shares were issued and outstanding as of
the date hereof. Each outstanding share of Common Stock is entitled to one (1)
vote, either in person or by proxy, on all matters that may be voted upon the
owners thereof at meetings of the stockholders.
The holders of Common Stock (i) have equal ratable rights to dividends
from funds legally available therefor, when and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per share on all matters on which stockholders may vote at all meetings of
stockholders.
Holders of Shares of Common Stock of the Company do not have cumulative
voting rights, which means that the individuals holding Common Stock with voting
rights to more than 50% of eligible votes, voting for the election of directors,
<PAGE>
can elect all directors of the Company if they so choose and, in such event, the
holders of the remaining shares will not be able to elect any of the Company's
directors.
(b) Debt Securities.
The Company has not issued any debt securities to date.
(c)Other securities to be Registered
Class "A" Warrants
Each Warrant entitles the holder to purchase one Share of restricted Common
Stock at an exercise price of $10.00, subject to adjustment, through the first
anniversary of the date the Company's Shares are initially approved for trading
or quotation in any public market.
Item 12. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, as amended, authorizes the
Company to Indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorney's fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which a person is a party by reason of being
a director or officer of the Company if it is determined that such person acted
in accordance with the applicable standard of conduct set forth in such
statutory provisions. The Company's Certificate of Incorporation contains
provisions relating to the indemnification of director and officers and the
Company's By-Laws extends such indemnities to the full extent permitted by
Delaware law.
The Company may also purchase and maintain insurance for the benefit of any
director or officer which may cover claims for which the Company could not
indemnify such persons.
Item 13. Financial Statements.
The financial statements are included at the end of this Registration Statement,
prior to the signature page.
Item 14. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) List of Financial Statements filed herewith.
<PAGE>
(b) List of Exhibits.
Index to Exhibits
3.1 Certificate of Incorporation
3.2 By-Laws
4.1 Form of Warrant Certificate
10.1 Exclusive Distribution Agreement with Vitahealth Scientific, Inc.
27 Financial Data Schedule
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Virilitec Industries Inc.
100 Cedarhurst ave. Suite 201
Cedarhurst, NY 11516
We have audited the accompanying balance sheet of Virilitec Industries Inc. (a
development stage company) as of December 31, 1998, and the related statements
of operations, stockholders' equity, and cash flows for the period August 11,
1998 (inception) to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Virilitec Industries Inc. (a
development stage company) as of December 31, 1998, and the results of its
operations and its cash flows for the period August 11, 1998 (inception) to
December 31, 1998 in conformity with generally accepted accounting principles.
Morgenstern & Alexander
Certified Public Accountants
February 10, 1999
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
100 CEDARHURST AVE. SUITE 201
CEDARHURST, NEW YORK 11516
FINANCIAL STATEMENTS
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO DECEMBER 31, 1998
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current Assets:
Cash $ 6,279
Equipment, at cost 3,600
License fee 8,500
Deferred stock issuance costs 22,790
Miscellaneous 400
--------
Total $ 41,569
--------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable and accrued expenses $ 881
--------
Total Liabilities $ 881
--------
Commitments and other matters
Stockholders' Equity:
Common stock, $.001 par value;
20,000,000 shares authorized;
4,608,000 shares issued and outstanding,
of which 3,175,000 shares are
restricted shares and have been discounted 1,434
Additional paid-in capital 40,076
41,510
Deficit accumulated during the development stage (822)
----------
Total Stockholder's Equity 40,688
Total Liabilities &
Stockholder's Equity $ 41,569
=========
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO DECEMBER 31, 1998
Sales $ -
Costs and expenses:
General and administrative expenses (836)
Interest income 14
Net Loss $ ( 822)
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO DECEMBER 31, 1998
Deficit
Common Stock Accumulated
$.001 Par Value Additional During The
Paid - In Development
Shares Amount Capital Stage
Common stock issued in 3,175,000 $3,175
connection with the
formation of the Company
and its management team
Discount on common stock (3,175)
Common stock issued 1,433,000 1,434 $40,076
Net loss -
August 11, 1998 through
December 31, 1998 $ (822)
---------- ------ ------- -----------
Balance-December 31, 1998 4,608,000 $1,434 $40,076 $ (822)
========== ====== ======= ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
AUGUST 11, 1998
(INCEPTION) TO
DECEMBER 31, 1998
Cash Flows From Operating Activities
Net loss $ ( 822)
Adjustments to reconcile net loss to net
cash used in operating activities:
Changes in operating assets and liabilities:
Miscellaneous ( 400)
Accrued expenses 881
---------
Net cash used in operating activities ( 341)
----------
Cash Flows From Investing Activities
Capital expenditures (3,600)
License fee (8,500)
Net cash used in investing activities (12,100)
---------
Cash Flows From Financing Activities
Stock offering 41,510
Cost of stock offering (22,790)
Net cash from financing activities 18,720
Net increase in cash 6,279
Cash at beginning of year -0-
Cash at end of period $ 6,279
=========
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
THE COMPANY
Virilitec Industries Inc. (the Company) was incorporated on August 11, 1998 with
total authorized shares of 20,000,000, par value $.0001. The Company was formed
to license and distribute a line of bioengineered virility supplements.
Initially, the Company intends to market its product in international markets,
using independent sales agents.
SIGNIFICANT ACCOUNTING POLICIES
Use Of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Depreciation
Equipment, primarily computers, is depreciated by the straight-line method over
its estimated useful life. When property is retired or other wise disposed of,
the cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in operations.
Amortization
The licensing fee will be amortized on the straight-line basis over the life of
the agreement. All mandatory additional annual payments will be charged to
operations as they become due.
Stock issuance costs
Stock issuance costs represent expenses related to the Company's public stock
offering. These expenses include the direct costs of the offering such as legal,
filing fees, printing and related consulting fees. These cost will be deducted
from the proceeds of the offering upon its completion.
Stock Offering
The Company is conducting a public stock offering of up to 460,000 units at
$1.00 per unit. Each unit entitles the holder to one (1) share of common stock,
$.001 par value and one (1) redeemable Class A warrant entitling the holder to
purchase one (1) share of restricted common stock at an exercise price of $10.00
per share.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has issued stock to officers and directors without receiving any
consideration, but rather in exchange for present and anticipated management
services. Under generally accepted accounting principles, it is appropriate to
record stock issued at the fair value of the stock or services rendered
whichever is more clearly evident. Since the fair value of these services can
not be estimated at this time, the stock has been recorded at par value. In
addition, since the services have not yet been completed, the value has also
been recorded as a discount on stock issued.
