AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12,
1999
REGISTRATION NO. ________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------------
FORM 10SB
GENERAL FORM FOR REGISTRATION OF SECURITIES Of Small Business Issuers Under
Section 12(b) or 12(g) of the
Securities Exchange Act of 1934
------------------------------
UNITED VENTURES GROUP INC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0675444
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3000 47th AVENUE, LONG ISLAND CITY, NEW YORK 11101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 361-0400
------------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NATURE OF EACH EXCHANGE ON
WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
None
1
<PAGE>
Securities to be registered pursuant to Section 12(g)
of the Act:
Common Stock, .001 par value per share
(Title of Class)
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS......................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION...........................................25
ITEM 3. DESCRIPTION OF PROPERTIES...................................37
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT..............................................37
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS...............................38
ITEM 6. EXECUTIVE COMPENSATION......................................40
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............42
ITEM 8. DESCRIPTION OF SECURITIES TO BE REGISTERED ................49
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS......................43
ITEM 2. LEGAL PROCEEDINGS...........................................43
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ..............45
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES ...................48
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS...................49
FINANCIAL STATEMENTS AND EXHIBITS...........................50
2
<PAGE>
ITEM 1
BUSINESS
Company
United Ventures Group, Inc., through its wholly owned subsidiary Jarnow
Corp. (the"Company") is a manufacturer, designer and distributor of karat gold
jewelry in the United States. The Company offers its customers a large selection
of jewelry styles, consistent product quality and prompt delivery of product
orders. The Company's customers include mass merchandisers, discount stores,
home shopping networks, catalog showrooms, warehouse clubs and jewelry
wholesalers and distributors. In fiscal 1997 and in the ten month period ended
October 31, 1998, sales were made to approximately 100 customers, with sales to
the Company's five largest customers accounting for approximately 40% of net
sales. The Company's principal product line is a wide assortment of 14 karat
gold earrings, charms, bracelets and rings. The Company currently offers over
1000 styles of gold charms, earrings, bracelets and rings, with the majority of
its products retailing between $50 and $300. The Company's products are intended
to appeal to consumers who are value conscious as well as fashion conscious. The
Company also has engaged in the design, manufacture and distribution of karat
gold jewelry accented with colored gemstones.
The Company plans to focus its efforts on increasing its customer base
through expansion into department stores. The Company also seeks to expand its
product line and customer base through selective acquisitions of other concerns
which distribute complementary jewelry products, although it has not identified
any particular acquisition as of the date of this Registration Statement. The
Company intends to finance its long-term growth strategy using, internally
generated funds and, if necessary, borrowings under credit facilities.
Jarnow Corp., the Company's only active subsidiary, was incorporated in New
York State in July 1993. The Company acquired all of the issued and outstanding
shares of Shilaat Corp., a New York Corporation, which owns all of the shares of
Jarnow Corp. on November 26, 1998 in exchange for 3,750,000 shares of the
Company's Common Stock. Between November 1993 and April 1994, Jarnow acquired
the assets of Ultimar Creations, Inc. a manufacturer of fashion earrings and
rings, the American Charm division of Goldline Co., a manufacturer of charms,
and the assets of Joe Eisenberger & Co., Inc., a manufacturer of staple earrings
and rings. Each of these companies had separate manufacturing facilities, used
different manufacturing techniques, marketed their products through different
channels, had different customer bases, different personnel and different
bookkeeping systems. Within eight months, Jarnow was able to combine all three
companies into one facility, restructure the personnel, establish common
manufacturing processes and bookkeeping methods and substantially retain the
customer bases of each of the acquired companies. The Company believes that its
growth was attributed to its ability to furnish its customers with high quality,
innovatively styled jewelry, at reasonable cost, combined with a high level of
customer service.
Sources of Supply
The principal raw materials purchased by the Company are gold and
semi-precious stones. Approximately 90% of the Company's purchases are gold and
10% precious and semi-precious stones. The Company purchases both its gold
requirements and its precious and semi-precious stones from numerous local and
offshore suppliers in both small and large quantities. Gold acquired for
manufacture is at least .9995 fine and is then combined with other metals to
produce 14 karat and 10 karat gold. The term "karat" refers to the gold content
of alloyed gold, measured from a maximum of 24 karats (100% fine gold). Varying
quantities of metals such as silver, copper, nickel and zinc are combined with
fine gold to produce 14 karat gold of different colors. These alloys are in
abundant supply and are readily available.
Precious and semi-precious stones are available from many suppliers in the
United States. The world's supply of diamonds comes primarily from De Beers
Consolidated Mines, Limited ("De Beers"), a South African company. The continued
availability of diamonds to the jewelry industry is dependent, to some degree,
on a continual supply from De Beers. While several other countries are major
suppliers of diamonds, in the event of an interruption of
3
<PAGE>
supply from South Africa, the Jewelry industry, as a whole, could be adversely
affected, which could impact the supply of diamonds to the Company.
The Company has no continuing contracts with any of its suppliers and its
relationship with them may be terminated by either party at any time. The
Company is not dependent upon any particular supplier for its raw materials. The
Company has not encountered and does not envisage in the future, any difficulty
in obtaining sufficient raw materials for its needs.
The Company generally lessens the risk of market fluctuations in the price
of gold by either using the price it pays for the gold to determine the prices
it charges to its customers for finished products incorporating the gold or by
maintaining appropriate forward contracts for the purchase of gold which protect
the Company against fluctuations in the price of gold between the order date and
the date of sale.
The Company does not presently engage in hedging activities with respect to
possible fluctuations in the prices of precious, semi-precious gemstones or
metals. The Company believes the risk of not engaging in such activities is
minimal, since historically the Company has been able to adjust prices as
material fluctuations have occurred. The Company believes that a downward trend
in the prices of stones or metals would have little, if any, impact on the
valuation of the Company's inventories.
Manufacturing
The Company maintains an in-house design staff to create new designs for
its products and to work closely with the Company's senior officers and
marketing personnel to develop new products meeting the needs of the Company's
customers. The Company's marketing and merchandising staff also work in
partnership with major customers to develop products that are sold by those
customers. The Company's policy is to obtain proprietary protection for its
products and designs whenever possible. The Company updates its product
catalogue each year by adding new designs and eliminating less popular styles.
At the Company's facility in New York City, manufacturing processes combine
modern technology with hand craftsmanship to produce fashionable and affordable
jewelry products. Gold jewelry is principally produced using the "lost wax"
method of investment casting. This manufacturing operation originates with a
hand designed original which is then taken through a reverse molding procedure
to create a rubber mold. The rubber mold is infused with wax and a series of
such wax pieces are then surrounded in plaster of Paris. The plaster of paris is
placed in a furnace where the wax is eliminated by subjecting the plaster to
high temperatures. Molten gold is then infused into the areas from which the wax
has been eliminated and a rough gold piece is removed after cooling. The piece
produced through this investment casting method must be ground and polished and
in some cases, set with stones. The Company also produces tools for many of its
products that are capable of stamping out gold items. This process enables the
Company to produce many of its gold items more cheaply than using the lost wax
method.
One of the other production methods used is stamping. The Company creates
tools and dies for a large variety of products and then stamps out the products.
Stamping dies are custom produced by computer-aided tool cutting machines or are
hand crafted. The rough, stamped pieces are then trimmed and rounded. Precious,
semi-precious, or synthetic stones may be set in the individual pieces.
Substantially all of the Company's jewelry is manufactured by the Company
in its plant in New York City. The Company has facilities in its plant for gold
casting, gold stamping and tool manufacturing and has the ability to design an
item and to progress from design to finished product in under four weeks. Its
products are designed by an in-house staff, which enables the Company to rapidly
produce customer samples embodying new fashion trends.
4
<PAGE>
Marketing and Sales
The Company markets and sells its jewelry primarily through its in-house
sales force. Sales are made by its sales personnel primarily at the Company's
showroom in its New York City facility and at direct presentations at customer's
locations. Products are promoted through the use of catalogues and trade show
exhibitions.
The Company has an in-house sales force and does not employ outside
regional sales offices, and does not supply outside salespersons with samples.
This sales structure enables management to control the Company's selling
operation more effectively as well as to deal directly with and be readily
accessible to major customers. The Company supplements these sales efforts
through attendance at major industry trade shows. The Company assists its
customers in allocating their purchasing budgets among the different items
offered by the Company and monitors retail sales in order to assess customer
response to its products. The Company advertises in industry trade journals and
participates with customers in cooperative advertising programs. There are also
ads appearing in the promotional advertising pieces of its customers which are
paid for by its customers.
The marketing efforts of the Company are directed towards large retailers,
such as mass merchandisers and discount stores, catalog showrooms, national and
regional jewelry chains, home shopping networks, warehouse clubs, department
stores and large regional wholesalers. The Company's marketing efforts emphasize
maintaining and building upon the Company's relationship with existing
customers. The Company believes that providing exceptional customer service is a
key element of its marketing program. The Company maintains an adequate
inventory of finished goods which, coupled with its manufacturing capabilities,
enables it to rapidly fill customer orders. The Company's marketing efforts
emphasize its ability to fill orders in a prompt and reliable fashion. In
addition to prompt and reliable order fulfillment, the Company offers a wide
variety of customer support services designed to meet the individual needs of
its customers. For many of the Company's retail customers, the Company
prepackages, price-tags and bar codes individual pieces of jewelry, and then
ships an assortment of many prepackaged items to individual retail locations.
The Company also is able to provide to its customers computer generated reports
analyzing the customers' sales and information regarding market trends. In order
to fill customer orders more quickly and efficiently, the Company has
implemented an EDI program with certain retail customers. Under this program,
the Company electronically receives purchase orders from participating customers
and electronically transmits to the customer order acknowledgments, invoices and
advance shipping notices. Certain large retailers require their vendors to
utilize EDI programs. During each of fiscal 1997and the ten months ended October
31, 1998, approximately 60% of the Company's net sales, were made pursuant to
orders received through the EDI program.
The Company's net sales during the fiscal year ended December 31, 1997 and
the ten month period ended October 31, 1998 to its five largest customers
aggregated approximately 40% of total net sales during those periods, and sales
to one customer, J.C. Penney, accounted for approximately 20% of net sales
during the fiscal year ended December 31, 1997 and 15% for the ten month period
ended October 31, 1998.
The Company has no contracts with any of its customers other than the
orders for made-to-order products and its relationships with them may be
terminated by either party at any time.
Competition
The jewelry business is highly competitive in the United States. The
Company encounters competition primarily from manufacturers with national and
international distribution capabilities and, to a lesser extent, from small
regional suppliers of jewelry. Management believes that the Company is well
positioned in the industry and has a reputation for responsive customer service,
high quality and well designed jewelry with broad consumer appeal. The principal
competitive factors in the industry are price, quality, design and customer
service. The Company's specialized customer service programs are important
competitive factors in sales to nontraditional jewelry retailers, including
television shopping networks and discount merchandisers. The Company believes
that its infrastructure which enables it to offer these programs, combined with
low cost manufacturing capabilities, provides the Company with competitive
strengths that distinguish it from most of its current competitors. The recent
5
<PAGE>
trend towards consolidation at the retail level in the jewelry industry may
increase the level of competition facing the Company.
Security and Insurance
The facilities are protected by alarm systems connected to two "central
stations", one of which is located in the same building as the Company providing
ability to answer emergency calls on an immediate basis. Visitors to the
building pass three security check points provided by the building as well as
security of the Company. An underground secured parking garage provides added
convenience and security.
The Company employs armed security guards, who are on the premises during
all operating hours. All employees handling gold are scanned for metal upon each
exit from premises. In addition to security cameras all employees are provided
with magnetically coded badges for restricted access to all sensitive areas.
Numerous gold controls are in place for full accountability of all gold
movements in the plant, with specific guidelines of responsibility for all
employees and managers in the production, quality control, vault and shipping
departments.
The Company has not experienced any material losses from theft and casualty
to date. Nevertheless the Company maintains primary all-risk insurance, as well
as fidelity insurance, to cover such losses in transit or otherwise if there
were a loss. The Company believes that it maintains insurance coverage which is
adequate for its business and in conformity with industry practices
Employees
At February 28, 1999 the Company employed 50 full time employees. Of such
employees 2 were employed in management, 3 in sales and design, and 41 in
refining, machining, finishing, polishing, assaying, and fabricating, and 4 in
administration..
The Company is not a party to any collective bargaining agreement. The
Company considers its relations with its employees to be satisfactory and has
not experienced any interruption of operation due to labor disagreements with
its employees.
