U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
National Boston Medical, Inc.
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(Name of Small Business Issuer in its charter)
Nevada 04-3463412
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
43 Taunton Green, 3rd Floor
Taunton, Massachusetts 02780
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (508) 884-8820
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of class)
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696
Fax: (561) 659-5371
<PAGE>
Item 1: Description of Business:
(a) Business Development
National Boston Medical, Inc. (the "Company" or "NBM") is incorporated in
the State of Nevada. The Company was originally incorporated as Frozen Assets,
Inc. on June 21, 1995 ("Frozen Assets"). Through a series of share exchange
agreements discussed herein, the Company trades on the OTC Bulletin Board under
the symbol "NBMX". Its executive offices are presently located at 43 Taunton
Green, 3rd Floor, Taunton, Massachusetts 02780. Its telephone number is (508)
884-8820 and its facsimile number is (508) 880-5208.
The Company is filing this Form 10-SB on a voluntary basis so that the
public will have access to the required periodic reports on NBM's current status
and financial condition. The Company will file periodic reports in the event its
obligation to file such reports is suspended under the Securities and Exchange
Act of 1934 (the "Exchange Act".)
Initially the Company was engaged in the business of selling fragrances,
hand-rolled cigars and Irish chocolates. In October 1998, at the time it
acquired National Boston Medical, Inc., a Delaware corporation formed in August
1997 ("NBMDE") as a wholly-owned subsidiary, its purpose changed to NBMDE's
initial purpose of acquiring innovative and unique medical products. NBMDE's
founding philosophy arose from a concern regarding the occupational risks of
healthcare workers. NBMDE's initial product, Safeshield [originally called
Virashield], for which patent and trademark protection is being sought, forms a
long-lasting, antimicrobial, waterproof barrier on the skin. Prior to its
acquisition by the Company NBMDE had broadened its mission from purely
pharmaceuticals to include a line of medical instruments. Since the acquisition,
the Company has further expanded into the area of health, wellness and fitness
products. The Company continues to research the availability of additional
innovative products in the healthcare and related industries for development,
distribution or acquisition. See Part I, Item 1. "Description of the Business -
(b) Business of Issuer - Patents, Copyrights and Trademarks."
The Company is currently engaged in one (1) business which is divided into
two (2) divisions: (A) the Medical Products Division which (i) has the exclusive
rights to sell and distribute in the United States, Mexico and the World Wide
Web medical, dental and veterinary surgical instruments produced by Bontempi
Snc., an Italian manufacturer ("Bontempi Snc."); and (ii) markets over the
counter healthcare products and supplies such as Safeshield, VertaSon, VertaVac,
VertaLine Glutacide(TM) and Allergy Guard(TM) through healthcare distribution
channels ("MPD"); and (B) the Flex Marketing Division which advertises and sells
an innovative new wellness product called Backstroke(TM) through direct
marketing and response efforts ("FMD"). The common thread interwoven into each
area is a commitment to health and safety. It is the Company's intention to (i)
continue to market its healthcare products; (ii) continue as a distributor of
Bontempi Snc. instruments, (iii) continue to direct sell Backstroke(TM); (iv) to
conduct research to develop other health-related products or to acquire other
health-related products for distribution and sale and (v) to expand healthcare
e-commerce efforts begun by the MPD. See Part I, Item 1. "Description of the
Business - (b) Business of Issuer."
<PAGE>
In November 1997, prior to its acquisition by the Company, NBMDE entered
into a share exchange agreement with MMG, LLC ("MMG") , a Nevada limited
liability company formerly known as DJH Holdings LLC ("DJH") which had been
formed in March 1997. The exchange was made whereby NBMDE issued 499,000 shares
of its restricted common stock to the principals of DJH, which included an
issuance of 394,375 shares to Daniel Hoyng, the Company's President and CEO. The
Company has an employment contract with Mr. Hoyng. This offering was conducted
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Act")
and Rule 506 of Regulations D promulgated thereunder ("Rule 506") and Section
90.515 of the Nevada Code. See Part I, Item 1. "Employees and Consultants"; Part
I, Item 4. "Security Ownership of Certain Beneficial Owners and Management";
Part I, Item 5. "Directors, Executive Officer, Promoters and Control Persons";
Part I, Item 7. "Certain Relationships and Related Transactions"; and Part II,
Item 4. "Recent Sales of Unregistered Securities."