CAPITALIZATION
The Company currently has 4,608,000 shares of common stock outstanding, of which
management owns 3,675,000. Included in the 3,675,000 shares owned by directors
and company management are 3,175,000 shares of restricted shares as defined in
the Securities Act of 1933 and the regulations thereunder. Management which owns
3,125,000 restricted shares has agreed not to sell any of such shares for a
period of one year following the final closing of its stock offering referred to
above.
OPTIONS
The Company has granted to stock options to certain officers and directors to
purchase additional shares of restricted common stock of the Company as follows:
FIX UP TABLES
Exercise
Option Holders Number of Options Price (Per Share)
President and Chairman
175,000 2.50
of Board of Directors
President 150,000 4.00
Vice President/Director 25,000 2.00
Vice President/Director 50,000 3.00
Secretary/Treasurer and Director 25,000 2.50
Secretary/Treasurer and Director 50,000 4.00
Under the terms of the Company's licensing agreement, the Company has
also agreed to grant stock options to its manufacturer to purchase up to 300,00
additional restricted shares of the common stock of the Company for a period of
five years beginning October 31, 1999 according to the following schedule:
Exercise
Effective Date Number of Shares Price (Per Share)
10/31/1999 100,000 10.00
3/31/2000 100,000 10.00
10/31/2000 100,000 10.00
This options shall become effective only in the event the licensing and
distribution agreement between the Company and the manufacturer is still in
effect on the date the options are due to be effective.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
LICENSING AND DISTRIBUTION AGREEMENT
The Company has entered into a fifty (50) year licensing and
distribution agreement, whereby the Company was granted exclusive rights to
distribute a certain nutritional supplement designed to enhance human male sperm
count and potency. Under the terms of the agreement, the Company's independent
sales agents will place orders directly with the manufacturer, which will fill
such orders. The sales agents will pay the manufacturer upon order placement,
and the manufacturer, acting as collections agent for the Company, will forward
the Company's portion of sales proceeds to the Company. The manufacturer has
agreed to periodic review of its order receipts in order to ensure that the
Company is receiving its appropriate revenue.
The Company has paid an initial non-refundable one time licensing fee
of $8,500. The Company will also pay an annual licensing fee of $10,000,
commencing on 90 days after the product is manufactured and delivered and each
year thereafter, on the anniversary of the first payment's due date as long as
the licensing and distribution agreement has not been terminated before the date
such payment is due. The Company's agents are also required to pay $1.45 for
each unit of the product sold. The parties have agreed to certain minimum sales
and production quotas. If either the company or the manufacturer fail to meet
the minimum sales and production quotas, either party may terminate the
agreement without penalties.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
VIRILITEC INDUSTRIES, INC.
Date: /s/
Bella Roth, President and Chairman
Date: /s/
Moshe Laufer, Secretary, Treasurer and Director
Date:
Arnold A. Lipton, Vice President
CERTIFICATE OF INCORPORATION
CERTIFICATE OF INCORPORATION
OF
VIRILITEC INDUSTRIES, INC.
* * * * * * * * * * *
The undersigned, for the purpose of organizing a corporation
for conducting the business and promoting the purposes hereinafter stated, under
the provisions and subject to the requirements of the laws of the State of
Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts
amendatory thereof and supplemental thereto, and known, identified and referred
to as the "General Corporation Law of the State of Delaware"), hereby certifies
that:
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is
Virilitec Industries, Inc.
SECOND: The address, including street, number, city and county, of the
Corporation's initial registered office in the State of Delaware is 1209 Orange
Stret, Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The Corporation shall be authorized to issue 20,000,000 shares
of common stock, with a par value of $.0001 per share.
<PAGE>
FIFTH: The name and the mailing address of the sole incorporator is
Irving Rothstein, 292 Madison Avenue, 20th Floor, New York, New York 10017.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The Board of Directors shall have the power to adopt, amend or
repeal the by-laws of the Corporation. Election of directors need not be by
written ballot, unless otherwise required by the Corporation's By-Laws.
EIGHTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Eighth
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
NINTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said Section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
<PAGE>
Section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrator of such a person.
TENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article Tenth.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, hereby declares and certifies that this is my act and deed
and the facts herein stated are true and accordingly has executed, signed and
acknowledged this Certificate of Incorporation this 11th day of August, 1998.
/s/ IRVING ROTHSTEIN
Irving Rothstein, Incorporator
BY-LAWS
OF
VIRILITEC INDUSTRIES, INC.
(A Delaware Corporation)
ARTICLE I
OFFICES
1. OFFICE.
The registered office of the corporation shall be located in
the State of Delaware, County of New Castle, City of Wilmington, and the name of
the registered agent at such office shall be The Corporation Trust Company.
2. ADDITIONAL OFFICES.
The corporation may also have offices and places of business
at such other places, within or without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
STOCKHOLDERS
1. CERTIFICATES REPRESENTING SHARES.
Certificates representing shares shall set forth thereon the
statements prescribed by any applicable provision of law and shall be signed by
the Chairman of the Board of Directors, President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
and may be sealed with the corporate seal or a facsimile thereof. The signature
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
corporation itself or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
A Certificate representing shares shall not be issued until
the full amount of consideration therefor has been paid except as the General
Corporation Law may otherwise permit.
No Certificate representing shares shall be issued in place of
any certificate alleged to have been lost, destroyed or stolen, except on
production of such evidence of such loss, destruction or theft and on delivery
to the corporation, if the Board of Directors shall so require, of a bond of
<PAGE>
indemnity in such amount, upon such terms and secured by such surety as the
Board of Directors may in its discretion require.
2. FRACTIONAL SHARE INTERESTS.
The corporation may issue certificates for fractions of a
share where necessary to effect transactions authorized by the General
Corporation Law which shall entitle the holder in proportion to his fractional
holdings, to exercise voting rights, receive dividends and participate in
liquidating distributions; or it may pay in cash the fair value of fractions of
a share as of the time when those entitled to receive such fractions are
determined; or it may issue scrip in registered or bearer form over the manual
or facsimile signature of an officer of the corporation or of its agent,
exchangeable as therein provided for full shares, but such scrip shall not
entitle the holder to any rights of a stockholder except as therein provided.