Tradenames and Trademarks
The Company holds United States trademarks for some of its various brand
names including American Charm(R) and Jarnow(R) but believes that its trademarks
are not material to its business.
The Company also uses various unregistered tradenames, trademarks and
service marks. With the introduction of new products, the Company anticipates
continuing to adopt additional unregistered names and marks.
EDI ORDERS
As part of its programs to provide customers with just-in-time inventory
management and year-round availability of products, the Company maintains
year-round in-stock inventory of many of its products at its New York City
facility. The Company historically has not experienced excess inventory buildup
nor has it been forced to sell substantial amounts of inventory below cost. The
Company believes that it has been able to control excessive inventory buildup
because a substantial portion of its net sales have been attributable to
products pre-ordered by customers prior to manufacture, and because items kept
in its in-stock inventory tend to be stable products, which are not particularly
susceptible to rapid changes in fashion trends. As the Company's customers make
greater use of EDI just-in-time inventory management systems, the Company may be
required to increase its in-stock inventory.
6
<PAGE>
Environmental Regulation
The Company's manufacturing operations routinely involve the use of certain
materials that are classified as hazardous. The company' use of such material is
in compliance in all material respects with applicable federal, state and local
laws and regulations concerning the environment, health and safety.
However, the operation of a jewelry manufacturing plant entails risks in
these areas, and there can be no assurance that the Company will not incur
material costs or liabilities with the environmental laws and regulations. In
addition, potentially significant expenditures could be required in order to
comply with evolving environmental and health and safety laws, regulations or
requirements that may be adopted or imposed in the future. The Company believes,
although there can be no assurance, that the overall impact of compliance with
regulations and legislation protecting the environment will not have a material
effect on its future financial position or results of operations.
Seasonality
Retail sales of jewelry are weighted to the fourth quarter. According to
the World Gold Council, retail sales by quarter have remained consistent over
the last three years with the fourth quarter accounting for approximately 44% of
the retail dollar sales and 46% of the retail unit sales in the jewelry
industry. For manufacturers these sales patterns reflect a business that tends
to fall one-third in the first half of the year with the remaining two-thirds on
the second half of the year.
While the Company's sales are subject to seasonal fluctuations, this
fluctuation is mitigated to a degree by the early placement of orders by many of
the Company's customers, particularly for the Christmas holiday season. Further,
management believes that its sales and those of its customers are not as
seasonally affected as most competitor's sales because the Company's pricing is
so reasonable and designs are for mass merchandising as to generate year round
impulse purchases.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Ten Months Ended October 31, 1998 Compared to Ten Months Ended October 31, 1997
Net sales decreased $901,495 or 7.7% for the ten months ended October 31,
1998 from net sales of $11,754,442 for the ten months ended October 31, 1997 due
to a change in the buying patterns of two large customers which we expect will
increase purchases in 1999 .
Cost of sales as a percentage of net sales remained constant at
approximately 74.5% for both ten months ended October 31, 1998 and ten months
ended October 31, 1997.
Operating expenses, and general and administrative expenses remained
constant at approximately 26.4% for both ten months ended October 31, 1998 and
ten months ended October 31, 1997.
Interest expenses as a percentage of net sales remained constant at
approximately 18.3% for both ten months ended October 31, 1998 and ten months
ended October 31, 1997.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales decreased $785,304 or 5% for the year ended December 31, 1997
from net sales of
7
<PAGE>
$15,604,076 for the year ended December 31, 1996 due to a change in buying
patterns of two large customers which we expect will increase purchases in 1999
.
Cost of sales as a percentage of net sales remained constant at
approximately 73% for both year ended December 31, 1997 and for the year ended
December 31, 1996.
Operating expenses, and general and administrative expenses remained
constant at approximately 17.5% for both year ended December 31, 1997 and for
the year ended December 31, 1996.
Interest expenses as a percentage of net sales decreased to 5.3% in the
year ended December 31, 1997 from 6% in the year ended December 31, 1996.
Liquidity and Capital Resources
The Company satisfies its working capital requirements through internally
generated funds, loans from shareholders, and use of a revolving line of credit
facility with Allstate Financial Corp. ("Allstate"), which provides borrowings
up to $8,500,000 subject to certain requirements. See Note 6 to "Notes to
Financial Statement." The Company's borrowings under the Line of Credit bear
interest at 15% per annum. Interest on any borrowings is paid monthly.
Additional funding will be available to the Company upon increase of eligible
accounts receivable, as defined. At October 31, 1998, $8,135,000 was
outstanding. Borrowings and the revolving credit facility tend to be highest in
the fourth quarter. The Company's obligations under the revolving credit
facility are secured by a security interest on all the assets of the Company
guaranteed by Isaac Nussen and George Weisz. At December 31, 1997, the
shareholders subordinated an aggregate of $294,000 in loans made by them to the
Company to the loans made by Allstate to the Company.
The Company does not currently rely on a gold consignment program for its
gold bullion production requirements. Many jewelry manufacturing companies rely
on such a program to finance their inventories and to hedge against fluctuations
in gold values. Briefly described, a jewelry manufacturer tallies his raw gold
value in inventory ands sells it to the lender, receiving full value thereof.
This has a positive and immediate impact on the jeweler's cash flow.
Concurrently with the sale of gold, the jeweler takes back physical possession
of the sold gold, on a consignment basis at low interest rates (generally
4.0%-6.0%). The jeweler then uses the lender's gold for manufacturing
requirements and replenishes on a cash basis as the gold is used. The jeweler
effectively is financing his gold requirements "off balance sheet" as is holding
gold that is lender-owned. The Company believes that current costs of borrowing
funds is effectively low enough as to not warrant using this method of
financing. The Company also believes that this method of financing carries
certain risk and costs which the Company feels do not make it worthwhile at
current interest rates. Included in these risks is the absolute necessity of
tracking exact details of all gold shipments and immediately replacing them.
Failure to do so leaves the Company at risk of having to buy gold at high prices
in order to replace gold at low prices and not replenish on time.
Inflation and Seasonality
8
<PAGE>
The Company's operating expenses are directly affected by inflation,
resulting in an increased cost of doing business. Because the cost of sales
depends on the price of raw materials bought in markets located throughout the
world, the Company is influenced by inflation on an international basis. In
addition, gold prices are affected by political factors by changing perception
of the value of gold relative to currencies and by inflationary pressures.
The Company is impacted by the seasonal demands of its customers. A
significant portion of the sales in the fine jewelry industry is concentrated in
the forth quarter in anticipation of the holiday season. Accordingly, the
Company's's operating results and working capital requirements fluctuate
considerably during the year.
ITEM 3 Description of Property
Facilities
The Company leases facilities at 30-00 47th Avenue, Long Island City, N.Y.
from an unaffiliated person which it uses as its executive and sales offices and
for manufacturing. It occupies 20,000 sq. feet at a rent starting at $104,500
per annum over a five and a half year lease terminating December 31, 1999, plus
a proportional share of real estate tax and operating expense increases and
utilities. Approximately 50% of the facility is used for manufacturing, 25% is
used for distribution and shipping, and 25% is used for sales and administration
functions. The Company believes that its facilities are adequate for its present
level of operations and sufficient to accommodate any increase until December
31, 1999.
ITEM 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth at December 31, 1998, the name of each
person known by the Company to own beneficially more than 5% of the shares of
Common Stock of the Company and the number of shares owned by each such person
and by each officer and director and all officers and directors as a group,
together with the respective percentage holdings of such shares.
9
<PAGE>
Shares Percent
Beneficially of Shares
Name and Address Owned Owned
George Weisz(1) 1,125,000 25.9%
30-00 47 Avenue
Long Island City, New York 11101
Isaac Nussen(1) 1,125,000 25.9%
30-00 47 Avenue
Long Island City, New York 11101
Odyssey Acquisition Corp(1) (2) 1,500,000 34%
Eric J. Rothschild -0- -0-
30-00 47 Avenue
Long Island City, New York 11101
Israel Braun -120,000- - 2.7-
30-00 47 Avenue
Long Island City, New York 11101
Mark Colacurcio - 0 - - 0 -
All officers and Directors as a 2,370,000 54.5
group (6 persons)
(1) Odyssey Acquisition Corp. granted Mr. Weisz and Mr. Nussen the unconditional
right to vote 750,000 of such shares. In addition, the Company issued preferred
shares to Mr. Weiz and Mr. Nussen which provide that they will be able to vote
no less than 54% of all the voting stock of the Company.
(2) Mr. William Gladstone is the President of the Corporation.
ITEM 5 MANAGEMENT
Executive Officers and Directors of the Company
The directors and executive officers of the Company are:
Name Age Position
Isaac Nussen 49 President, CEO and Director
George Weisz 60 Chief Operating Officer, Vice President ,
Secretary and Director
Eric J. Rothschild 68 Director
Martin Weisz 32 Treasurer and Chief Financial Officer
Israel Braun 54 Director
Mark Colacurcio 39 Director
Isaac Nussen has served as President CEO and Director since November 1998.
He also served and still serves in the same positions for Jarnow Corporation
since 1993. Prior thereto he served as an executive officer of Michael Anthony
Jewelers, Inc. and other jewelry manufacturing companies for over 25 years.
10
<PAGE>
George Weisz (a.k.a. Ghidale Weisz) has served as Chief Operating Officer,
Vice President and Secretary since November 1998. He also served and still
serves in the same positions for Jarnow Corporation since 1993. Prior thereto he
served as an executive officer of Michael Anthony Jewelers, Inc. and other
jewelry manufacturing companies for over 25 years.
Eric J. Rothschild has served as a director since November 1998. For the
past five years, and prior thereto, he has been a self-employed physician and a
member of Orangeburg Orthopedic Associates.
Martin Weisz has served as Treasurer and Chief financial officer since
January 1999. He has been in the Jewelry industry for the past ten years and at
Jarnow since 1993.
Israel Braun has served as a Director of the Company since November 1998.
Since 1990 he has been the President of American Computer Forms, Inc., a
distributer of stationary and computer paper.
Mark Colacurcio has been a Director of the Company since November, 1998
Prior to that time he was President of the Company.
Directors of the Company are elected to serve until the next annual meeting
of shareholders or until their respective successors are elected and qualified.
The Company does not pay direct remuneration for services to any of its
directors. All officers serve at the discretion of the Board of Directors
subject to the terms of their employment agreements. By agreement, in connection
with the sale of Jarnow to the Company, the parties agreed that Mr. Weisz and
Mr. Nussen shall have a right to nominate themself and an additional two persons
to be members of the Board of Directors. Odyssey Acquisition Corp.,( "Odyssey")
shall have a right to nominate one member of the Board of Directors. Mr.
Colacurcio is the nominee of Odyssey. See "Management--Executive Compensation."
ITEM 6 Executive Compensation
The Summary Compensation Table below sets forth compensation paid by the
Company, and its subsidiaries for the three fiscal years ended December 31, 1998
for services in all capacities for its CEO and President. No other principal
executive officer received a total annual salary and bonus from the Company
which exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-term
Compensation
Annual Compensation Awards
(a) (b) (c) (e) (g)
Name and Other Annual Securities Underlying
Principal Position Year Salary Compensation Options/SAR (#)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$250,000 1998
George Weisz 1997 $250,000 0 0
Chief Executive Officer 1996 $250,000
$250,000 1998
Isaac Nussen 1997 $250,000 0 0
President 1996 $250,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
Mr. Weisz and Nussen intend to enter into a four year employment Contract
pursuant to which they will be entitled to receive at an annual salary of
$250,000 each. In addition, both will be entitled to receive a bonus of 2 1/2%
of the Company's net profit (before taxes) in excess of $500,000 in each fiscal
year commencing with the fiscal year ending December 31, 1999, cost of living
increase, and for the Company to purchase and keep in force for the benefit of
Mr.
11
<PAGE>
Weisz and Mr. Nussen, and each of them, a life insurance policy in the face
amount of $1,000,000. Further, on change of control, in the event either or both
Mr. Weisz or Mr. Nussen, terminates their employment with the Company, they will
each be entitled to receive a lump sum payment equal to 290% of his average
annual compensation for the five years preceding the date of termination.
Stock Option Plan
In November 1998, the Company adopted a Stock Option Plan (the "Plan"). An
aggregate of 600, 000 shares of Common Stock are authorized for issuance under
the Plan. The Plan provides that incentive and non-qualified options may be
granted to officers and other key employees and consultants to the Company for
the purpose of providing an incentive to such persons to work for the Company.