From November to December 1997, prior to its acquisition by the Company,
NBMDE conducted a self-directed private placement offering its twelve percent
(12%) convertible preferred Series A shares and three-year warrants exercisable
at $2.50. NBMDE received proceeds of $25,000 from one (1) investor and granted
warrants to purchase 10,000 shares of NBMDE's Common Stock. NMBDE used an
Offering Memorandum in connection with this placement. This offering was
conducted pursuant to Section 4(2) of the Act and Rule 506 and Section 25102(f)
of the California Code. See Part II, Item 4. "Recent Sales of Unregistered
Securities."
From December 1997 to June 1998, prior to its acquisition by the Company,
NBMDE conducted a self-directed private placement offering shares of the NBMDE's
12% convertible bonds and three-year warrants exercisable at $1.25 per share.
NBMDE received proceeds of $2,403,500 from thirty-five (35) investors and
granted warrants to purchase 1,922,800 shares of NBMDE's Common Stock. NBMDE
used an Offering Memorandum in connection with this placement. This offering was
conducted pursuant to Section 4(2) of the Act and Rule 506 and Section 8-6-11 of
the Alabama Code, Section 44-1844 of the Arizona Code, Section 517.061(11)(a) of
the Florida Code, Section 10-5-5(e) of the Georgia Code; Section 130.293 of the
Illinois Code, Section 710 I.A.C. 1- 13-6(d) of the Indiana Code, Section 51:705
of the Louisiana Code, Section 80A.15(Subd. 2)(h) of the Minnesota Code, Section
30-54.210 of the Missouri Code, Section 359(f)(2)(d) of the New York Code,
Section 18(b)(4)(D) of the North Carolina Code and Section 460-44A-506 of the
Washington Code. See Part II, Item 4. "Recent Sales of Unregistered Securities."
From December 1997 to June 1998, prior to its acquisition by the Company,
NBMDE conducted a self-directed private placement offering shares of the NBMDE's
12% convertible bonds and three-year warrants exercisable at $2.50 per share.
NBMDE received proceeds of $1,105,000 from forty-seven (47) investors and
granted warrants to purchase 392,000 shares of NBMDE's Common Stock. NDMDE used
an Offering Memorandum in connection with this placement. This offering was
conducted pursuant to Section 4(2) of the Act and Rule 506 and Section 8-6-11 of
the Alabama Code, Section 25102(f) of the California Code, Section
517.061(11)(a) of the Florida Code, Section 10-5-5(e) of the Georgia Code;
Section 130.293 of the Illinois Code, Section 710 I.A.C. 1- 13-6(d) of the
Indiana Code, Section 51:705 of the Louisiana Code, Section 402(b)(9) of the
Massachusetts Code, Section 359(f)(2)(d) of the New York Code, Section 203(d) of
the Pennsylvania Code, Section 35-1-320(9) of the South Carolina Code and
Section 551.23 of the Wisconsin Code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
<PAGE>
In late 1997, NBMDE entered into a Consulting Agreement with the David
Arden Group ("DAG"), for which NBMDE paid commissions in the form of cash and
stock to DAG in connection with an offering of NBMDE's 12% bonds and warrants.