3. SHARE TRANSFERS.
Upon compliance with provisions restricting the
transferability of shares, if any, transfers of shares of the corporation shall
be made only on the share record of the corporation by the registered holder
thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes due
thereon.
4. RECORD DATE FOR STOCKHOLDERS.
For the purpose of determining the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to or dissent from any proposal without a meeting, or for
the purpose of determining stockholders entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of any other action,
the directors may fix, in advance, a date as the record date for any such
determination of stockholders. Such date shall not be more than sixty days nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. If no record date is fixed, the record date for the
determination of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if no notice is given, the day
on which the meeting is held; the record date for determining stockholders for
any other purpose shall be at the close of business on the day on which the
resolution of the directors relating thereto is adopted. When a determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders has been made as provided in this paragraph, such determination
shall apply to any adjournment thereof, unless the directors fix a new record
date under this paragraph for the adjourned meeting.
MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "stockholder" or "stockholders"
refers to an outstanding share or shares and to a holder or holders of record of
<PAGE>
outstanding shares when the corporation is authorized to issue only one class of
shares, and said reference is also intended to include any outstanding share or
shares and any holder or holders of record of outstanding shares of any class
upon which or upon whom the Certificate of Incorporation confers such rights
where there are two or more classes or series of shares or upon which or upon
whom the General Corporation Law confers such rights notwithstanding that the
Certificate of Incorporation may provide for more than one class or series of
shares, one or more of which are limited or denied such rights thereunder.
5. MEETINGS.
TIME. The annual meeting shall be held on the date fixed, from time to
time, by the directors, provided, that each successive annual meeting shall be
held on a date within thirteen months after the date of the preceding annual
meeting. A special meeting shall be held on the date fixed by the directors
except when the General Corporation Law confers the right to fix the date upon
stockholders.
PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the directors may, from time
to time, fix. Whenever the directors shall fail to fix such place, or, whenever
stockholders entitled to call a special meeting shall call the same, the meeting
shall be held at the office of the corporation in the State of Delaware.
CALL. Annual meetings may be called by the directors or by any officer
instructed by the directors to call the meeting or by the President. Special
meetings may be called in like manner except when the directors are required by
the General Corporation Law to call a meeting, or except when the stockholders
are entitled by said Law to demand the call of a meeting.
NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. The notice of all
meetings shall be in writing, shall state the place, date, and hour of the
meeting, and shall state the name and capacity of the person issuing the same.
The notice for a special meeting shall indicate that it is being issued by or at
the direction of the person or persons calling the meeting. The notice of an
annual meeting shall state that the meeting is called for the election of
directors and for the transaction of other business which may properly come
before the meeting, and shall (if any other action which could be taken at a
special meeting is to be taken at such annual meeting) state the purpose or
purposes. The notice of a special meeting shall in all instances state the
purpose or purposes for which the meeting is called. If any action is proposed
to be taken which would, if taken, entitle stockholders to receive payment for
their shares, the notice shall include a statement of that purpose and to that
effect. Except as otherwise provided by the General Corporation Law, a copy of
the notice of any meeting shall be given, personally or by first class mail, not
less than ten days nor more than sixty days before the date of the meeting,
unless the lapse of the prescribed period of time shall have been waived, to
each stockholder at his record address or at such other address which he may
have furnished by notice in writing to the Secretary of the corporation. If a
meeting is adjourned to another time or place, and if any announcement of the
adjourned time or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
<PAGE>
fix a new record date for the adjourned meeting. Notice of a meeting need not be
given to any stockholder who submits a signed waiver of notice, in person or by
proxy, before or after the meeting. The attendance of a stockholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting shall constitute a waiver of
notice by him.
STOCKHOLDER LIST. There shall be prepared and made, at least ten days
before every meeting of stockholders, a complete list of the stockholders,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by this section or the books of the
corporation, or to vote at any meeting of stockholders.
CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by any one of the following officers--the Chairman of the Board, if any, the
President, a Vice President, or, if none of the foregoing is in office and
present, by a chairman to be chosen by the stockholders. The Secretary of the
corporation, or in his absence, an Assistant Secretary, shall act as Secretary
of the meeting, but if neither the Secretary nor Assistant Secretary is present,
the chairman of the meeting shall appoint a Secretary of the meeting.
PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or his attorney-in-fact. No proxy
shall be valid after the expiration of three years from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the stockholder executing it, except as otherwise provided by the General
Corporation Law.
INSPECTORS OF ELECTION. The directors, in advance of any meeting, may
appoint one or more inspectors to act at the meeting or any adjournment thereof.
If inspectors are not so appointed, the person presiding at the meeting may,
and, on the request of any stockholder shall, appoint one or more inspectors. In
case any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, if any, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspectors, if any, shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
<PAGE>
votes, ballots or consents, determine the result and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting or any stockholder entitled to vote thereat,
the inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by him or them.
QUORUM. Except as the General Corporation Law and these By-Laws may
otherwise provide, the holders of a majority of the outstanding shares shall
constitute a quorum at a meeting of stockholders for the transaction of any
business. When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any stockholders. The stockholders present may
adjourn the meeting despite the absence of a quorum.
VOTING. Each share shall entitle the holder thereof to one vote. In the
election of directors, a plurality of the votes cast shall elect. Any other
action shall be authorized by a majority of the votes cast except where the
Certificate of Incorporation or the General Corporation Law prescribe a
different proportion of votes.
6. STOCKHOLDER ACTION WITHOUT MEETINGS.
Any action required to be taken, or any action which may be taken, at
any annual or special meeting of stockholders, 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 by the holders of the
outstanding stock having not less than one-half (1/2) of the votes entitled to
vote thereon had there been an actual meeting and they were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing and shall be delivered to the corporation by delivery to
its registered office in Delaware, its principal place of business, or an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
ARTICLE III
BOARD OF DIRECTORS
1. FUNCTIONS AND DEFINITIONS.
The business of the corporation shall be managed by its Board
of Directors. The word "director" means any member of the Board of Directors.
The use of the phrase "entire board" herein refers to the total number of
directors which the corporation would have if there were no vacancies.
<PAGE>
2. QUALIFICATIONS AND NUMBER.
Each director shall be at least eighteen years of age. A
director need not be a stockholder, a citizen of the United States, or a
resident of the State of Delaware.