The Plan may be administered by either the Board of Directors or a committee of
three directors appointed by the Board ("Committee"). The Board or Committee
determines, among other things, the persons to whom stock options are granted,
the number of shares subject to each option, and the date or dates upon which
each option may be exercised, and the exercise price per share.
Options may be granted under the Plan until November 2008. Options granted
under the Plan are exercisable for a period of up to ten years from the date of
grant. Options terminate upon the optionee's termination of employment with the
Company, except that under certain circumstances an optionee may exercise an
option within the three-month period after termination of employment. An
optionee may not transfer any options granted to such optionee except that an
option may be exercised by the personal representative of a deceased optionee
within the three-month period following the optionee's death. Incentive options
granted to any employee who owns more than 10% of the Company's outstanding
Common Stock immediately before the grant must have an exercise price of not
less than 110% of the fair market value of such underlying stock on the date of
the grant and the exercise term of such options may not exceed five years. The
aggregate fair market value of Common Stock (determined at the date of grant)
for which any employee may exercise incentive option in the first calendar year
may not exceed $100,000.
The Board of Directors may from time to time amend or may terminate the
Plan without action by the Company's shareholders, but no such amendment may
increase the number of shares of Common Stock that may be issued under the Plan
without the consent of the Company's shareholders or impair the rights of
holders of outstanding options without the consent of such holders. To date no
stock option are outstanding under the plan .
The Company has no pension or profit sharing plan or other contingent forms
of remuneration, other than as provided for in employment agreements with George
Weisz and Isaac Nussen. See "Executive Compensation."
The Company has been advised that in the opinion of the Commission
indemnification for liabilities arising under the Securities Act is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 7
CERTAIN TRANSACTIONS
On November 26, 1998, the Company issued 2,250,000 shares of Common Stock
to George Weisz and Isaac Nussen (1,125,000 to each) in exchange for all of
their issued and outstanding shares of Shilaat Corp., the parent company of
Jarnow. In addition, in November 1998, the Company issued 1,500,000 shares of
Common Stock to Odyssey Acquisition Corp. in exchange for its shares of Shilaat
Corp.
At October 30, 1998, the Company owes George Weisz and Isaac Nussen moneys
in connection with certain loans made to the Company and for salaries.
George Weisz and Isaac Nussen have personally guaranteed, without
compensation therefor, the Company's indebtedness to All State Financial. The
company will use its best efforts to remove them from the guarantee or then
compensate.
DESCRIPTION OF CAPITAL STOCK
ITEM 8
12
<PAGE>
The Company's authorized capital stock consists of (i) 40,000,000 shares
of Common Stock, par value $.001 per share and (iii) 5,000,000 shares of
Preferred Stock, par value $.001 per share ("Preferred Stock"). 4,400,000 shares
of Common Stock and 200,000 shares of Series A Preferred Stock are currently
outstanding.
Common Stock
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. Cumulative voting of shares of
Common Stock is prohibited. The holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor, subject to the
payment of any preferential dividends with respect to any Preferred Stock that
from time to time may be outstanding. In the event of the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of the holders of any outstanding Preferred
Stock. The holders of Common Stock have no preemptive or conversion rights or
other subscription rights, and there are no redemptive or sinking funds
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are fully paid and nonassessable, and all of the shares of Common
Stock offered hereby, when issued, will be fully paid and nonassessable.
Vote of the holders of a majority of the issued and outstanding Common
Stock entitled to vote thereon is sufficient to authorize, affirm, ratify or
consent to such act or action, except as otherwise provided by law.
See "Certain Anti-Takeover Matters" below.
Under the Delaware General Corporation Law ("DGCL"), stockholders may take
certain actions without the holding of a meeting by a written consent or
consents signed by the holders of a majority of the outstanding shares of the
capital stock of the Company entitled to vote thereon. Prompt notice of the
taking of any action without a meeting by less than unanimous consent of the
stockholders will be given to those stockholders who do not consent in writing
to the action. The purposes of this provision are to facilitate action by
stockholders and to reduce the corporate expense associated with annual and
special meetings of stockholders. If stockholders action is taken by written
consent, the Company will be required to send each stockholder entitled to vote
on the applicable matter, but whose consent was not solicited, an information
statement containing information about the action taken.
Certain Anti-Takeover Matters
The Company's Bylaws establish advance notice procedures with regard to
stockholder proposals relating to the nomination of candidates for election as
directors, the removal of directors and amendments to the Certificate of
Incorporation or Bylaws to be brought before meetings of stockholders of the
Company. These procedures provide that notice of such stockholder proposals must
be timely given in writing to the Secretary of the Company prior to the meeting
at which the action is to be taken. Generally, to be timely, notice must be
received at the principal executive offices of the Company not less than 90 days
nor more than 180 days prior to an annual meeting or, in the case of a special
meeting, not less than 40 days nor more than 60 days prior to such meeting (or
if fewer than 50 days' notice or prior public disclosure of the meeting date is
given or made by the Company, not later than the seventh day following the day
on which the notice was mailed or such public disclosure was made).
The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, subject to certain exceptions, Section 203 prohibits a
Delaware corporation from engaging in a "business
13
<PAGE>
combination" with an "interested stockholder" for a period of three years
following the date that such stockholder became an interested stockholder,
unless (i) prior to such date the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder or (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
for purposes of determining the number of shares outstanding those shares owned
by (x) persons who are directors and also officers and (y) employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer), or (iii) on or subsequent to such date the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66-2/3% of the outstanding vote stock which is not owned by the
interested stockholder. Section 203 defines a "business combination" to include
certain mergers, consolidations, asset sales and stock issuances and certain
other transactions resulting in a financial benefit to an "interested
stockholder." In addition, Section 203 defines an "interested stockholder" to
include any entity or person beneficially owning 15% or more of the outstanding
voting stock of the corporation and any entity or person affiliated with such an
entity or person.
Limitation of Liability
Section 102(b)(7) of the DGCL allows a Delaware corporation to limit a
director's personal liability for monetary damages for breaches of certain
fiduciary duties owned to the corporation and its stockholders. The Company's
Certificate of Incorporation contains a provision that limits the liability of
its directors for monetary damages for any breach of fiduciary duty as a
director to the maximum extent permitted by the General Corporation Law. This
provision, however, does not eliminate a director's liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for a transaction from which the director
derived an improper personal benefit or (iv) in respect of certain unlawful
dividend payments or stock purchases or redemptions. The inclusion of this
provision in the Certificate of Incorporation may reduce the likelihood of
derivative litigation against directors and may discourage or deter stockholders
or management from bringing a lawsuit against directors for breaches of their
fiduciary duties, even though such an action, if successful, might otherwise
have benefitted the Company and its stockholders. This provision does not
prevent the Company or its stockholder from seeking injunctive relief or other
equitable remedies against its directors under applicable state law, although
there can be no assurance that such remedies, if sought, would be obtained.
Transfer Agent
The Transfer Agent for the Common Stock is Florida Atlantic Stock Transfer,
7130 Nob Hill Road, Tanara'e FL 33321.
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
ITEM 1
The Company's Common Stock is listed for trading on the Bulletin Board. The
following table sets forth the range of high and low bid prices of the Company's
Common Stock for the fiscal quarters of 1997 and 1998 on the Bulletin Board.
These quotations represent prices between dealers in securities, do not include
retail mark-ups, mark-downs
14
<PAGE>
or commissions and do not necessarily represent actual transactions.
Fiscal Year Ended Fiscal Year Ended
December 31, 1997 December 31, 1998
High Bid Low Bid High Bid Low Bid
COMMON STOCK ( UVGI )
First Quarter 1.5 1.187
Second Quarter 1.25 .25
Third Quarter 4 .75 .3125 .25
Fourth Quarter 1.5 1.125 8.03 .25
- ----------------------------
The closing bid price of the Common Stock on December 31, 1998 was $7.875
Holders of Common Stock are entitled to dividends, when, as, and
if declared by the Board of Directors out of funds legally available therefore.
The holders of the Common Stock may not receive dividends until the holders of
the Preferred Stock, if issued, receive all accrued but unpaid dividends. The
Company has not paid any cash dividends on its Common Stock and, for the
immediate future, intends to retain earnings, if any, to finance the development
and expansion of its business.
ITEM 2. LEGAL PROCEEDINGS
Management knows of no material legal proceeding pending, threatened
or contemplated which the Company is or may be a party to or which any of its
property is subject.
ITEM 3 Changes in and Disagreements With Accountants.
None
Item 4. Recent Sales of Unregistered Securities.
No securities that were not registered under the Securities Act have
been issued or sold by the Registrant within the past three years except as
follows:
July 1, 1996 Registrant issued 25,000 Shares in connection with a
merger of a company into Registrant.
In May 1996 Registrant issued 10,117 shares to the founders of the
Company.
In November 1998, the Registrant issued 3,750,000 shares to
three persons in exchange for the shares of Shilaat Corp.
In November 1998, the Company issued 600,000 shares in a Rule 504
offering.
In December 1998, the Company issued 120,000 shares in exchange for
the cancellation of debt.
15
<PAGE>
The aforementioned issuances and sales were made in reliance upon the
exemption from the registration provisions of the 1933 Act afforded by Section
4(2) thereof and/or Regulation D promulgated thereunder, as transactions by an
issuer not involving a public offering. The purchasers of the securities
described above acquired them for their own account and not with a view to any
distribution thereof to the public. The certificates evidencing the securities
bear legends stating that the securities may not be offered, sold or transferred
other than pursuant to an effective registration statement under the 1933 Act,
or an exemption from such registration requirements. The Registrant will place
stop transfer instructions with its transfer agent with respect to all such
securities.
Item 5. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation to provide indemnification to a director, officer,
employee or agent of the corporation, including attorneys' fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred by him in
connection with such action, suit or proceeding, if such party 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, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful as
determined in accordance with the statute, and except that with respect to any
action which results in a judgment against the person and in favor of the
corporation the corporation may not indemnify unless a court determines that the
person is fairly and reasonably entitled to the indemnification.
Section 145 further provides that indemnification shall be provided
if the party in question is successful on the merits.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person in connection with the securities being registered) the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Part III
ITEM 1 Exhibits
3.1 Certificate of Incorporation as Amended
3.2 By-Laws
5.1 Stock Option Plan
SIGNATURES
Pursuant to the requirements of Section 12 the Securities Exchange
Act of 1934, the
16
<PAGE>
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on this 12 day of March 1999.
UNITED VENTURES GROUP, INC
By:/s/ ISAAC NUSSEN
Isaac Nussen
President
17
<PAGE>
JARNOW CORPORATION
INDEX TO FINANCIAL STATEMENTS
Jarnow Corporation:
Independent Auditors' Report....................................................
Balance Sheet at December 31, 1998..............................................
Statement of Income and Retained Earnings (Deficit)
for the years ended December 31, 1997 and 1996..................................
Statement of Cash Flows for the years ended December 31, 1997 and 1996..........
Notes to Financial Statements...................................................
Unaudited - Jarnow Financial Statements:
Balance Sheet at October 31, 1998...............................................
Statement of Income and Retained Earnings
for the ten months ended October 31, 1998 and 1997..............................
Unaudited - Pro-forma United Ventures Group, Inc. Financial Statements:
Description of Unaudited Pro-forma Financial Statements.........................
Unaudited Pro-forma Consolidated Balance Sheet at October 31, 1998..............
Notes of Unaudited Pro-forma Financial Statements...............................
<PAGE>
INDEPENDENT AUDITORS' REPORT
June 23, 1998
To the Board of Directors and Stockholders
Jarnow Corporation
Long Island City, New York
We have audited the accompanying balance sheet of Jarnow Corporation as
of December 31, 1997 and the related statements of income and retained earnings
(deficit), and cash flows for the years ended December 31, 1997 and 1996.These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Jarnow Corporation
as of December 31, 1997 and the results of its operations and its cash flows for
the years ended December 31, 1997 and 1996 in conformity with generally accepted
accounting principles.
/s/Feldman Sherb Ehrlich & Co., P.C.