The Agreement was declared null and void ab initio by the Company in June 1999,
at which time the Company entered into agreements with Dragons Forever, Ltd., a
Bahamian corporation ("DFL") and Evergreen Consulting Group, Ltd., a Bahamian
corporation ("ECG"). See Part I, Item 1. "Employees and Consultants"; Part I,
Item 7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In February 1998, prior to its acquisition by the Company, NBMDE entered
into a Consulting Agreement with Ira Weingarten d/b/a Equity Communications
("Equity") to provide financial public relations consulting services in exchange
for $60,000 annually and 1.5% of the issued and outstanding stock of the
company, which at that time was estimated at 75,000 shares. The term of the
contract was for a period of one (1) year. In December 1998, after its
acquisition of NBMDE, the Company terminated this agreement. As part of a
settlement agreement, the Company issued 175,000 shares of its unrestricted
Common Stock valued at $7,000 to Equity and Equity executed a full and general
release for all claims.. NBMDE relied upon Section 3(b) of the Act and Rule 504
of Regulation D promulgated thereunder ("Rule 504") and Section 49:3-50(b)(9) of
the New Jersey Code. See Part I, Item 1. "Employees and Consultants"; Part I,
Item 7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In February 1998, the Company's predecessor, Frozen Assets, entered into a
share exchange agreement with Growth Industries, Inc., a Nevada corporation
formed in February, 1998, ("Growth") whereby Frozen Assets canceled 2,500,000
shares of its restricted common stock and exchanged 1,200,000 of its convertible
preferred stock (which stock contained 10 to 1 conversion and voting rights) for
all of the outstanding capital stock of Growth, which then became a wholly-owned
subsidiary of Frozen Assets. The Company relied upon Section 4(2) of the Act and
Rule 506 and Section 90.532 of the Nevada Code. Growth is currently inactive and
its corporate charter has been revoked by the state of Nevada. See Part I, Item
7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities.")
On March 1, 1998, the Company executed a convertible note with Thomson
Kernaghan & CO. ('TK") in the amount of $500,000, which note bore interest at
the rate of 12% and was due and payable on or before March 31, 1999 (the "TK
Note"). In July 1998, TK converted $10,000 of principal plus the accrued
interest on the Note into the Company's common stock at a price of $0.1216 per
share for a total of 84,779 shares. The principals of the Company failed to
disclose this outstanding liability to NBMDE at the time of their exchange
agreement in October 8, 1998. The new principals of the Company honored the debt
and on October 20, 1998 allowed TK to convert an additional $100,000 of
principal plus the accrued interest on the Note into the Company's common stock
at a price of at a price of $0.24 for 443,790 shares. On or about October 28,
1998 TK converted the remaining $390,000 of principal plus accrued interest into
513,647 post split shares of the Company's Common Stock. While no offering
memorandum was used in connection with this offering, the business plan of the
<PAGE>
Company, which was disclosed to the investor, then was for the provision of
product development, sales and services for the fragrance, hand rolled cigar and
Irish chocolate industries. The Company claimed an exemption from registration
in connection with each of the issuances under Section 3(b) of the Act and Rule
504. No state exemption was required as TK is located in Canada. Part II, Item
4. "Recent Sales of Unregistered Securities."
On March 16, 1998, the Company amended its Articles of Incorporation
changing its name to Growth Industries, Inc. Since both the parent and the
subsidiary bore the same name and the same state of incorporation, a consent to
use of the name was filed with the state of Nevada.
On March 24, 1998, the Company entered into a share exchange agreement with
Fragrance Express Inc., a Florida corporation formed in July, 1996, ("Fragrance
Florida") whereby the Company exchanged 1,200,000 of its convertible preferred
stock (which stock contained 10 to 1 conversion and voting rights) for all of
the outstanding capital stock of Fragrance Florida, which then became a
wholly-owned subsidiary of the Company. On June 4, 1998, the Company amended its
Articles of Incorporation changing its name to Fragrance Express, Inc. Although
the parent and its subsidiary Fragrance Florida bore the same name, they did not
share the same state of incorporation, so no consent was necessary. The Company
relied upon Section 4(2) of the Act and Rule 506 and Section 517.061(11) of the
Florida Code. See Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
On May 21, 1998, NBMDE, prior to its acquisition by the Company, entered
into a Consulting Agreement with Rothschild Reserve International, Inc.