The initial Board of Directors shall consist of two (2)
people. Thereafter, the number of directors constituting the entire board may be
fixed from time to time by action of the directors or of the stockholders. The
number of directors may be increased or decreased by action of directors or
stockholders, provided that any action of the directors to effect such increase
or decrease shall require the vote of a majority of the entire board. No
decrease shall shorten the term of any incumbent directors.
3. ELECTION AND TERM.
Directors who are elected at an annual meeting of
stockholders, and directors who are elected in the interim to fill vacancies and
newly created directorships, shall hold office until the next annual meeting of
stockholders and until their successors have been elected and qualified. In the
interim between annual meetings of stockholders or of special meetings of
stockholders called for the election of directors, newly created directorships
and any vacancies in the Board of Directors, including vacancies resulting from
the removal of directors for cause or without cause, may be filled by the vote
of the remaining directors then in office, although less than a quorum exists.
4. MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
PLACE. Meetings shall be held at such place within or without the State
of Delaware as shall be fixed by the Board.
CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, or
the President, or of a majority of the directors in office. A regular meeting
should be held quarterly.
NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required
for regular meetings for which the time and place have been fixed. Written, oral
or any other mode of notice of the time and place of special meetings shall be
given to each director twenty-four hours prior to the meeting. The notice of any
meeting need not specify the purpose of the meeting. Any requirement of
furnishing a notice shall be waived by any director who signs a waiver of notice
before or after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to him.
<PAGE>
QUORUM AND ACTION. A majority of the entire Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided such
majority shall constitute at least one-third of the entire Board. A majority of
the directors present, whether or not a quorum is present, may adjourn a meeting
to another time and place. Except as otherwise provided herein or in any
applicable provision of law, the vote of a majority of the directors present at
the time of the vote at a meeting of the Board, if a quorum is present at such
time, shall be the action of the Board.
CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present, shall preside at all meetings. Otherwise, the President, if present, or
any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause or
without cause by the stockholders.
6. COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority
of the entire Board, designate from their number one or more directors to
constitute an Executive Committee which shall possess and may exercise all the
powers and authority of the Board of Directors in the management of the affairs
of the corporation between meetings of the Board (except to the extent
prohibited by applicable provisions of the General Corporation Law), and/or such
other committee or committees, which, to the extent provided in the resolution,
shall have and may exercise the powers of the Board of Directors in the
management of the business affairs of the corporation and may authorize the seal
of the corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. All such
committees shall serve at the pleasure of the Board. Each committee shall keep
regular minutes of its meetings and report the me to the Board of Directors when
required.
7. CONFERENCE TELEPHONE.
Any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of such Board or committee by
means of a conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time. Such
participation shall constitute presence in person at such meeting.
8. ACTION IN WRITING.
Any action required or permitted to be taken at any meeting of
the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board or the committee, as the case may be, consent in
writing to the adoption of a resolution authorizing the action, and the
<PAGE>
resolution and the written consents thereto are filed with the minutes of the
proceedings of the Board or committee.
ARTICLE IV
OFFICERS
1. EXECUTIVE OFFICERS.
The directors may elect or appoint a Chairman of the Board of
Directors, a President, one or more Vice Presidents (one or more of whom may be
denominated "Executive Vice President"), a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, and such other
officers as they may determine. Any two or more offices may be held by the same
person.
2. TERM OF OFFICE; REMOVAL.
Unless otherwise provided in the resolution of election or
appointment, each officer shall hold office until the meeting of the Board of
Directors following the next meeting of stockholders and until his successor has
been elected and qualified. The Board of Directors may remove any officer for
cause or without cause.
3. AUTHORITY AND DUTIES.
All officers, as between themselves and the corporation, shall
have such authority and perform such duties in the management of the corporation
as may be provided in these By-Laws, or, to the extent not so provided, by the
Board of Directors.
4. THE PRESIDENT.
The President shall be the chief executive officer of the
corporation. Subject to the direction and control of the Board of Directors, he
shall be in general charge of the business and affairs of the corporation.
5. VICE PRESIDENTS.
Any Vice President that may have been appointed, in the
absence or disability of the President shall perform the duties and exercise the
power of the President, in the order of their seniority, and shall perform such
other duties as the Board of Directors shall prescribe.
6. THE SECRETARY.
The Secretary shall keep in safe custody the seal of the
corporation and affix it to any instrument when authorized by the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors.
<PAGE>
7. THE TREASURER.
The Treasurer shall have the care and custody of the corporate
funds, and other valuable effects, including securities, and shall keep full and
accurate accounts of receipts and disbursements in books belonging to 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. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board, or whenever they may require it, an
account of all his transactions as Treasurer and of the financial condition of
the corporation. If required by the Board of Directors, the Treasurer shall give
the corporation a bond for such term, in such sum and with such surety or
sureties as shall be satisfactory to the Board for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
ARTICLE V
BOOKS AND RECORDS
The books of the corporation may be kept within or without the
State of Delaware, at such place or places as the Board of Directors may, from
time to time, determine. Any of the foregoing books, minutes, or records may be
in written form or in any other form capable of being converted into written
form within a reasonable time.
ARTICLE VI
CORPORATE SEAL
The corporate seal, if any, shall be in such form as the Board
of Directors shall prescribe.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be as fixed by the
Board of Directors.
ARTICLE VIII
CONTROL OVER BY-LAWS
The stockholders entitled to vote in the election of directors
or the directors may amend or repeal the By-Laws and may adopt new By-Laws.
<PAGE>
ARTICLE IX
INDEMNITY
Any person who was or is a party or threatened to be made a
party to any threatened, pending or completed action, suit or proceedings,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he or she is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, join venture, trust or other
enterprise (including employee benefit plans) (hereinafter an "indemnitee"),
shall be indemnified and held harmless by the corporation to the fullest extent
authorized by the General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification than
permitted prior thereto), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such indemnitee in connection with such action, suit or proceeding, if the
indemnitee acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe such
conduct was unlawful. The termination of the proceeding, whether by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe such conduct was
unlawful.
Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (including employee benefit plans) shall be indemnified and
held harmless by the corporation to the fullest extent authorized by the General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification than permitted prior thereto),
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court in which such suit or action was
brought, shall determine upon application, that despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such Court
shall deem proper.
All reasonable expenses incurred by or on behalf of the
indemnitee in connection with any suit, action or proceeding, may be advanced to
the indemnitee by the corporation.