Certified Public Accountants
<PAGE>
JARNOW CORPORATION
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
CURRENT ASSETS:
Cash $ 6,670
Accounts receivable - net of allowance for doubtful
accounts of $51,000 4,879,191
Inventories 10,922,793
Prepaid expenses 99,860
Deferred financing costs 69,672
---------------
TOTAL CURRENT ASSETS 15,978,186
Equipment, improvements and fixtures 950,047
Costs in excess of net assets acquired 442,501
Deferred offering costs 90,000
Deposits 17,624
---------------
$ 17,478,358
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit - bank $ 8,173,666
Term loan - bank, current portion 116,676
Notes payable - related party 500,000
Due to stockholders - subordinated 294,121
Accounts payable and accrued expenses 642,089
--------------
TOTAL CURRENT LIABILITIES 9,726,552
Term loan - bank 204,155
--------------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 200 shares authorized, issued and
outstanding 1,500,000
Additional paid-in capital 5,900,000
Retained earnings 147,651
--------------
TOTAL STOCKHOLDERS' EQUITY 7,547,651
$ 17,478,358
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
JARNOW CORPORATION
STATEMENTS OF INCOME AND RETAINED EARNINGS (DEFICIT)
Years Ended
December 31,
1997 1996
--------------- -------------------
<S> <C> <C>
NET SALES $ 14,818,772 $ 15,604,076
Cost of goods sold (10,835,340) (11,528,480)
--------------- ------------------
GROSS PROFIT 3,983,432 4,075,596
Selling, general and administrative (2,646,311) (2,729,513)
--------------- ------------------
INCOME FROM OPERATIONS 1,337,121 1,346,083
INTEREST EXPENSE (794,968) (945,407)
--------------- ------------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 542,153 400,676
Provision for income taxes (79,800) (625)
--------------- ----------------
INCOME BEFORE EXTRAORDINARY ITEM 462,353 400,051
EXTRAORDINARY ITEM - Loss on early
extinguishment of debt (net of income tax benefit of -
$28,000) 279,624
---------------
NET INCOME 182,729 400,051
ACCUMULATED DEFICIT- BEGINNING OF YEAR (35,078) (435,129)
--------------- ------------------
RETAINED EARNINGS (DEFICIT)- END OF YEAR $ 147,651 $ (35,078)
=============== ==================
</TABLE>
See notes to financial statements.
<PAGE>
JARNOW CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
December 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
----------- ----------
<S> <C> <C>
Net income $ 182,729 $ 400,051
------------ ----------
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 871,175 884,620
Write-off of deferred financing costs 175,446 -
Change in assets and liabilities:
Decrease (increase) in accounts receivable 455,893 (1,743,449)
Increase in merchandise inventories (4,626,708) (17,419)
(Increase) decrease in prepaid expenses (66,336) 187,095
(Increase) decrease in deposits (171) 15,815
Decrease in accounts payable and accrued expenses (392,431) (212,515)
Decrease in deposits from customers (100,000) (111,804)
---------- -----------
Total adjustments (3,683,132) (997,657)
---------- -----------
Net cash used in operating activities (3,500,403) (597,606)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment, improvements, and fixtures (155,431) (424,430)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - banks, net of repayments 9,138,941 1,125,980
Proceeds from notes payable - related party 500,000 -
Proceeds from stockholders' loans - 110,200
Increase in deferred financing costs (79,625) -
Repayment of notes payable (6,146,048) (200,000)
Borrowings - stockholders 242,704 -
----------- -----------
Net cash provided by financing activities 3,655,972 1,036,180
----------- -----------
NET INCREASE IN CASH 138 14,144
CASH - BEGINNING OF YEAR 6,532 (7,612)
----------- -----------
CASH - END OF YEAR $ 6,670 $ 6,532
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $ 786,856 $ 744,260
========== ===========
Taxes paid $ 24,659 $ 9,098
========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Contribution of debt to additional paid - in capital $ 5,900,000 $ -
========== ============
See notes to financial statements.
</TABLE>
<PAGE>
JARNOW CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND DECEMBER 31, 1996
1. ORGANIZATION, OWNERSHIP AND PRINCIPAL BUSINESS ACTIVITIES
Jarnow Corporation (the "Company") was organized in the State of New
York on July 12, 1993 for purposes of acquiring jewelry manufacturing
companies. The Company's customers are principally large national retail
stores. On December 20, 1993, the principal shareholders of the Company
formed Ultimar II Jewelry Corporation, ("Ultimar II") for the purpose of
acquiring all of the issued and outstanding common stock of Ultimar
Creations, Inc., a wholesale jewelry manufacturer which was subsequently
liquidated. On April 20, 1994, such principal shareholders of the
Company formed JE Jewelry Corporation, ("JE Jewelry") for purposes of
acquiring certain assets from Joe Eisenberger and Co., Inc.
("Eisenberger"), a wholesale jewelry manufacturer. On April 26, 1994,
the Company acquired certain assets from GoldLine Co., Inc.
("GoldLine"). On November 20, 1997 JE Jewelry and Ultimar II were merged
into Jarnow under a plan of merger dated September 4, 1997.
All of the issued and outstanding common shares of Ultimar II and JE
Jewelry were canceled and all of its assets and liabilities were
transferred to the Company. Ultimar II and JE Jewelry subsequently went
out of existence. The Merger has been accounted for as a combination of
commonly controlled entities and is recorded at the transferors
historical cost basis. Accordingly, the financial statements presented
herein present the financial position and results of operations and cash
flows for JE Jewelry and Ultimar II and the Company as if they had been
combined for all periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The presentation 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.
Inventories - Inventories are stated at the lower of cost, determined by
the first-in first-out method, or market.
Allowance for Doubtful Accounts and Returns - Provisions for losses on
accounts receivable are made in amounts required to maintain an adequate
allowance for doubtful accounts. Accounts receivable are written off
against such allowance when it is determined by the Company that
collection will not be received.
The Company provides an allowance for returns by customer. The allowance
is on a specific identification basis by customer. Such allowance was
$422,000 at December 31, 1997.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equipment, Improvements and Fixtures - Equipment, improvements and
fixtures are recorded at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives
(5-10 years) of the related assets. Leasehold improvements are amortized
over the lesser of the related lease terms or the estimated useful lives
of the improvements. Depreciation expense for the year ended December
31, 1997 was $448,047. Maintenance and repairs are charged to expense as
incurred.
Deferred Financing Costs - In connection with the refinancing of its
debt a bank in 1997 (see Note 6), the Company incurred certain financing
costs which are being amortized over the term of the related loan which
expires on August 12, 2000. Related accumulated amortization at December
31, 1997 totaled $9,954.
Costs in Excess of Net Assets Acquired - Costs in excess of net assets
acquired are amortized on a straight-line basis over an estimated life
of five years based on the useful life of the underlying intangible
assets acquired.
Income Taxes - The Company, with the consent of its stockholders, has
elected under the Internal Revenue Code and New York State Tax Statutes
to be an S Corporation. In lieu of corporate income taxes, the
stockholders of an S Corporation are taxed on their proportionate share
of the Company's taxable income. Therefore, no provision or liability
for federal or state income taxes would be included in the financial
statements pertaining to the Company. Local income taxes are calculated
based on income as defined by New York City.
Impairment of Long-Lived Assets - The Company reviews long-lived assets
for impairment whenever circumstances and situations change such that
there is an indication that the carrying amounts may not be recovered.
At December 31, 1997, the Company believes that there has been no
impairment of its long-lived assets.
3. EQUIPMENT, IMPROVEMENTS, AND FIXTURES
Equipment, improvements, and fixtures, at December 31, 1997 consists of
the following:
Factory machinery and equipment $ 1,950,419
Furniture and fixtures 27,781
Leasehold improvements 43,267
Computer software 194,004
Computer equipment 126,554
-------------
2,342,025
Less: accumulated depreciation and amortization (1,391,978)
$ 950,047
============
All equipment, improvements, and fixtures are pledged pursuant to
a line of credit agreement entered into between the Company and a
bank (see Note 6).
<PAGE>
4. COSTS IN EXCESS OF NET ASSETS ACQUIRED - NET
Costs in excess of net assets acquired relates to the acquisition of
the stock and assets (see Note 1) and consists of the following:
Customer lists, styles, and backlog $ 601,230
Acquisition costs 1,026,031
------------
1,627,261
Less: accumulated amortization (1,184,760)
$ 442,501
============
Amortization expense of the costs in excess of net assets acquired
amounted to $325,451 and $465,809 for the years ended December 31, 1997
and 1996, respectively..
5. LOAN PAYABLE - RELATED PARTY
In December 1997, the Company entered into a $500,000 loan with an entity
that is wholly owned by the shareholders of the Company. The note is
payable upon demand and bears interest at 8% per annum.
6. NOTE PAYABLE - BANK
On August 13, 1997, the Company entered into a new financing agreement
with a bank, that provides for two borrowing facilities. The proceeds of
both facilities were used to refinance the existing notes payable to
another institution and the bank and to provide the Company with
additional working capital financing.
The first facility provides the Company with a revolving line of credit of
$10,000,000. Borrowings are limited to 80% of the net amount of eligible
receivables plus 50% of inventory, which cannot exceed $4,000,000, as
defined.
The second facility consists of a term loan in which the Company borrowed
$350,000, payable in 35 equal monthly installments of $9,723 comprised of
principal, plus related interest, commencing October 1, 1997.
Both facilities bear an interest rate of 1/2% above the bank's base rate,
as defined, and expire on August 12, 2000. The facilities are secured by
the Company's accounts receivable, inventory and machinery and equipment.
The Company is required to maintain certain financial ratios and is bound
by certain restrictive covenants as defined.
In connection with the refinancing the Company recorded an extraordinary
loss on the early extinguishment of debt.
<PAGE>
6. NOTE PAYABLE - BANK (continued)
In June 1998, the Company entered into a financing arrangement with a
financial institution which provided for initial funding of $6,500,000
based upon and secured by certain levels of accounts receivable, inventory
and equipment. Additional funding will be available to the Company upon
the increase of eligible accounts receivable, as defined. The Company is
bound by certain covenants, as defined. The proceeds from this loan were
used to repay the Company's existing line of credit and term loan with the
bank (Note 6). The financing arrangement bears an interest rate of 15% per
annum. The shareholders of the Company have guaranteed payment of the
obligation.
7. DUE TO STOCKHOLDERS
Due to stockholders in the aggregate amount of $294,121, represent
advances from stockholders of the Company. Such advances are in the form
of noninterest bearing loans and are payable on demand. During March 1997
a former shareholder and a Company owned in part by such shareholder
assigned the amounts due from the Company of $1,923,643 and $750,000,
respectively, to the remaining stockholders of the Company. In addition,
the stockholders contributed to the capital of the Company $5,900,000 of
the loans payable to them and subordinated the remaining $294,121 to the
borrowings from the bank.
8. COMMITMENTS AND CONTINGENCIES
The Company leases space for its administrative offices, showrooms and its
manufacturing plant under an operating lease expiring on December 31,
1999. The lease provides for the Company to pay a proportionate share of
the building's real estate taxes and operating expense escalations, as
defined.
For the year ended December 31, 1997 and 1996, the Company incurred total
rent expense amounting to $123,537 and $102,500 respectively.
At December 31, 1997, the aggregate future minimum lease payments
required under such lease are as follows:
Year ending
December 31,
1998 $ 118,750
1999 123,500
----------
$ 242,250
==========
9. ECONOMIC DEPENDENCY AND CREDIT RISK
For the year ended December 31, 1997, 27% of the Company's sales were
derived from one customer. For the year ended December 31, 1996, 46% of
the Company's sales were from two customers.
<PAGE>
10. PROPOSED PUBLIC OFFERING
In November 1997, the Company entered into a letter of intent with an
underwriter for an initial public offering of the Company's common stock.
The number of shares to be offered and the price per share is being
negotiated between the Company and the underwriter. In conjunction with
such offering the Company has capitalized $90,000 in deferred offering
costs which will be deducted from the proceeds of the offering or
expensed if the offering is not consummated.