("Rothschild") and Mayflower Industries, Inc. ("Mayflower") whereby Rothschild
and Mayflower agreed to provide a fully trading public company to NBMDE in
exchange for issuance of 650,000 shares of NBMDE's Common Stock which were to be
converted into 400,000 (200,000 each) restricted shares in the new public
company and a commitment to issue an additional 225,000 (112,500 each)
unrestricted shares in the new public company after acquisition. NBMDE relied
upon Section 4(2) of the Act and Rule 506 and Section 517.061(11) of the Florida
Code. See Part I, Item 1. "Employees and Consultants"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
In June 1998, prior to its acquisition with the Company, NBMDE entered into
a stock exchange agreement with DermaGuard, Inc. ("DermaGuard") whereby NBMDE
acquired ten percent (10%) or 700 shares of the issued and outstanding shares of
DermaGuard's Common Stock in exchange for three percent (3%) or 150,000 shares
of NBMDE's issued and outstanding Common Stock. NBMDE relied upon Section 4(2)
of the Act, Rule 506, Section 402(b)(9) of the Massachusetts Code and Section
51:705 of the Lousiana Code. See Part I, Item 1. "Description of Business - (b)
Business of Issuer - MPD Division - Safeshield" and "(b) Business of Issuer
Distribution of Products"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
On July 17, 1998, prior to its acquisition by the Company, NBMDE entered
into an Exclusive Distribution Agreement with both Bontempi Medical Corporation
(U.S.A.), a Massachusetts corporation formed in March 1996, ("BMC-US") and
Bontempi Medical Corporation (Canada), a Canadian corporation formed in June
1995, ("BMC-CAN") (collectively "Bontempi"). In exchange for the exclusive
<PAGE>
rights to sell Bontempi Snc. instruments in the U.S., Mexico and though the
World Wide Web. As part of this Agreement, NBMDE was to pay $307,999 which was
convertible to shares of NBMDE's restricted common stock and to issue 2,374,999
shares of its restricted common stock to Bontempi and its shareholders,
including 658,333 shares to Victor Bianchi, currently serving as a Director of
the Company. Bontempi and its shareholders converted the remaining $258,000 of
the amount due pursuant to a notice of conversion dated October 10, 1998 to
3,225,000 shares of the Company's restricted common stock. The Company relied
upon Section 4(2) of the Act and Rule 506 and Section 402(b)(9) of the
Massachusetts Code. See Part I, Item 1. "Employees and Consultants"; Part I,
Item 4. "Security Ownership of Certain Beneficial Owners and Management; Part I,
Item 5. "Directors, Executive Officer, Promoters and Control Persons"; Part I,
Item 7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In July 1998, prior to its acquisition by the Company, NBMDE entered into
an agreement with each of its 12% bondholders and the holder of the 12%
Preferred Series A shares by which all of such holders, except one, agreed to
convert their bonds, and permit NBMDE to enter into a share exchange agreement
with a public company with distributions to be made at the time that NBMDE
executed a share exchange agreement. The one objecting bondholder, First Pacific
Master Superannuation Fund filed suit in Massachusetts against the Company in
March 1999. The parties have since executed a settlement agreement. See Part II,
Item 2. "Legal Proceedings" and Part II, Item 4. "Recent Sales of Unregistered
Securities.