<PAGE>
The rights to indemnification and to advancement of expenses
conferred in this section shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the certificate of
incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
The indemnification and advancement of expenses provided by
this section shall continue as to a person who has ceased to be a director
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
If any provision of this Article is determined to be
unenforceable in whole or in part, such provision shall nonetheless be enforced
to the fullest extent permissible it being the intent of this Article to provide
indemnification to all persons eligible hereunder to the fullest extent
permitted under law. Accordingly, if the law is changed in any way, whether by
act of the Legislature or by a court, these provisions shall be deemed amended
to include such changes.
WARRANT CERTIFICATE
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF THE SECURITIES), OR
(iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
EXERCISABLE ON OR BEFORE
5:30 P.M. NEW YORK TIME ON
[FIRST ANNIVERSARY OF FIRST PUBLIC TRADING]
No. W-99-__ _____ Warrants
This Warrant Certificate certifies that ________________, or
registered assigns, is the registered holder of ______ warrants to purchase
initially, at any time from [insert date when underlying common stock first
becomes listed or quoted for public trading], until 5:30 p.m. New York time, on
the first anniversary of the exercise date (the "Expiration Date"), up to ______
full-paid and non-assessable shares of common stock, $.001 par value ("Common
Stock") of Virilitec Industries, Inc., a Delaware corporation (the "Company"),
at the initial exercise price, subject to adjustment in certain events, of
$10.00 per share of Common Stock (the "Exercise Price"); upon surrender of this
Warrant Certificate and payment of the Exercise Price at an office or agency of
the Company. Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of the
Company.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
This Warrant may be redeemed, at a price of $.05 per Warrant,
on thirty day's prior written notice at any time after the price for the Common
Stock closes at no less than $15.00 per share for a period of twenty consecutive
trading days ending on the third day prior to the day on which the Company gives
notice, as reported for the principal market on which the Common Stock is traded
or quoted (the "Market Price").
The Exercise Price and number of shares of Common Stock
subject to this Warrant shall be subject to adjustment from time to time as
Follows:
<PAGE>
(i) If the Company shall, at any time, subdivide its
outstanding Common Stock by recapitalization, reclassification, forward
split thereof, or other such issuance without additional consideration
(including without limitation a stock dividend), the Exercise Price
immediately prior to such subdivision shall be proportionately
decreased, and if the Company shall at any time combine the outstanding
Common Stock by recapitalization, reclassification, reverse split or
combination thereof, the Exercise Price immediately prior to such
combination shall be proportionately increased. Any such adjustment to
the Exercise Price shall become effective at the close of business on
the record date for such subdivision or combination.
(ii) If any capital reorganization or reclassification of the
capital stock of the Company or consolidation or merger of the Company
with another corporation shall be effected in such a way that holders
of Common Stock shall be entitled to receive stock, securities, cash or
assets with respect to or in exchange of Common Stock, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, as the case may be, each holder of a Warrant shall have
the right thereafter and until the Expiration Date to exercise such
Warrant for the kind and amount of stock, securities, cash or assets
receivable upon such reorganization, reclassification, consolidation,
merger or sale by a holder of the number of shares of Common Stock for
the purchase of which such Warrant might have been exercised
immediately prior to such reorganization, reclassification,
consolidation, merger or sale, subject to adjustment which shall be as
nearly equivalent as may be practicable to the adjustments provided for
herein.
(iii) In the event that the Company shall sell or issue at any
time after the date of this Warrant and prior to its termination,
shares of Common Stock at a consideration per share less than the
Market Price, other than in a transaction covered by (ii) above, then
the Exercise Price shall be adjusted by dividing (a) an amount equal to
(X) the total number of shares of Common Stock outstanding (which shall
include shares of Common Stock underlying any then outstanding
securities) on the date of issuance of this Warrant multiplied by the
Exercise Price in effect on the date of the issuance of this Warrant
(subject, however, to adjustment in the manner set forth above), plus
(Y) the aggregate of the amount of all consideration, if any, received
by the Company for the issuance or sale of Common Stock since the date
of issuance of this Warrant, by (b) the total number of shares of
Common Stock outstanding (which shall include shares of Common Stock
underlying any then outstanding securities) immediately after such
issuance or sale.
<PAGE>
(iv) Upon any adjustment of the then current Exercise Price as
hereinabove provided, the number of shares of Common Stock issuable
upon exercise of a Warrant shall be changed to the number of shares
determined by dividing (X) the aggregate Exercise Price payable for the
purchase of all shares issuable upon exercise of the Warrant
immediately prior to such adjustment by (Y) the Exercise Price per
share in effect immediately after such adjustment or, in other words,
the number of shares as to which this Warrant may be exercised shall be
increased or decreased so that the total sum payable to the Company on
the exercise of this Warrant shall remain constant.
(v) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease in such
price of at least 1%, provided, however, that any adjustments which by
reason of the foregoing are not required at the time to be made shall
be carried forward and taken into account and included in determining
the amount of any subsequent adjustment, and provided further, however,
that in case the Company shall at any time subdivide or combine the
outstanding Common Stock as a dividend, said amount of 1% per share
shall forthwith be proportionately increased in the case of a
combination or decreased in the case of a subdivision or stock dividend
so as to appropriately reflect the same.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided for
herein, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: ___________, 1999.
VIRILITEC INDUSTRIES, INC.
By: ___________________________
Bella Roth, President
[SEAL]
Attest:
- -------------------------------
Moshe Laufer, Secretary
<PAGE>
[FORM OF ELECTION TO EXERCISE WARRANTS]
The undersigned hereby irrevocably elect to exercise the
right, represented by this Warrant Certificate, to purchase shares of Common
Stock and herewith tenders in payment for such securities a certified or
official bank check payable in New York Clearing House Funds to the order of
Virilitec Industries, Inc. in the amount of $_______________, all in accordance
with the terms hereof. The undersigned requests that a certificate for such
securities be registered in the name of _____________________ whose address is
____________________________ and that such Certificate be delivered to
_______________________ whose address is ________________________________.
Dated: Signature _____________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ________________________________ hereby sells,
assign, and transfers unto _____________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________________,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: Signature _____________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
EXCLUSIVE DISTRIBUTION AGREEMENT
This EXCLUSIVE DISTRIBUTION AGREEMENT ("Agreement") made as of
this 25th day of August, 1998, by and between Vitahealth Scientific, Inc., a New
York corporation to be formed (the "Company"), and Virilitec Industries, Inc., a
Delaware corporation ("Distributor").