<PAGE>
JARNOW CORPORATION
BALANCE SHEET
OCTOBER 31, 1998
(Unaudited)
ASSETS
CURRENT ASSETS:
Accounts receivable, net of allowance $ 6,872,085
Inventories 9,220,769
Prepaid expenses 36,001
Deferred financing costs 89,833
----------------
TOTAL CURRENT ASSETS 16,218,688
PROPERTY AND EQUIPMENT, net 765,855
OTHER ASSETS 17,624
----------------
$ 17,002,167
================
LIABILITIES AND STOCHOLDERS' DEFICIT
CURRENT LIABILITIES:
Cash overdraft $ 87,610
Accounts payable and accrued expenses 739,828
Line of credit 8,135,178
Note payable - related party 500,000
Due to stockholders 48,689
----------------
TOTAL CURRENT LIABILITIES 9,511,305
STOCKHOLDERS' DEFICIT:
Common stock - no par value; 1,500,000
200 shares authorized, issued and outstanding
Additional paid-in capital 5,900,000
Retained earnings 90,862
----------------
TOTAL STOCKHOLDERS' DEFICIT 7,490,862
----------------
$ 17,002,167
================
<PAGE>
JARNOW CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1998 AND 1997
(Unaudited)
Ten Months Ended
October 31,
-----------------------------------
1997 1998
--------------- ----------------
NET SALES $ 10,852,927 $ 11,754,442
COST OF GOODS SOLD 7,973,282 8,662,153
--------------- ----------------
GROSS PROFIT 2,879,645 3,092,289
Operating Expenses -
General and administrative 1,993,772 2,141,179
--------------- ----------------
INCOME FROM OPERATIONS 885,873 951,110
Interest expense 856,931 615,668
--------------- ----------------
INCOME BEFORE INCOME TAXES 28,942 335,442
Provision for income taxes 27,118 25,071
--------------- ----------------
INCOME BEFORE EXTRODINARY ITEM 1,824 310,371
Extrodinary item:
Loss on extinguishment of debt 58,613 279,624
--------------- ----------------
NET (LOSS) INCOME $ (56,789) $ 30,747
=============== ================
RETAINED EARNINGS (DEFICIT)
BEGINING OF PERIOD 147,651 (35,078)
RETAINED EARNINGS (DEFICIT)
END OF PERIOD $ 90,862 $ (4,331)
=============== ================
<PAGE>
UNITED VENTURES GROUP, INC.
(FORMERLY TRAVELNET INTERNATIONAL, CORP.)
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
The accompanying pro forma consolidated balance sheet has been prepared
to show the effects of the acquisition of Jarnow Corporation by United Ventures
Group, Inc. The acquisition is accounted for as a reverse acquisition under the
purchase method of accounting since the shareholders of Jarnow obtained control
of the consolidated entity. Accordingly, the merger of the two companies is
recorded as a recapitalization of Jarnow, with Jarnow treated as the continuing
entity.
The following unaudited pro forma consolidated balance sheet presents
the pro forma financial position of the United Ventures Group, Inc. at October
31, 1998 as if the acquisition of Jarnow Corporation had occurred on such date.
<PAGE>
<TABLE>
<CAPTION>
UNITED VENTURES SROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1998
ASSETS
United Ventures Pro Forma
Jarnow (formerly Travelnet Adjustments Pro Forma
Corporation International, Corp.) DR (CR) Total
----------------------- ---------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Accounts receivable, net $ 6,872,085 6,872,085
Inventories 9,220,769 9,220,769
Prepaid expenses 36,001 36,001
Deferred financing costs 89,833 89,833
----------------------- ---------------------- ----------------- ----------------
TOTAL CURRENT ASSETS 16,218,688 - - 16,218,688
PROPERTY AND EQUIPMENT, net 765,855 - - 765,855
OTHER ASSETS 17,624 - - 17,624
----------------------- ---------------------- ----------------- ----------------
$ 17,002,167 $ - - $ 17,002,167
======================= ====================== ================= ================
LIABILITIES AND STOCHOLDERS' DEFICIT
CURRENT LIABILITIES:
Cash overdraft $ 87,610 $ (2) (2,000) $ 85,610
Accounts payable and
accrued expenses 739,828 739,828
Line of credit 8,135,178 8,135,178
Note payable - related party 500,000 500,000
Due to stockholders 48,689 - 48,689
----------------------- ---------------------- ----------------- ----------------
TOTAL CURRENT LIABILITIES 9,511,305 - (2,000) 9,509,305
STOCKHOLDERS' DEFICIT:
Common stock 1,500,000 (1) (1,500,000) -
Common stock - $.001 par value; 75 (1) 3,750 3,825
20,000,000 shares authorized; 650,000
shares issued and outstanding; 3,825,000
shares issued and outstanding pro forma
Preferred stock - $.001 par value; (2) 2,000 2,000
5,000,000 shares authorized; 2,000,000
shares issued and outstanding pro forma
Additional paid-in capital 5,900,000 435,197 (1) 1,500,000 7,396,175
(1) (439,022)
Retained earnings 90,862 (435,272) (1) 435,272 90,862
----------------------- ---------------------- ----------------- ----------------
TOTAL STOCKHOLDERS' DEFICIT 7,490,862 - 2,000 7,492,862
----------------------- ---------------------- ----------------- ----------------
$ 17,002,167 $ - - $ 17,002,167
======================= ====================== ================= ================
See notes to pro forma financial statements.
</TABLE>
<PAGE>
UNITED VENTURES GROUP, INC.
(FORMERLY TRAVELNET INTERNATIONAL, CORP.)
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
A. The following unaudited pro-forma adjustments are included in the
accompanying unaudited adjusted consolidated balance sheet at October
31, 1998:
(1) To record the acquisition by United Ventures Group,
Inc. in November 1998 of 100% of the issued and
outstanding shares of Jarnow Corporation in exchange
for 3,750,000 shares of its common stock. The
exchange has been accounted for as a reverse
acquisition under the purchase method for business
combinations. Accordingly, the combination of the two
companies is recorded as a recapitalization of Jarnow
Corporation, pursuant to which Jarnow Corporation,
Inc. is treated as the continuing entity.
(2) To record issuance of 2,000,000 shares of series A
Preferred stock.
EXHIBIT 1.1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
UNITED VENTURES GROUP, INC.
Under Section 242 of the
General Corporation Law of the States of Delaware
UNITED VENTURES GROUP, INC.(the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, by meeting of the Board,
adopted the following resolutions proposing and declaring advisable the
following amendment to the Certificate of Incorporation of said Corporation:
RESOLVED, that Article FOURTH of the Certificate of Incorporation be
amended and, as amended, read as follows:
FOURTH: The total number of shares of all classes of stock which
the Corporation shall be authorized to issue is 40,000,000 of which
35,000,000 shall be designated as Common Stock with a par value of
$.001 per share, and 5,000,000 shall be designated as Preferred Stock
with a par value of $.001 per share.
The Board of Directors may divide the Preferred Stock into any
number of series, fix the designation and number of shares of each such
series, and determine or change the designation, relative rights,
preferences, and limitations of any series of Preferred Stock. The
Board of Directors (within the limits and restrictions of any
resolutions adopted by it originally fixing the number of shares of any
series of Preferred Stock) may increase or decrease the number of
shares initially fixed for any series, but no such decrease shall
reduce the number below the number of shares then outstanding and
shares duly reserved for issuance.
SECOND: That the aforesaid amendment has been consented to and authorized by the
holders of a majority of the issued and outstanding stock entitled to vote by
written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware, and prompt notice of the
taking of this corporate action is being given to all stockholders who did not
consent in writing, in accordance with Section 228 of the General Corporation
Law of the State of Delaware.
<PAGE>
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its President and Secretary, this 30 th day of December, 1998.
UNITED VENTURES GROUP, INC.
By:/s/ Isaac Nussen_______
Isaac Nussen, President
ATTEST:
By: /s/_George Weisz_____
George Weisz
EXHIBIT 3.2
BYLAWS
OF
UNITED VENTURES GROUP, INC.
(a Delaware corporation)
TABLE OF CONTENTS
Page
----
ARTICLE 1 Offices 1
1.1 Principal Office ....................................................1
1.2 Additional Offices...................................................1
ARTICLE 2 Meeting of Stockholders .............................................1
2.1 Place of Meeting ....................................................1
2.2 Annual Meeting ......................................................1
2.3 Special Meetings ....................................................1
2.4 Notice of Meetings ..................................................2
2.5 Business Matter of a Special Meeting ................................2
2.6 List of Stockholders ................................................2
2.7 Organization and Conduct of Business ................................2
2.8 Quorum and Adjournments .............................................3
2.9 Voting Rights........................................................3
2.10 Majority Vote .......................................................3
2.11 Record Date for Stockholder Notice and Voting .......................3
2.12 Proxies .............................................................4
2.13 Inspectors of Election ..............................................4
2.14 Action Without Meeting by Written Consent ...........................4
ARTICLE 3 Directors
3.1 Number; Qualifications ..............................................5
3.2 Resignation and Vacancies ...........................................5
3.3 Removal of Directors ................................................5
3.4 Powers ..............................................................5
3.5 Place of Meetings ...................................................5
3.6 Annual Meetings .....................................................7
3.7 Regular Meetings ....................................................7
3.8 Special Meetings ....................................................7
<PAGE>
3.9 Quorum and Adjournments .............................................7
3.10 Action Without Meeting ..............................................7
3.11 Telephone Meetings ..................................................7
3.12 Waiver of Notice ....................................................7
3.13 Fees and Compensation of Directors...................................8
3.14 Rights of Inspection ................................................8
ARTICLE 4 Committees of Directors .............................................8
4.1 Selection ...........................................................8
4.2 Power ...............................................................8
4.3 Committee Minutes ...................................................9
ARTICLE 5 Officers.............................................................9
5.1 Officers Designated..................................................9
7.2 Waiver .............................................................14
ARTICLE 8 General Provisions .................................................14
8.1 Dividends ..........................................................14
8.2 Dividend Reserve ...................................................14
8.3 Annual Statement ...................................................14
8.4 Checks .............................................................14
8.5 Corporate Seal .....................................................14
8.6 Execution of Corporate Contracts and Instruments ...................14
ARTICLE 9 Amendments .........................................................15
ARTICLE 10 Indemnification......................................................
-ii-
<PAGE>
BYLAWS
OF
UNITED VENTURES GROUP, INC.
(a Delaware corporation)
ARTICLE 1
Offices
1.1 Principa1 Office. The Board of Directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of Delaware.
1.2 Additional Offices. The Board of Directors (the "Board") may at any
time establish branch or subordinate offices at any place or places.
ARTICLE 2
Meeting of Stockholders
2.1 Place of Meeting. All meetings of the stockholders for the election of
directors shall be held at the principal office of the Corporation, at such
place as may be fixed from time to time by the Board or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board and stated in the notice of the meeting. Meetings of
stockholders for any purpose may be held at such time and place within or
without the State of Delaware as the Board may fix from time to time and as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
2.2 Annual Meeting. Annual meetings of stockholders shall be held at such
date and time as shall be designated from time to time by the Board and stated
in the notice of the meeting. At such annual meetings, the stockholders shall
elect a Board and transact such other business as may properly be brought before
the meetings.
2.3 Special Meetings. Special meetings of the stockholders may be called
for any purpose or purposes, unless otherwise prescribed by the statute or by
the Certificate of Incorporation, at the request of the Board, the Chairman of
the Board, the President or the holders of shares entitled to cast not less than
ten percent (10%) of the votes at the meeting or such additional persons as may
be provided in the certificate of incorporation or bylaws. Such request shall
state the purpose or purposes of the proposed meeting. Upon request in writing
that a special meeting of stockholders
1
<PAGE>
be called for any proper purpose, directed to the chairman of the board of
directors, the president, the vice president or the secretary by any person
(other than the board of directors) entitled to call a special meeting of
stockholders, the person forthwith shall cause notice to be given to the
stockholders entitled to vote that a meeting will be held at a time requested by
the person or persons calling the meeting, such time not to be less than
thirty-five (35) nor more than sixty (60) days after receipt of the request.
Such request shall state the purpose or purposes of the proposed meeting.
2.4 Notice of Meetings. Written notice of stockholders' meetings, stating
the place, date and time of the meeting and the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days prior to the
meeting.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
2.5 Business Matter of a Special Meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
2.6 List of Stockholders. The officer in charge of the stock ledger of the
Corporation or the transfer agent shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting 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 (10) days prior to the meeting, at a place within the
city where the meeting is to be held, which place, if other than the place of
the meeting, shall be specified in the notice of the meeting. The list shall
also be produced and kept at the place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present in person
thereat.
2.7 Organization and Conduct of Business. The Chairman of the Board or, in
his or her absence, the President of the Corporation or, in their absence, such
person as the Board may have designated or, in the absence of such a person,
such person as may be chosen by the holders of a majority of the shares entitled
to vote who are present, in person or by proxy, shall call to order any meeting
of the stockholders and act as Chairman of the meeting. In the absence of the
Secretary of the Corporation, the Secretary of the meeting shall be such person
as the Chairman appoints.
The Chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of
2
<PAGE>
discussion as seems to him or her in order.
2.8 Quorum and Adjournments. Except where otherwise provided by law or the
Certificate of Incorporation or these By-Laws, the holders of a majority of the
stock issued and outstanding and entitled to vote, present in person or
represented in proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to have less than a quorum
if any action taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If, however, a
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat who are present in person or
represented by proxy shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented.
2.9 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder.
2.10 Majority Vote. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation or of these By-Laws, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
2.11 Record Date for Stockholder Notice and Voting. For purposes of
determining the stockholders entitled to notice of any meeting or to vote, or
entitled to receive payment of any dividend or other distribution, or entitled
to exercise any right in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten (10)
days before the date of any such meeting nor more than sixty (60) days before
any other action.
If the Board does not so fix a record date, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
2.12 Proxies. Every person entitled to vote for directors or on any other
matter shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the Corporation. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the stockholder or the stockholder's
attorney-in-fact. A validly
3
<PAGE>
executed proxy which does not state that it is irrevocable shall continue in
full force and effect unless (i) revoked by the person executing it, before the
vote pursuant to that proxy, by a writing delivered to the Corporation stating
that the proxy is revoked or by a subsequent proxy executed by, or attendance at
the meeting and voting in person by, the person executing the proxy; or (ii)
written notice of the death or incapacity of the maker of that proxy is received
by the Corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven months from
the date of the proxy, unless otherwise provided in the proxy.
2.13 Inspectors of Election. Before any meeting of stockholders the Board
may appoint any person other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of election are so
appointed, the Chairman of the meeting may, and on the request of any
stockholder or a stockholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one (1) or three (3). If
inspectors are appointed at a meeting on the request of one or more stockholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the Chairman of the meeting may, and upon the request of any
stockholder or a stockholder's proxy shall, appoint a person to fill that
vacancy.
2.14 Action Without Meeting by Written Consent. All actions required to be
taken at any annual or special meeting 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 outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office, its principal place of business, or an
officer or agent of the corporation having custody of the book in which
proceedings of meetings or stockholders are recorded.
ARTICLE 3
Directors
3.1 Number; Qualifications. The number of the directors shall be determined
from time to time by resolution of the Board and the initial Board shall consist
of three (3) directors. All directors shall be elected at the annual meeting or
any special meeting of the stockholders, except as provided in Section 3.2, and
each director so elected shall hold office until the next annual meeting or any
special meeting or until his successor is elected and qualified or until his
earlier resignation or removal. Directors need not be stockholders.
3.2 Resignation and Vacancies. A vacancy or vacancies in the Board shall be
deemed to exist in the case of the death, resignation or removal of any
director, or if the authorized number of directors be increased. Vacancies may
be filled by a majority of the remaining directors, though less than a quorum,
or by a sole remaining director, unless otherwise provided in the Certificate
4
<PAGE>
of Incorporation. The stockholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors. If the Board
accepts the resignation of a director tendered to take effect at a future time,
the Board shall have power to elect a successor to take office when the
resignation is to become effective. If there are no directors in office, then an
election of directors may be held in the manner provided by statute.
3.3 Removal of Directors. Unless otherwise restricted by statute, the
Certificate of Incorporation or these By-Laws, any director or the entire Board
may be removed, with or without cause, by the holders of at least a majority of
the shares entitled to vote at an election of directors.
3.4 Powers. The business of the Corporation shall be managed by or under
the direction of the Board which may exercise all such powers of the Corporation
and do all such lawful acts and things which are not by statute or by the
Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders. Without prejudice to these general
powers, and subject to the same limitations, the directors shall have the power
to:
(a) Select and remove all officers, agents, and employees of the
Corporation; prescribe any powers and duties for them that are consistent with
law, with the Certificate of Incorporation, and with these By-Laws; fix their
compensation; and require from them security for faithful service;
(b) Confer upon any office the power to appoint, remove and suspend
subordinate officers, employees and agents;
(c) Change the principal executive office or the principal business
office in the State of California or any other state from one location to
another; cause the Corporation to be qualified to do business in any other
state, territory, dependency or country and conduct business within or without
the State of California; and designate any place within or without the State of
California for the holding of any stockholders meeting, or meetings, including
annual meetings;
(d) Adopt, make, and use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificates;
(e) Authorize the issuance of shares of stock of the Corporation on
any lawful terms, in consideration of money paid, labor done, services actually
rendered, debts or securities canceled, tangible or intangible property actually
received;
(f) Borrow money and incur indebtedness on behalf of the Corporation,
and cause to be executed and delivered for the Corporation's purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations and other evidences of debt and securities;
(g) Declare dividends from time to time in accordance with law;
5
<PAGE>
(h) Adopt from time to time such stock option, stock purchase, bonus
or other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(i) Adopt from time to time regulations not inconsistent with these
By-Laws for the management of the Corporation's business and affairs.
3.5 Place of Meetings. The Board may hold meetings, both regular and
special, either within or without the State of Delaware.
3.6 Annual Meetings. The annual meetings of the Board shall be held
immediately following the annual meeting of stockholders, and no notice of such
meeting shall be necessary to the Board, provided a quorum shall be present. The
annual meetings shall be for the purposes of organization, and an election of
officers and the transaction of other business.
3.7 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and place as may be determined from time to time by the
Board.
3.8 Special Meetings. Special meetings of the Board may be called by the
Chairman of the Board, the President, a Vice President or a majority of the
Board upon one (1) day's notice to each director.
3.9 Quorum and Adjournments. At all meetings of the Board, a majority of
the directors then in office shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board, except as may otherwise
be specifically provided by law or the Certificate of Incorporation. If a quorum
is not present at any meeting of the Board, the directors present may adjourn
the meeting from time to time, without notice other than announcement at the
meeting at which the adjournment is taken, until a quorum shall be present. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved of
by at least a majority of the required quorum for that meeting.
3.10 Action Without Meeting. Unless otherwise restricted by the Certificate
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
3.11 Telephone Meetings. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any member of the Board or any committee may
participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
6
<PAGE>
constitute presence in person at the meeting.
3.12 Waiver of Notice. Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
3.13 Fees and Compensation of Directors. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, the Board shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board and may be paid a
fixed sum for attendance at each meeting of the Board or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.14 Rights of Inspection. Every director shall have the absolute right at
any reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the Corporation and also of
its subsidiary corporations, domestic or foreign. Such inspection by a director
may be made in person or by agent or attorney and includes the right to copy and
obtain extracts.
ARTICLE 4
Committees of Directors
4.1 Selection. The Board may, by resolution passed by a majority of the
entire Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member.
4.2 Power. Any such committee, to the extent provided in the resolution of
the Board, shall have and may exercise all the powers and authority of the Board
in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board as provided in Section 151(a)
of the General Corporation Law of
7
<PAGE>
Delaware, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of
dissolution, removing or indemnifying directors or amending the By-Laws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or to adopt a
certificate of ownership and merger. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board.
4.3 Committee Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the Board when required.
ARTICLE 5
Officers
5.1 Officers Designated. The officers of the Corporation shall be chosen by
the Board and shall be a President, a Secretary and a Treasurer. The Board may
also choose a Chairman of the Board, one or more Vice Presidents, and one or
more assistant Secretaries and assistant Treasurers. Any number of offices may
be held by the same person, unless the Certificate of Incorporation or these
By-Laws otherwise provide.
5.2 Appointment of Officers. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section 5.3 or
5.5 of this Article 5, shall be appointed by the Board, and each shall serve at
the pleasure of the Board, subject to the rights, if any, of an officer under
any contract of employment.
5.3 Subordinate Officers. The Board may appoint, and may empower the
President to appoint, such other officers and agents as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the By-Laws or as the
Board may from time to time determine.
5.4 Removal and Resignation of Officers. Subject to the rights, if any, of
an officer under any contract of employment, any officer may be removed, either
with or without cause, by an affirmative vote of the majority of the Board, at
any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board, by any officer upon whom such power of removal may be
conferred by the Board. Any officer may resign at any time by giving written
notice to the Corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the
8
<PAGE>
acceptance of the resignation shall not be necessary to make it effective. Any
resignation is without prejudice to the rights, if any, of the Corporation under
any contract to which the officer is a party.
5.5 Vacancies in Offices. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
5.6 Compensation. The salaries of all officers of the Corporation shall be
fixed from time to time by the Board and no officer shall be prevented from
receiving a salary because he is also a director of the Corporation.
5.7 The Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, perform such other powers and duties as
may be assigned to him from time to time by the Board. If there is no President,
the Chairman of the Board shall also be the Chief Executive Officer of the
Corporation and shall have the powers and duties prescribed in Section
5.8 of this Article 5.
5.8 The President. Subject to such supervisory powers, if any, as may be
given by the Board to the Chairman of the Board, if there be such an officer,
the President shall be the Chief Executive Officer of the Corporation, shall
preside at all meetings of the stockholders and in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board, shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board are carried into effect. He or she
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board to some other officer or agent of the
Corporation. 5.9 The Vice President. The Vice President (or in the event there
be more than one, the Vice Presidents in the order designated by the directors,
or in the absence of any designation, in the order of their election), shall, in
the absence of the President or in the event of his disability or refusal to
act, perform the duties of the President, and when so acting, shall have the
powers of and subject to all the restrictions upon the President. The Vice
President(s) shall perform such other duties and have such other powers as may
from time to time be prescribed for them by the Board, the President, the
Chairman of the Board or these By-Laws.
5.10 The Secretary. The Secretary shall attend all meetings of the Board
and the stockholders and record all votes and the proceedings of the meetings in
a book to be kept for that purpose and shall perform like duties for the
standing committees, when required. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the Board,
and shall perform such other duties as may from time to time be prescribed by
the Board, the Chairman of the Board or the President, under whose supervision
he or she shall act. The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant
9
<PAGE>
Secretary, shall have authority to affix the same to any instrument requiring
it, and, when so affixed, the seal may be attested by his or her signature or by
the signature of such Assistant Secretary. The Board may give general authority
to any other officer to affix the seal of the Corporation and to attest the
affixing thereof by his or her signature. The Secretary shall keep, or cause to
be kept, at the principal executive office or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the Board, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same and the number and date of
cancellation of every certificate surrendered for cancellation.
5.11 The Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order designated by the Board (or in
the absence of any designation, in the order of their election) shall, in the
absence of the Secretary or in the event of his or her inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as may from time to time be
prescribed by the Board.
5.12 The Treasurer. The Treasurer shall have the custody of the Corporate
funds and 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. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the President and
the Board, at its regular meetings, or when the Board so requires, an account of
all his or her transactions as Treasurer and of the financial condition of the
Corporation.
5.13 The Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order designated by the Board (or
in the absence of any designation, in the order of their election) shall, in the
absence of the Treasurer or in the event of his or her inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as may from time to time be
prescribed by the Board.
ARTICLE 6
Stock Certificates
6.1 Certificates for Shares. The shares of the Corporation shall be
represented by certificates or shall be uncertificated. Certificates shall be
signed by, or in the name of the Corporation by, the Chairman of the Board, or
the President or a Vice President and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Within
a reasonable time after the issuance or transfer of uncertified stock, the
Corporation shall send to the registered owner thereof a written notice
containing the information required by the General Corporation Law of the State
of Delaware or a statement that the Corporation will furnish without charge to
each stockholder
10
<PAGE>
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
6.2 Signatures on Certificates. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
6.3 Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate of shares duly endorsed or accompanied
by proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated share, such uncertificated shares shall be canceled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the Corporation.
6.4 Registered Stockholders. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a percent registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
6.5 Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to receive notice of, or to vote at, any
meeting of stockholders or any adjournment thereof or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or to exercise
any rights in respect of any change, conversion, or exchange of stock or for the
purpose of any lawful action, the Board may fix, in advance, a record date which
shall not be more than sixty (60) nor less than ten (10) days prior to the date
of such meeting, nor more than sixty (60) days prior to the date of any other
action. A determination of stockholders of record entitled to notice or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
6.6 Lost, Stolen or Destroyed Certificates. The Board may direct thee a new
certificate or certificates be issued to replace any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing the
issue of a new certificate or certificates, the Board may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of the lost,
stolen or destroyed certificate or certificates, or his
11
<PAGE>
or her legal representative, to advertise the same in such manner as it shall
require, and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
ARTICLE 7
Notices
7.1 Notice. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram or telephone.
7.2 Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
.