On October 1, 1998, the Company sold 9,640,724 shares of its common stock
to NBMDE for $120,509. These shares represent 2,410,181 post split shares. NBMDE
promptly distributed these shares to its shareholders pro-rata at a price of
$0.05 per share for a property distribution valued at $120,509. This represented
approximately 18.22 percent of each person's share holdings of NBMDE as of
August 19, 1998. In each instance, the issuance of securities was to its own
security holders and either pursuant to a merger, share exchange or
reorganization or pursuant to a dividend or a property distribution which was
duly voted upon and approved by the shareholders of both corporations. The
Company claimed the exemption from registration in connection with each of the
following issuances under Section 3(b) of the Act and Rule 504. In addition, the
Company relied upon the following statutes in the states in which the
shareholders were residents: Alabama Code Section 8-6-11(12); Arizona Code
Sections 44-1844(5) and/or 44-1844(7); California Code Section 25103(c) and Rule
260.103; Florida Code Section 517.061(4) or (6); Georgia Code Sections 10-5-9(6)
and (8); Illinois Code Section 4 [5/4](I); Indiana Code Sections 23-2-1-2(11)
and (15); Louisiana Code Sections 51:709(6), (8) and (12); Massachusetts Code
Section 402(11); Minnesota Code Section 80A.15(n); Missouri Code Section
409.402(11);New Hampshire Code Section 421- B:17(l) and (n); New Jersey Code
Section 49:3-50(11); New York Code Section 80.5; North Carolina Code Section
78A-17(11); Ohio Code Section 1707.03(K)(1) and (2); Pennsylvania Code Section
203 [70 P.S. 1-203](q); Rhode Island Code Section 7-11-402(13) and (16); South
Carolina, Section 35-1-310(11); Texas Code Section 5 [581-5](E) and (G); Vermont
Code Section 4204a(4) and (5); Virginia Code Section 13.1-514(B)(8) and (14);
and Washington Code Section 21.20.320(11); Wisconsin Code Section 551.2(13) and
(14). See Part II, Item 4. "Recent Sales of Unregistered Securities."
<PAGE>
On October 8, 1998, the Company entered into a share exchange agreement
with NBMDE, which wholly-owned two dormant subsidiaries, MMG, Inc., a
Massachusetts corporation formed in March 1997 and Virushield Inc., a
Massachusetts corporation formed in December, 1997. Prior to the closing of the
share exchange, the Company conducted a pre-share exchange 4 to 1 reverse split
of its common stock and a 20 to 1 reverse split of its preferred stock. The
Company then issued 14,988,614 shares of its restricted common stock to NBMDE's
shareholders in a 1 for 1 exchange for all of the issued and outstanding shares
of NBMDE. The predecessor of NBMDE was Medical Marketing Group, LLC, a Nevada
limited liability company ("MMG"). At the time of the share exchange, NBMDE
became a wholly-owned subsidiary of the Company. As a result of this
acquisition, warrants to purchase 1,922,800 shares of NBMDE's restricted Common
Stock exercisable at $1.25 and warrants to purchase 402,000 shares of NBMDE's
restricted Common Stock exercisable at $2.50, were converted to an equal number
of warrants to purchase restricted Common Stock of the Company, which Company
warrants are exercisable for three (3) years from the date of their issuance.
The Company relied upon Section 4(2) of the Act and Rule 506 and Section 7309A
of the Delaware Code and Section 90.515 of the Nevada Code. On October 15, 1998,
the Company amended its Articles of Incorporation changing its name to National
Boston Medical, Inc. See Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
On October 9, 1998, prior to changing its name, the Company entered into a
Consulting Agreement with Good Works, Inc. to provide corporate growth
development consulting services to the Company in exchange for issuance of
500,000 shares of the Company's Common Stock. The Company relied upon Section
3(b) of the Act and Rule 504 and Section 517.061(11) of the Florida Code. See
Part I, Item 1. "Employees and Consultants"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
On October 9, 1998, prior to changing its name, the Company entered into a
Consulting Agreement with Rothschild whereby Rothschild agreed to provide
corporate growth development consulting services as a media consultant to the
Company in exchange for issuance of 250,000 shares of the Company's Common
Stock. The Company relied upon Section 3(b) of the Act and Rule 504 and Section
517.061(11) of the Florida Code. See Part I, Item 1. "Employees and
Consultants"; Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
In October and November 1998, the Company issued 1,702,488 shares of its
unrestricted Common Stock to eleven (11) individuals and companies in exchange
for services rendered which were valued at $68,100. The Company relied upon
Section 3(b) of the Act and Rule 504 and Florida Code Section 517.061(11);
Massachusetts Codes Section 402(b)(9); Nevada Code Section 90.530(11); South
Carolina Code Section 35-1-320(9) and the need for no state exemption for the
one investor which was a Bahamian corporation. See Part II, Item 4. "Recent
Sales of Unregistered Securities."