W I T N E S S E T H :
WHEREAS, the Company and Distributor desire to enter into a
relationship whereby Distributor will act as an exclusive distributor for the
Company for its nutritional supplement designed to enhance human male sperm
count and potency (the "Product"), upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises, covenants and conditions hereinafter contained, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby mutually agree as follows:
1. Engagement of Distributor.
Subject to the terms and provisions hereof, including without
limitation payment of the license fee contained on Schedule A hereto, the
Company hereby grants to Distributor the exclusive worldwide right to distribute
and sell the Product and Distributer hereby accepts such engagement.
2. Term.
The term of this Agreement shall be for fifty years from the
date hereof, subject to earlier termination as hereinafter provided.
<PAGE>
3. Terms of Purchase and Sale of Product.
3.1 Distributor's agents shall place their orders with respect to the
Product directly with the Company's manufacturing facility which is currently
located in Jerusalem, Israel. Payment for all orders shall be due and payable by
the agents at the time of order placement.
3.2 If The Company notifies Distributor that an increase in price
resulting from any increase in the ex-factory price of the Products affects any
order theretofore accepted by the Company, Distributor may cancel said order or
accept Product covered thereby at the new price. If The Company does not receive
notice of such election within a reasonable time, but no less than 10 business
days, the Company may ship such Product at the new price and Distributor shall
be deemed to have placed its order at such new price. Each shipment hereunder
shall constitute a separate and independent sale. If the terms of sale and
payment for any order are not fulfilled, The Company may decline to make further
deliveries. No goods shall be returned without the Company's prior written
consent.
3.3 The Company shall sell Product to Distributor in accordance with
the price schedule set forth in Schedule B hereto. The Company agrees hereby not
to raise the price of the Product more than once every 12 months and that no
price increase may exceed 10%. All prices are F.O.B. the purchaser's location
unless otherwise specified by Distributor. All amounts payable pursuant to this
Agreement shall be paid in United States dollars.
3.4 The Company shall act as collections agent for Distributor and
shall promptly forward to Distributor its portion of the sales proceeds as
determined in accordance with Schedule B hereto. Upon reasonable notice and
during regular business hours, Distributor shall have the right to periodically
<PAGE>
review the Company's books and records to ensure that Distributor is receiving
its appropriate fees hereunder.
3.5 The Company shall not be liable for delay or failure to perform by
reason of contingencies beyond its control, including without limitation, acts
of God, delays of carriers, vessel or car shortages, accidents, failure of
sources of supply of raw materials, power or supplies, or excessive cost
thereof, contingencies interfering with the transportation of Product, or by
reason of voluntary or involuntary compliance with any law, regulation or any
other act of governmental authority. Quantities so affected may be eliminated by
the Company from accepted orders without liability.
3.6 Distributor agrees to meet the following sales quotas:
* During the 2nd month of production and sales -- at least 22,500
capsules
* During months 3-5 -- at least 55,000 capsules per month
* During the 6th month -- at least 150,000 capsules
* Thereafter, at least 200,000 capsules per month
Beginning January 1, 2000, the monthly sales quota shall increase by
10% and the then existing sales quota shall increase by 10% on January 1 of each
year thereafter through the term of this Agreement. In the event the Company is
unable to provide Distributor in a timely manner with the amount of capsules
necessary for distributor to meet the monthly sales quotas, distributor's sole
remedy shall be to terminate the Agreement pursuant to Section 9. In the event
Distributor does not meet the monthly sales quotas, either party may terminate
the Agreement pursuant to Section 9 with 30 days notice without penalty or
financial consequence. The previous sentence notwithstanding, upon Distributor's
receipt of the Company's Notice of Termination for not meeting the sales quota,
Distributor shall have the right, during the 30 day period, to continue this
Agreement on a non-exclusive basis in which case the Company must continue to
supply Distributor, as per the terms of this Agreement.
3.7 Since the Product is in the final stages of reformulation and the
Company has not completed construction of its manufacturing facility, the
parties agree that the sales quotas stated above shall not begin until the month
<PAGE>
next beginning following the 95th day after execution of this Agreement. In the
event the Product is still not ready after such period, Distributor may
terminate this Agreement at any time during the following thirty (30) days
unless it agrees to an extension period with the Company, in which event its
right to terminate this Agreement pursuant to this provision shall be held in
abeyance until the conclusion of such extension period.
4. Advertising.
Distributor shall not use any Advertising Materials (as hereinafter
defined) without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. The proposed uses and the proposed
duration of use of the Advertising Materials shall be stated by Distributor when
submitting the same for approval, and the approval of the Company for any such
Advertising Materials shall extend only to the said proposed uses and only for
the duration stated. For purposes of this Agreement, the term "Advertising
Materials" shall mean all advertising, promotional, packaging, labeling and
display materials used with respect to the Product and all other textual or
pictorial material embodying, bearing, depicting or otherwise pertaining to, the
name and/or character of the Product.
5. Certain Agreements and Covenants.
5.1 Distributor shall devote its best efforts actively to promote,
market and distribute the Product at its own expense.
5.2 Distributor shall not order any item similar to the Product from
any other person or entity and shall not itself manufacture, or arrange for the
manufacture, directly or indirectly, of any such similar item.
<PAGE>
5.3 Distributor shall not, during the term of this Agreement or
thereafter, make or permit any of its sales representatives to make, any sales
of Product except in accordance with the provisions of this Agreement.
5.4 The Company shall maintain warehouse stocks of the Product in
quantities sufficient for the proper promotion and sale of the Product and to
enable it to fulfill all orders promptly.
5.5 Distributor shall employ an adequate staff of properly trained
sales personnel.
5.6 Distributor shall notify the Company immediately upon the
occurrence of any event described in Section 9.1 hereof.
5.7 The Company is the sole owner of the Product and all rights
pertaining thereto, having been assigned said rights by the inventor of the
Product and that the Company has the full and complete ability and authority to
enter into this Agreement.
6. Rights in Name; Trademark and Copyright Protection.
6.1 Distributor recognizes that there is great value to the Name of the
Product and the goodwill associated therewith; and that nothing contained in
this Agreement gives Distributor any interest or property rights therein.