ARTICLE 8
General Provisions
8.1 Dividends. Dividends upon the capital stock of the Corporation, subject
to any restrictions contained in the General Corporation Laws of Delaware or the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board at any regular or special meeting. Dividends may be paid in cash, in
property or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
8.2 Dividend Reserve. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
8.3 Annual Statement. The Board shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
12
<PAGE>
8.4 Checks. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board may from time to time designate.
8.5 Corporate Seal. The Board may provide a suitable seal, containing the
name of the Corporation, which seal shall be in charge of the Secretary. If and
when so directed by the Board or a committee thereof, duplicates of the seal
maybe kept and used by the Treasurer or by an Assistant Secretary or Assistant
Treasurer.
8.6 Execution of Corporate Contracts and Instruments. The Board, except as
otherwise provided in these By-Laws, may authorize any officer or officers, or
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Corporation; such authority may be general or
confined to specific instances. Unless so authorized or ratified by the Board or
within the agency power of an officer, no officer, agent or employee shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
ARTICLE 9
Amendments
In addition to the right of the stockholders of the corporation to make,
alter, amend, change, add to or repeal the bylaws of the corporation, the Board
of Directors shall have the power (without the assent or vote of the
stockholders) to make, alter, amend, change, add to or repeal the bylaws of the
corporation.
ARTICLE 10
Indemnification
10.01 Action. Etc. Other Than by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding 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 with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
13
<PAGE>
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 reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
10.02 Actions Etc. by or in the Right of the Corporation. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
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 for
negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit 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 the Court of Chancery or such other court shall deem proper.
10.03 Determination of Right of Indemnification. Any indemnification
under Section 10.01 or 10.02 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 10.01 and 10.02. Such determination shall be made (i) by the Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
10.04 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 10.01 or 10.02, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys fees) actually and
reasonably incurred by him in connection therewith.
10.05 Prepaid Expenses. Expenses (including attorneys' fees)incurred by
an officer or director in defending a civil or criminal action, suitor
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board in the specific case
upon receipt of an undertaking by or on behalf of the director or officer to
repay
14
<PAGE>
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate.
10.06 Other Rights and Remedies. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaws, 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 administrators of such a person.
10.07 Insurance. Upon resolution passed by the Board, The Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
10.08 Constituent Corporations. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
10.09 Other Enterprises, Fines, and Serving at Corporation's Request.
For purposes of this Article, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this article.
15
EXHIBIT 5.1
UNITED VENTURES GROUP, INC.
1998 STOCK OPTION PLAN
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1998 Stock Option Plan (the "Plan") of UNITED
VENTURES GROUP, INC. (the "Company") are (i) to align the interests of the
Company's stockholders and the recipients of options under this Plan by
increasing the proprietary interest of such recipients in the Company's growth
and success, (ii) to advance the interests of the Company by attracting and
retaining officers, other key employees and consultants, and well-qualified
persons who are not officers or employees of the Company ("Non-Employee
Directors") for service as directors of the Company and (iii) to motivate such
persons to act in the long-term best interests of the Company's stockholders.
1.2 ADMINISTRATION. This Plan shall be administered by the Board of Directors
(the "Board") or a committee (the "Committee")designated by the Board of
Directors of the Company consisting of two or more members of the Board. Each
member of the Committee, if a Committee shall be appointed, shall be a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
The Board or Committee shall, subject to the terms of this Plan, select
eligible persons for participation in this Plan and shall determine the number
of shares of Common Stock subject to each option granted hereunder, the exercise
price of such option, the time and conditions of exercise of such option and all
other terms and conditions of such option, including, without limitation, the
form of the option agreement. The Board or Committee shall, subject to the terms
of this Plan, interpret this Plan and the application thereof, establish rules
and regulations it deems necessary or desirable for the administration of this
Plan and may impose, incidental to the grant of an option, conditions with
respect to the grant, such as limiting competitive employment or other
activities. All such interpretations, rules, regulations and conditions shall be
final, binding and conclusive. The Board or Committee may, in its sole
discretion and for any reason at any time take action such that any or all
outstanding options shall become exercisable in part or in full. Each option
shall be evidenced by a written agreement (an "Agreement") between the Company
and the optionee setting forth the terms and conditions of such option.
The Board or Committee may delegate some or all of its power and
authority hereunder to the Chief Executive Officer or other executive officer of
the Company as the Board or Committee deems appropriate; provided, however, that
the Board or Committee may not delegate its power and authority with regard to
the selection for participation in this Plan of an officer or other person
subject to Section 16 of the Exchange Act or decisions concerning the timing,
pricing or amount of an option grant to such an officer or other person.
<PAGE>
No member of the Board of Directors or Committee, and neither the Chief
Executive Officer nor other executive officer to whom the Board or Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation, construction or determination made in connection with
this Plan in good faith, and the members of the Board of Directors and the
Committee and the Chief Executive Officer or other executive officer shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys' fees) arising therefrom to
the full extent permitted by law and under any directors' and officers'
liability insurance that may be in effect from time to time.
A majority of the Board or Committee shall constitute a quorum. The
acts of the Board or Committee shall be either (i) acts of a majority of the
members of the Board or Committee present at any meeting at which a quorum is
present or (ii) acts approved in writing by all of the members of the Board or
Committee without a meeting.
1.3 ELIGIBILITY. Participants in this Plan shall consist of such officers and
other employees or persons expected to become employees of the Company or its
subsidiaries and consultants who are providing bona fide services unrelated to
the offer or sale of securities in a capital raising transaction to the Company
or a Subsidiary from time to time (individually a "Subsidiary" and collectively
the "Subsidiaries") as the Board or Committee in its sole discretion may select
from time to time. For purposes of this Plan, references to employment by the
Company shall also mean employment by a Subsidiary and engagement as a
consultant to the Company or a Subsidiary. The Board or Committee's selection of
a person to participate in this Plan at any time shall not require the Board or
Committee to select such person to participate in this Plan at any other time.
Non-employee directors of the Company shall be eligible to participate in this
Plan in accordance with Section III.
1.4 SHARES AVAILABLE. Subject to adjustment as provided in Section 4.7, 600,000
shares of the common stock, $0.001 par value, of the Company (the "Common
Stock"), shall be available for grants of options under this Plan, reduced by
the sum of the aggregate number of shares of Common Stock which become subject
to outstanding options under this Plan. To the extent that shares of Common
Stock subject to an outstanding option are not issued or delivered by reason of
the expiration, termination, cancellation or forfeiture of such option or by
reason of the delivery or withholding of shares of Common Stock to pay all or a
portion of the exercise price of such option, or to satisfy all or a portion of
the tax withholding obligations relating to such option, then such shares of
Common Stock shall again be available under this Plan.
Shares of Common Stock shall be made available from authorized and
unissued shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
II. STOCK OPTIONS
2.1 GRANTS OF STOCK OPTIONS. The Board or Committee may, in its discretion,
grant options
2
<PAGE>
to purchase shares of Common Stock to such eligible persons as may be selected
by the Board or Committee. Each option, or portion thereof, that is not an
incentive stock option, shall be a non-qualified stock option. An incentive
stock option may not be granted to any person who is not an employee of the
Company or any subsidiary (as defined in Section 424 of the Code). An incentive
stock option shall mean an option to purchase shares of Common Stock that meets
the requirements of Section 422 of the Code, or any successor provision, which
is intended by the Board or Committee to constitute an incentive stock option.
Each incentive stock option shall be granted within ten years of the effective
date of this Plan. To the extent that the aggregate Fair Market Value
(determined as of the date of grant) of shares of Common Stock with respect to
which options designated as incentive stock options are exercisable for the
first time by a participant during any calendar year (under this Plan or any
other plan of the Company, or any parent or subsidiary as defined in Section 424
of the Code) exceeds the amount (currently $100,000) established by the Code,
such options shall constitute non-qualified stock options. "Fair Market Value"
shall mean the last reported sale price of a share of Common Stock on Nasdaq, or
on such principal stock exchange on which the Common Stock may then be listed,
on the date as of which such value is being determined or, if there shall be no
reported sale price for such date, on the next preceding date for which a sale
was reported, in each case as such price is officially reported by Nasdaq or
such exchange, or if the Common Stock is not then listed on an exchange or
quoted on a system that reports last sale price, then the average of the last
reported bid and asked prices for the Common Stock for such date as furnished by
Nasdaq or a similar organization if Nasdaq is not then reporting such
information; provided, that if Fair Market Value for a specified date cannot be
determined as provided in the preceding clause, Fair Market Value shall be
determined by the Board or Committee by whatever means or method as the Board or
Committee, in the good faith exercise of its discretion, shall at such time deem
appropriate.
2.2 TERMS OF STOCK OPTIONS. Options shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Board or Committee shall deem
advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Board or
Committee; provided, however, that the purchase price per share of Common Stock
purchasable upon exercise of a non-qualified stock option shall not be less than
the Fair Market Value of a share of Common Stock on the date of grant of such
option and the purchase price per share of Common Stock purchasable upon
exercise of an incentive stock option shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date of grant of such option;
provided further, that if an incentive stock option shall be granted to any
person who, at the time such option is granted, owns capital stock possessing
more than 10% of the total combined voting power of all classes of capital stock
of the Company (or of any parent or subsidiary as defined in Section 424 of the
Code) (a "Ten Percent Holder"), the purchase price per share of Common Stock
shall be the price (currently 110% of Fair Market Value) required by the Code in
order to constitute an incentive stock option.
(b) Option Period and Exercisability. The period during which an option
may be exercised
3
<PAGE>
shall be determined by the Board or Committee; provided, however, that no
incentive stock option shall be exercised later than ten years after its date of
grant; provided further, that if an incentive stock option shall be granted to a
Ten Percent Holder, such option shall not be exercised later than five years
after its date of grant. The Board or Committee may, in its discretion,
establish performance measures or other criteria which shall be satisfied or met
as a condition to the grant of an option or to the exercisability of all or a
portion of an option. The Board or Committee shall determine whether an option
shall become exercisable in cumulative or non-cumulative installments and in
part or in full at any time. An exercisable option, or portion thereof, may be
exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) either (A) in
cash, (B) by delivery (either actual delivery or by attestation procedures
established by the Company) of previously owned whole shares of Common Stock
(which the optionee has held for at least six months prior to the delivery of
such shares or which the optionee purchased on the open market and in each case
for which the optionee has good title, free and clear of all liens and
encumbrances) having an aggregate Fair Market Value, determined as of the date
of exercise, equal to the aggregate purchase price payable by reason of such
exercise, (c) by authorizing the Company to withhold whole shares of Common
Stock which would otherwise be delivered upon exercise of the option having an
aggregate Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (D) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) a combination of (A), (B) and (C), in each
case to the extent set forth in the Agreement relating to the option and (ii) by
executing such documents as the Company may reasonably request. The Company
shall have sole discretion to disapprove of an election pursuant to any of
clauses (B)-(E). Any fraction of a share of Common Stock which would be required
to pay such purchase price shall be disregarded and the remaining amount due
shall be paid in cash by the optionee. No certificate representing Common Stock
shall be delivered until the full purchase price therefor has been paid (or
arrangement made for such payment to the Company's satisfaction).
2.3 TERMINATION OF EMPLOYMENT.
(a) Disability, Retirement and Death. Subject to paragraph (d) below
and unless otherwise specified in the Agreement relating to an option, if an
optionee's employment with the Company terminates by reason of Disability or
death each option held by such optionee shall be exercisable only to the extent
that such option is exercisable on the effective date of such optionee's
termination of employment or date of death, as applicable, and may thereafter be
exercised by such optionee (or such optionee's executor, administrator, legal
representative, beneficiary or similar person) until and including the earliest
to occur of (i) the date which is one year (or such other period as set forth in
the Agreement relating to such option) after the effective date of such
optionee's termination of employment or date of death, as applicable, and (ii)
the expiration date of the term of such option. For purposes of this Plan,
"Disability" shall mean the inability of an optionee substantially to perform
4
<PAGE>
such optionee's duties and responsibilities for a continuous period of at least
six months.
(b) Other Termination. Subject to paragraph (d) below and unless
otherwise specified in the Agreement relating to an option if an optionee's
employment with the Company terminates for any reason other than Disability or
death, each option held by such optionee shall be exercisable only to the extent
that such option is exercisable on the effective date of such optionee's
termination of employment and may thereafter be exercised by such optionee (or
such optionee's legal representative or similar person) until and including the
earliest to occur of (i) the date which is three months after the effective date
of such optionee's termination of employment and (ii) the expiration date of the
term of such option.