In November 1998, the Company issued 185,055 shares of its unrestricted
Common Stock to six (6) individuals and companies who should have received the
property distribution made in October, 1998, but did not receive their shares at
that time. These shares were valued at $9,253. The Company relied upon
<PAGE>
Section 3(b) of the Act and Rule 504 and Florida Code Section 517.061(11), New
York Code Section 80.9 and the need for no state exemption for the three (3)
parties which were Bahamian corporations. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In November 1998, the Company issued a total of 100,000 shares of its
restricted Common Stock to two (2) individuals in exchange for services
rendered. 75,000 shares were issued to Richard Alfieri and 25,000 shares to one
(1) individual who should have received the property distribution made in
October, 1998, but who did not receive his shares. These shares were valued at
$4,000 ($3,000 was attributable to Mr. Alfieri's services.) The Company relied
upon Section 4(2) of the Act and Rule 506 and Florida Code Section 517.061(11)
and no state exemption for the one party who was a Mexican resident. See Part I,
Item 1. "Employees and Consultants"; Part I, Item 7. "Certain Relationships and
Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
On November 21, 1998, the Company entered into a share exchange agreement
with Flex Marketing, Inc., an Ohio corporation ("Flex") and its shareholders
whereby the Company exchanged 400,000 (200,000 each) shares of its restricted
common stock with Ernest Zavoral and Remon Heyek for 100% of the issued and
outstanding shares of Flex. Following the exchange, Flex became a wholly-owned
subsidiary of the Company. These shares were valued at $248,000. The President
of Flex, Ernest Zavoral, remained with the Company as the President of Flex and
received 400,000 shares of the restricted common stock of the Company. Mr.
Zavoral is entitled to receive 150,000 restricted shares of the Common Stock
annually (for which he is currently entitled to vote and receive dividends), has
the ability to purchase additional shares in the event of any offering of the
Company's stock at 75% of the offering price to maintain his then current
percentage of the Company's outstanding common stock, has an option to purchase
750,000 shares of the restricted common stock of the Company over the next three
(3) years for the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and he may convert one-third of his salary to shares of the
Company's restricted common stock at the average trading price of the Company's
common stock for the last twelve (12) months or the then current market price at
the time the option is exercised. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
1707.03(X) of the Ohio Code. See Part I, Item 1. "Employees and Consultants";
Part I, Item 4. "Security Ownership of Certain Beneficial Owners and
Management"; Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
On November 28, 1998, the Company executed a 10% convertible note in the
amount of $750,000 in favor of TK and issued a warrant to purchase 200,000
shares of the Company's Common Stock. The Note was convertible into restricted
shares of the Company's Common Stock and has registration rights. The warrant is
exercisable at $0.48 per share and has piggy-back registration rights. The
exercise period commences 30 days following the effective date of a registration
statement covering such warrants. The Note has since been converted into
8,000,000 shares of restricted common stock of the Company in full and final
satisfaction of the Note. The Company relied upon Section 4(2) of the Act and
Rule 506. No state exemption was required as TK is located in Canada.
<PAGE>
See Part I, Item 2. "Management's Discussion and Analysis or Plan of Operation -
Operating Expenses - Interest and Other Income (Expense), Net" and Part II, Item
4, "Recent Sales of Unregistered Securities".