6.2 Distributor agrees with and covenants to the Company that it will
not, during the term of this Agreement or thereafter, directly or indirectly
through its subsidiaries or through any other person or entity controlling,
controlled by or under common control with Distributor (hereinafter referred to
as an "affiliate") or otherwise, (i) assert any interest in or property rights
in the name of the Product (the "Name") ; or (ii) adopt or use or register, or
attempt to register, as a trademark, service mark, trade name or corporate name
or as part of a trademark, service mark, trade name or corporate name, the Name,
any term or translation meaning the same thing as the Name, or any word, symbol
or picture, or combination thereof, which is confusingly or colorably similar to
the Name; or (iii) permit or acquiesce in any of the foregoing activities by any
of its subsidiaries, other affiliates, manufacturers, distributors, or customers
or any of the employees, officers, shareholders, partners or agents of any of
the foregoing.
<PAGE>
6.3 Distributor agrees to place on all Product and all Advertising
Materials such copyright notices as shall be specified by the Company, such
notices to be sufficient in size, legibility, form, location, number and
permanency to comply with all applicable trademark and copyright laws as are in
effect at the time of public distribution of the Advertising Materials. When
requested by the Company, Distributor also agrees to add to any copyright notice
any language or legend requested by the Company to obtain or maintain copyright
protection in a particular country. Distributor also agrees that it will not,
without the Company's prior written consent, affix to any of the Product or to
any Advertising Materials a copyright notice in its own name or in the name of
any other person or entity. Distributor's authorization to make public
distribution of the Product and all approvals by the Company of Advertising
Materials pursuant to Article 4 hereof are expressly conditioned upon
Distributor's compliance with this Section 6.3.
6.4 The Company agrees that at the request of Distributor to cause the
appropriate statutory notice of trademark and/or copyright registration to be
imprinted wherever the Name is used.
<PAGE>
7. Infringements.
7.1 When Distributor learns that any person or entity is or may be
making unauthorized uses of the Name or any trademarks or copyrights associated
therewith, Distributor agrees promptly to give the Company written notice giving
full information with respect to the actions by such person or entity.
7.2 Distributor shall have no right to, and agrees that it will not,
make any demands or claims, bring suit, effect any compromises or settlements,
permit any infringer to dispose of inventory or continue to use the Name or any
trademarks and copyrights associated therewith or take any other action with
respect to the infringement or possible infringement of any trademarks or
copyrights associated with the Name, in each case without the prior written
consent of the Company.
7.3 Upon such notification pursuant hereto by Distributor of an
infringement, the Company at its sole expense, shall promptly take all necessary
and reasonable action to prevent such infringement.
8. Indemnification.
8.1 Distributor agrees to defend, indemnify, and hold the Company
harmless from any and all claims, liabilities, judgments, penalties, losses,
costs, damages, and expenses, including but not limited to, reasonable
attorneys' fees and court costs, arising by reason of or in connection with any
act under or in violation of this Agreement by Distributor, its subsidiaries or
other affiliates, or the employees or agents of any of the foregoing, including
but not limited to, the distribution, exploitation, advertising or sale of the
Product, but excluding any claims relating to the quality or efficacy of the
Product.
<PAGE>
8.2 The Company agrees to defend, indemnify, and hold Distributor
harmless from any and all claims, liabilities, judgments, penalties, losses,
costs, damages, and expenses, including but not limited to, reasonable
attorneys' fees and court costs, arising by reason of or in connection with the
Product, including specifically but without limitation, any claims relating to
the quality or efficacy of the Product.
8.3 With respect to any claims or suits coming within the scope of the
foregoing indemnifications:
(i) The indemnified party shall have the right (but not the obligation)
to require the indemnifying party to defend it and to approve any attorney
selected to defend it;
(ii) The indemnified party shall have the right to participate, with
such counsel as it shall select, in any suit or claim instituted against it and
being defended by the indemnifying party; and
(iii) The indemnifying party hereby agrees that, with respect to any
claim or suit being defended:
(a) it will keep the indemnified party fully and promptly
advised with respect thereto;
(b) it will not enter into any compromise or settlement of such
claim or suit without the prior written consent of the
indemnified party; and
<PAGE>
(c) it will promptly pay any judgment or settlement and all
other amounts payable by it Distributor pursuant to this
Article 8.
9. Termination.
9.1 At the Company's option, this Agreement may be terminated, upon its
written notice thereof to Distributor (i) upon the breach of any of the terms or
provisions hereof by Distributor (provided, however, that, Distributor shall
have a period of thirty (30) days after such notification to remedy a breach of
any of the terms or provisions hereof if and only if such breach can reasonably
be cured within such thirty (30) day period), or (ii) upon the occurrence of any
of the following circumstances: (a) Distributor's business is discontinued; (b)
Distributor's liabilities exceed its assets; (c) Distributor is unable to pay
its debts as they come due or becomes insolvent; or (d) Distributor files a
petition for bankruptcy or for reorganization or makes an assignment for the
benefit of its creditors or an arrangement pursuant to any bankruptcy,
reorganization or similar law or is adjudicated bankrupt or a petition in
bankruptcy is filed against Distributor and is not dismissed within 30 days from
the date of filing or a receiver is appointed for it or its business.
9.2 At Distributor's option, this Agreement may be terminated, upon its
written notice thereof to the Company (i) upon the breach of any of the terms or
provisions hereof by the Company (provided, however, that, the Company shall
have a period of thirty (30) days after such notification to remedy a breach of
any of the terms or provisions hereof if and only if such breach can reasonably
be cured within such thirty (30) day period), or (ii) upon the occurrence of any
of the following circumstances: (a) the Company's business is discontinued; (b)
the Company's liabilities exceed its assets; (c) the Company is unable to pay
its debts as they come due or becomes insolvent; (d) the Company files a
petition for bankruptcy or for reorganization or makes an assignment for the
benefit of its creditors or an arrangement pursuant to any bankruptcy,
reorganization or similar law or is adjudicated bankrupt or a petition in
bankruptcy is filed against the Company and is not dismissed within 30 days from
the date of filing or a receiver is appointed for it or its business; or (e) a
change in control in the Company without Distributor's prior written consent.
9.3 Any termination pursuant to this Article 9 shall be without
prejudice to the rights of either party to monies due or to become due pursuant
to this Agreement.
9.4 Upon the termination of this Agreement by the Company pursuant to
the terms hereof, Distributor agrees (i) not to represent to the public or to
any of its customers, directly or indirectly, that it is an authorized
distributor for the Product, (ii) to refrain from further use of the Name and
from any further reference to it, (iii) to refrain from using any designation
confusingly or colorably similar to the Name, (iv) to immediately cease the
selling and distribution of the Product, except for Product already ordered and
paid for, and Distributor agrees to use its best efforts to sell such Product as
soon as possible, and (v) to promptly remove and otherwise discontinue the use
of all Advertising Materials.