(c) Death Following Termination of Employment. Subject to paragraph (d)
below and unless otherwise specified in the Agreement relating to an option, if
an optionee dies during the period set forth in Section 2.3(a) following
termination of employment by reason of Disability or if an optionee dies during
the period set forth in Section 2.3(b) following termination of employment for
any other reason other than Disability, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the date of
such optionee's death and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person
until and including the earliest to occur of (i) the date which is one year (or
such other period as set forth in the Agreement relating to such option) after
the date of death and (ii) the expiration date of the term of such option.
(d) Termination of Employment - Incentive Stock Options.
(i) Unless otherwise specified in the Agreement relating to the option,
if the employment with the Company of a holder of an incentive stock option
terminates by reason of Permanent and Total Disability (as defined in Section
22(e)(3) of the Code) or death, each incentive stock option held by such
optionee shall be exercisable only to the extent that such option is exercisable
on the effective date of such optionee's termination of employment by reason of
Permanent and Total Disability or date of death, as applicable, and may
thereafter be exercised by such optionee (or such optionee's executor,
administrator, legal representative, beneficiary or similar person) until and
including the earliest to occur of (1) the date which is one year (or such
shorter period as set forth in the Agreement relating to such option) after the
effective date of such optionee's termination of employment by reason of
Permanent and Total Disability or date of death, as applicable, and (2) the
expiration date of the term of such option.
(ii) If the employment with the Company of a holder of an incentive
stock option terminates for any reason other than Permanent and Total Disability
or death, each incentive stock option held by such optionee shall be exercisable
only to the extent such option is exercisable on the effective date of such
optionee's termination of employment, and may thereafter be exercised by such
holder (or such holder's legal representative or similar person) until and
including the earliest to occur of (1) the date which is three months after the
effective date of such optionee's termination of employment and (2) the
expiration date of the term of such option.
5
<PAGE>
(iii) If the holder of an incentive stock option dies during the period
set forth in Section 2.3(d)(i) following termination of employment by reason of
Permanent and Total Disability (or such shorter period as set forth in the
Agreement relating to such option), or if the holder of an incentive stock
option dies during the period set forth in Section 2.3(d)(ii) following
termination of employment for any reason other than Permanent and Total
Disability or death, each incentive stock option held by such optionee shall be
exercisable only to the extent such option is exercisable on the date of the
optionee's death and may thereafter be exercised by the optionee's executor,
administrator, legal representative, beneficiary or similar person until and
including the earliest to occur of (1) the date which is one year (or such
shorter period as set forth in the Agreement relating to such option) after the
date of death and (2) the expiration date of the term of such option.
III. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
3.1 ELIGIBILITY. Each member of the Board of Directors of the Company who is not
an employee, either full-time or part-time, of the Company or a Subsidiary (a
"non-employee director") may be granted options to purchase shares of Common
Stock in accordance with this Section III. All options granted under this
Section III shall constitute non-qualified stock options.
3.2 GRANTS OF STOCK OPTIONS. Each non-employee director shall be granted
non-qualified stock options in such amount as the Board or Committee shall
determine from time to time.
3.3 EXERCISE PRICE. Each option granted under this Section III shall have an
exercise price equal to the Fair Market Value per share of Common Stock on the
date of grant.
3.4 OPTION PERIOD AND EXERCISABILITY. Each option granted under this Section III
shall be exercisable and shall expire at such time as the Board or Committee
shall determine.
3.5 TERMINATION OF DIRECTORSHIP. Upon the termination of an optionee's service
as a non-employee director for any reason, all options granted to such
non-employee director under this Section III shall remain fully exercisable to
the extent exercisable on the date of such termination and thereafter may be
exercised by such holder (or such holder's executor, administrator, legal
representative, beneficiary or similar person) until and including the earliest
to occur of (i) the date which is three months after the effective date of such
optionee's termination of directorship and (ii) the expiration date of the term
of such option.
IV. GENERAL
4.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the stockholders,
shall become effective as of the date of approval by the Board. No option may be
exercised prior to the date of such stockholder approval. This Plan shall
terminate when shares of Common Stock are no longer available for the
6
<PAGE>
grant of options, unless terminated earlier by the Board. Termination of this
Plan shall not affect the terms or conditions of any option granted prior to
termination.
If this Plan is not approved by the stockholders of the Company,
this Plan and any options granted hereunder shall be null and void.
4.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) of the Code; provided, however,
that no amendment shall be made without stockholder approval if such amendment
would (i) increase the maximum number of shares of Common Stock available under
this Plan (subject to Section 4.7) or (ii) effect any change inconsistent with
Section 422 of the Code. No amendment may impair the rights of a holder of an
outstanding option without the consent of such holder.
4.3 AGREEMENT. No option shall be valid until an Agreement is executed by the
Company and the optionee and, upon execution by the Company and the optionee and
delivery of the Agreement to the Company, such option shall be effective as of
the effective date set forth in the Agreement.
4.4 NON-TRANSFERABILITY. Unless otherwise specified in the Agreement relating to
an Option, no option hereunder shall be transferable other than by will or the
laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the
foregoing sentence, each option may be exercised during the optionee's lifetime
only by the optionee or the optionee's legal representative or similar person.
Except as permitted by the second preceding sentence, no option hereunder shall
be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any attempt to so sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose of any option
hereunder, such option and all rights thereunder shall immediately become null
and void.
4.5 TAX WITHHOLDING. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock, payment by the optionee of
any Federal, state, local or other taxes which may be required to be withheld or
paid in connection with an option hereunder. An Agreement may provide that (i)
the Company shall withhold whole shares of Common Stock which would otherwise be
delivered upon exercise of the option having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with the option (the "Tax Date") in the amount necessary to satisfy
any such obligation or (ii) the optionee may satisfy any such obligation by any
of the following means: (A) a cash payment to the Company, (B) delivery (either
actual delivery or by attestation procedures established by the Company) to the
Company of previously owned whole shares of Common Stock (which the optionee has
held for at least six months prior to the delivery of such shares or which the
optionee purchased on the open market and in each case for which the optionee
has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value determined as of the Tax Date, equal to the amount
necessary to satisfy any such obligation, (c) authorizing the Company to
withhold whole shares of Common Stock which would otherwise be delivered upon
exercise of the option having an
7
<PAGE>
aggregate Fair Market Value determined as of the Tax Date, equal to the amount
necessary to satisfy any such obligation, (D) a cash payment by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (E) any combination of (A), (B) and (C), in each case to
the extent set forth in the Agreement relating to the option; provided, however,
that the Company shall have sole discretion to disapprove of an election
pursuant to any of clauses (B)-(E). Any fraction of a share of Common Stock
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the optionee.
4.6 RESTRICTIONS ON SHARES. Each option hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise of such option
or the delivery of shares thereunder, such option shall not be exercised and
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of Common Stock delivered pursuant
to any option hereunder bear a legend indicating that the sale, transfer or
other disposition thereof by the holder is prohibited except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
4.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option, the purchase
price per security, and the number and class of securities subject to each
option to be granted to non-employee directors pursuant to Article III shall be
appropriately adjusted by the Board or Committee, such adjustments to be made in
the case of outstanding options without an increase in the aggregate purchase
price. The decision of the Board or Committee regarding any such adjustment
shall be final, binding and conclusive. If any adjustment would result in a
fractional security being (a) available under this Plan, such fractional
security shall be disregarded, or (b) subject to an option under this Plan, the
Company shall pay the optionee, in connection with the first exercise of the
option in whole or in part occurring after such adjustment, an amount in cash
determined by multiplying (A) the fraction of such security (rounded to the
nearest hundredth) by (B) the excess, if any, of (x) the Fair Market Value on
the exercise date over (y) the exercise price of the option.
4.8 CHANGE IN CONTROL. Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one or more
corporations, or upon the sale of substantially all the assets or more than 50%
or the then outstanding shares of stock of the Company to another person or
entity, the Board or Committee may provide in writing in connection with such
transaction for any or all of the following alternatives (separately or in
combinations); (i) for outstanding options to become immediately exercisable
and/or for other acceleration of the exercisability of options outstanding under
this Plan, and may in either case provide that such options shall terminate
unless exercised within a specified time period; (ii) for the assumption of the
options
8
<PAGE>
theretofore granted under this Plan or the substitution for such options
outstanding under this Plan of new options to purchase shares of capital stock
of a successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and exercise prices; or (iii)
for the continuance of this Plan by a successor corporation in which event this
Plan and the options theretofore granted under this Plan shall continue in the
manner and under the terms so provided.
4.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to
participate in this Plan. Neither this Plan nor any option granted hereunder
shall confer upon any person any right to continued employment by the Company,
any Subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
4.10 RIGHTS AS STOCKHOLDER. No person shall have any rights as a stockholder of
the Company with respect to any shares of Common Stock which are subject to an
option hereunder until such person becomes a stockholder of record with respect
to such shares of Common Stock.
4.11 DESIGNATION OF BENEFICIARY. If permitted by the Company, an optionee may
file with the Board or Committee a written designation of one or more persons as
such optionee's beneficiary or beneficiaries (both primary and contingent) in
the event of the optionee's death. To the extent an outstanding option granted
hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to
exercise such option.
Each beneficiary designation shall become effective only when filed in writing
with the Board or Committee during the optionee's lifetime on a form prescribed
by the Board or Committee. The spouse of a married optionee domiciled in a
community property jurisdiction shall join in any designation of a beneficiary
other than such spouse. The filing with the Board or Committee of a new
beneficiary designation shall cancel all previously filed beneficiary
designations. If an optionee fails to designate a beneficiary, or if all
designated beneficiaries of an optionee predecease the optionee, then each
outstanding option hereunder held by such optionee, to the extent exercisable,
may be exercised by such optionee's executor, administrator, legal
representative or similar person.
4.12 GOVERNING LAW. This Plan, each option hereunder and the related Agreement,
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of New York and construed in accordance
therewith without giving effect to principles of conflicts of laws.
4.13 FOREIGN EMPLOYEES. Without amending this Plan, the Board or Committee may
grant options to eligible persons who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment of
the Board or Committee be necessary or desirable to foster and promote
achievement of the purposes of this Plan and, in furtherance of such purposes
the Board or Committee may make such modifications, amendments, procedures,
subplans and the like as may be necessary or advisable to comply with provisions
of laws in other countries or jurisdictions in which the Company or its
Subsidiaries operates or has employees.
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001077543
<NAME> UNITED VENTURES GROUP INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> OCT-31-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 6,923,085
<ALLOWANCES> 51,000
<INVENTORY> 9,220,769
<CURRENT-ASSETS> 16,218,688
<PP&E> 593,479
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,002,167
<CURRENT-LIABILITIES> 9,511,305
<BONDS> 0
0
0
<COMMON> 1,500,000
<OTHER-SE> 5,990,862
<TOTAL-LIABILITY-AND-EQUITY> 17,002,167
<SALES> 10,852,927
<TOTAL-REVENUES> 10,852,927
<CGS> 7,973,282
<TOTAL-COSTS> 7,973,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 856,931
<INCOME-PRETAX> 28,942
<INCOME-TAX> 27,118
<INCOME-CONTINUING> 1,824
<DISCONTINUED> 0
<EXTRAORDINARY> (58,613)
<CHANGES> 0
<NET-INCOME> (56,789)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001077543
<NAME> UNITED VENTURES GROUP INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 6,670
<SECURITIES> 0
<RECEIVABLES> 4,930,191
<ALLOWANCES> 51,000
<INVENTORY> 10,922,793
<CURRENT-ASSETS> 15,978,786
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,478,358
<CURRENT-LIABILITIES> 9,726,552
<BONDS> 0
0
0
<COMMON> 1,500,000
<OTHER-SE> 6,047,651
<TOTAL-LIABILITY-AND-EQUITY> 17,478,358
<SALES> 14,818,772
<TOTAL-REVENUES> 14,818,772
<CGS> 10,835,340
<TOTAL-COSTS> 10,835,340
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 794,968
<INCOME-PRETAX> 542,153
<INCOME-TAX> 79,800
<INCOME-CONTINUING> 462,353
<DISCONTINUED> 0
<EXTRAORDINARY> (279,624)
<CHANGES> 0
<NET-INCOME> 182,729
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>