Effective January 20, 1999, the Company entered into an agreement to
spinoff Fragrance Express Florida, Inc., a wholly-owned subsidiary of the
Company ("Fragrance Florida") and its wholly-owned subsidiary, Fragrance Express
of Florida, Inc. Pursuant to this agreement, NBM was to return all issued and
outstanding stock of Fragrance Florida at such time as Fragrance Florida became
a wholly-owned subsidiary of Telenetworx, Inc, a Florida corporation
("Telenetworx") in exchange for (i) the issuance of 15% of the issued and
outstanding stock of Telenetworx; (ii) a demand note from Fragrance Florida
payable to the Company in the amount of $700,000 bearing interest at the rate of
10% per annum and secured by a third mortgage on property located in Athens,
Georgia and (iii) an irrevocable agreement for a period of sixty (60) days for
the Company to have the right to refinance the Athens' property, the proceeds of
which would liquidate the demand note. To date, neither the Telenetworx stock
nor the demand note have been delivered to the Company. See Part I, Item 7.
"Certain Relationships and Related Transactions"; and Part II, Item 4. "Recent
Sales of Unregistered Securities."
In January 1999, the Company sold 1,212,121 shares of its unrestricted
Common Stock to one (1) company for $100,000. The Company relied upon Section
3(b) of the Act and Rule 504. Since the company was a Canadian corporation, no
state exemption was required. See Part II, Item 4. "Recent Sales of Unregistered
Securities."
On February 1, 1999, the Company entered into another Consulting Agreement
with Equity to provide financial public relations consulting services in
exchange for $30,000 payable over six (6) months. The term of the contract was
for a period of six (6) months. The Company had previously issued 175,000 shares
of its stock in December 1998 for services rendered which were valued at $7,000.
The contract was terminated by NBM in March of 1999. As part of the settlement,
Equity was paid $7,5000 and executed a full and general release. See Part I,
Item 1. "Employees and Consultants"; Part I, Item 7. "Certain Relationships and
Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
On February 11, 1999, the Company entered into a Consulting Agreement with
GFC Communications Corp. to provide public and financial communication
consulting services to the Company in exchange for $5,000 per month. The term of
the contract was for a period of one (1) year, but provided for termination on
30 days notice. NBM could elect to pay the fee with unrestricted common stock.
The contract was terminated by the Company in April 1999. See Part I, Item 1.
"Employees and Consultants"; and Part I, Item 7. "Certain Relationships and
Related Transactions."
In February 1999, the Company issued warrants to purchase 1,000,000 shares
of the Company's restricted Common Stock exercisable at $1.00 to DermaGuard in
connection with an amendment to a Manufacturing, Distribution and Assignment
Agreement with the Company relative to the Company's Safeshield products. These
warrants have piggy-back registration rights. The Company relied upon Section
4(2) of the Act and Rule 506 and Louisiana Code Section 51:705. See Part I,
<PAGE>
Item 1. "Description of the Business - (b) Business of Issuer - MPD Division -
Safeshield" and - "(b) Business of Issuer - Distribution of Products" and Part
II, Item 4. "Recent Sales of Unregistered Securities."
In February 1999, the Company sold 1,666,667 shares of its unrestricted
Common Stock to one (1) company for $100,000. The Company relied upon Section
3(b) of the Act and Rule 504. Since the company was a Canadian corporation, no
state exemption was required. See Part II, Item 4. "Recent Sales of Unregistered
Securities."
In February 1999, the Company entered into an agreement for a term of one
(1) year with Webfoot Marketing Inc. to redesign NBM's website. The Company
committed to issue 40,000 shares of its unrestricted Common Stock and 137,500 of
its restricted Common Stock. The Company also committed to pay $10,000 each
quarter in cash or to issue an equivalent value in unrestricted Common Stock if
the Company could qualify for a registration on Form S-8. Either party can
cancel the contract with 30 days notice. The Company relied on Section 3(b) of
the Act and Rule 504 for the unrestricted Common Stock and Section 4(2) and Rule
506 for the restricted Common Stock and Florida Code Section 517.061(1). See
Part I, Item 1. "Description of Business - (b) Business of Issuer - MPD-
Bontempi Instruments" and Part II, Item 4. "Recent Sales of Unregistered
Securities."