10. Notices.
Any notice, demand, request or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed
<PAGE>
effective when hand delivered, or, if mailed, upon having been properly
deposited in appropriate mail, postage prepaid, registered or certified mail,
return receipt requested (if available), and addressed as set forth in Schedule
C hereto. Any party may change its address for purposes of this Agreement by
written notice given in accordance herewith.
11. Miscellaneous.
11.1 All of the provisions of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns; provided, however, that neither party hereto may assign
or transfer its interest in this Agreement, or delegate the performance of its
duties hereunder, without the prior written consent of the other party.
11.2 This Agreement (including the Schedules attached hereto) contains
the entire agreement between the Company and Distributor concerning the subject
matter hereof, and any oral statements or representations or prior written
matter with respect thereto not contained in this Agreement shall have no force
or effect. In the event of any conflict between the provisions of this Agreement
and the provisions contained in any contract or sales order or purchase order
form used by the Company or Distributor, the provisions of this Agreement shall
control.
11.3 The parties hereto represent and warrant to each other that they
have not dealt with or through any other person or firm who may claim a
brokerage or finder's fee with respect to this Agreement.
<PAGE>
11.4 None of the terms hereof may be waived, modified or discharged,
except by an instrument in writing specifically referring to this Agreement
signed by each of the parties hereto. No failure or delay on the part of either
party in exercising any power or right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. All rights and remedies provided for in this Agreement
shall be cumulative and in addition to any other rights or remedies such parties
may have at law or in equity.
11.5 In the event of a breach or threatened breach of the terms or
covenants of this Agreement by a party hereto, the other party shall, in
addition to all other remedies available to it, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof. In any
proceeding for an injunction, the responding party agrees that its ability to
answer in damages shall not be a bar or be interposed as a defense to the
granting of such temporary or permanent injunction against it, that the moving
party will not have an adequate remedy at law in the event of any breach
hereunder and that it will suffer irreparable damage and injury if the other
party breaches any of the provisions of this Agreement.
11.6 The provisions of this Agreement which place restrictions on
certain activities of Distributor after the termination of this Agreement and
the agreements in Article 8 shall survive the expiration or termination of this
Agreement and shall be enforceable after the termination of this Agreement.
<PAGE>
11.7 In the event that any of the provisions of this Agreement would be
held to be invalid, prohibited or unenforceable for any reason unless narrowed
by construction, this Agreement shall be construed as if such invalid,
prohibited or unenforceable provision had been more narrowly drawn so as not to
be invalid, prohibited or unenforceable. If any court construes any of the
provisions of this Agreement to be unenforceable because of the duration of such
provision or the area covered thereby, such court shall have the power to reduce
the duration or area of such provision and, in its reduced form, such provision
shall then be enforceable and shall be enforced. In the event any of the
provisions contained in this Agreement should be held to be invalid, prohibited
or unenforceable, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
11.8 Distributor is not an employee or agent of, or joint venturer
with, or partner of, the Company, but is an independent contractor. Neither
party hereto has, nor shall it hold itself out as having, any right, power or
authority to create any contract or obligation, either express or implied, on
behalf of, in the name of, or binding upon, the other, or to pledge the other's
credit, or to extend credit in the other's name, unless the other shall have
specifically consented thereto in writing. Each party hereto shall be entitled
to receive from the other prompt reimbursement for any legal, accounting or
other fees, and such other expenses, as it may reasonably incur in the
enforcement of this Agreement or any provision herein contained.
11.9 The section headings set forth in this Agreement are for
convenience of reference only and shall not be considered part of this Agreement
in any respect, nor shall they in any way limit or otherwise affect the meaning
or interpretation of any of the provisions of this Agreement.
<PAGE>
11.10 The parties hereto understand that the corporate entity defined
herein as the "Company" does not exist as of the date of this Agreement and that
it will be formed shortly hereafter and that Mr. Moshe Einhorn, the inventor of
the Product and the principal of the New York corporation intended to be a party
hereto, is not accepting any personal liability hereto and that if the
identified name of the corporation is unavailable he shall select another name
and all references hereto to the "Company" shall mean the New York corporation
so formed on behalf of Mr. Einhorn.
11.11 This Agreement shall be construed in accordance with and governed
by the internal laws of New York, without regard to principles of conflicts of
law.
11.12 This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in its behalf by its duly authorized signatory or
signatories, as of the day and year first above written.
VITAHEALTH SCIENTIFIC, INC.
Attest: By:_________________________________
Authorized Signatory
VIRILITEC INDUSTRIES, INC.
Attest: By:_________________________________
Authorized Signatory
<PAGE>
SCHEDULE A - License Fee
Distributor will pay an initial non-refundable one-time fee of
$8,500 and an annual fee of $10,000 beginning 90 days after the Product is
manufactured and ready for delivery to Distributor's agents upon order and then
annually thereafter, provided this Agreement has not been terminated, for any
reason, prior to the date such payment is due.
Distributor will grant the Company stock options to purchase
up to 300,000 additional restricted shares of Distributor's common stock for a
period of 5 years beginning October 30, 1999 according to the following
schedule:
Date Option to be Effective Amount of Options Exercise Price (per Share)
10/30/1999 100,000 $10.00
2/29/2000 100,000 $10.00
10/30/2000 100,000 $10.00
These options shall vest only in the event the Agreement is
still in effect on the date the options are due to be effective. The shares of
common stock underlying the options have no registration rights.
<PAGE>
SCHEDULE B - Price of Product and Proceeds to Distributor
The Company will sell Product to each of the Distributor's Agents at
a price to be determined by Distributor, of which price the Company will retain
$1.45 and forward the balance to Distributor.
<PAGE>
SCHEDULE C - Addresses for Distribution
Company:
PUT IN VITAHEALTH COMPANY ADDRESS
Distributor:
Viriliec Industries, Inc.
100 Cedarhurst Avenue, Suite 201
Cedarhurst, NY 11516
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(Replace this text with the legend)
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<CIK> 0001076700
<NAME> VIRILITEC INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-11-1998
<PERIOD-END> DEC-31-1998
<CASH> 6,279
<SECURITIES> 0
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0
0
<COMMON> 1,434
<OTHER-SE> 40,076
<TOTAL-LIABILITY-AND-EQUITY> 41,569
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