In March 1999, the Company issued 800,000 of its restricted Common Stock to
be held in escrow for the benefit of Virasept Pharmaceutical Inc. ("Virasept")
to secure payment on a promissory note given in settlement of Virasept's
cancellation of the distribution agreement relative to Allergy Guard(TM). Such
shares have not been delivered to Virasept and remain in escrow. The Company
relied upon Section 4(2) of the Act and Rule 506 and New York Code Section
359(f)(2)(d). See Part I, Item 1. "Description of Business - (b) Business of
Issuer - MPD- Allergy Guard(TM)" and Part II, Item 4. "Recent Sales of
Unregistered Securities."
In March 1999, the Company entered into an agreement for a term of one (1)
year with Maximum Coverage Media Inc. ("MCM") to supply airtime and to act as
the Company's agent for the Backstroke(TM) infomercials. NBM pays 100% of the
airtime cost, of which MCM retains a 10% commission. NBM also issued to MCM
75,000 shares of its common stock upon execution, which stock carries Piggy-Back
Registration rights. NBM must also issue 50,000 shares for every three month
period where the sales to advertising ratio average exceeds 1.9 to 1. The
contract can be terminated on 30 days notice. The Company relied upon Section
4(2) of the Act and Rule 506 and Section 25102(f) of the California Code. See
Part I, Item 1. "Description of Business - (b) Business of Issuer - FMD-
Backstroke(TM)" and Part II, Item 4. "Recent Sales of Unregistered Securities."
In April, 1999, the Company sold 1,250,000 shares of its unrestricted
Common Stock, and cashless warrants to purchase 200,000 shares of the Company's
restricted Common Stock to one (1) individual for $100,000. The warrants are
exercisable at $.25, $.50, $.75 and $1.00 over a period of two (2) years from
issuance and contain piggy-back registration rights. The Company relied upon
Section 3(b) of the Act and Rule 504 for the unrestricted Common Stock, Section
4(2) of the Act and Rule 506 for the warrants and Oklahoma Code Sections
401(b)(22) and 660-10-11-50. The facts upon which the Company relied are the
sale was made to an accredited investor, the Company is not in the development
<PAGE>
stage, the Company reasonably believed that the investor was purchasing for
investment, is not subject to any "bad-boy" provisions and engaged in no
advertising (though permitted). See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In April 1999, the Company issued 3,888,888 shares of its unrestricted
Common Stock to three (3) companies in exchange for services rendered or release
of debt incurred, which services and debt release were valued at $349,999. The
Company relied upon Section 3(b) of the Act and Rule 504 and Florida Code
Section 517.061(11). See Part II, Item 4. "Recent Sales of Unregistered
Securities."
Effective May 5, 1999 and ending on November 11, 1999, the Company entered
into a Consulting Agreement with Buying Power Network to provide financial
public relations consulting services to the Company in exchange for $50,000 for
the first month, $35,000 for the second month and $25,000 for the third month,
with subsequent months to be agreed upon, each payable in cash or by issuance of
unrestricted shares of Common Stock with equivalent value. The contract was
terminated as of June 1, 1999. In exchange for services rendered by Buying Power
Network the first month, the Company issued 500,000 shares of its restricted
Common Stock valued at $50,000 to Joyce Research Group, of which Buying Power
Network is a division. The Company relied upon Section 4(2) of the Act and Rule
506 and Florida Code Section 517.061(11). See Part I, Item 1. "Employees and
Consultants"; Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
In June 1999, the Company entered into an agreement with DFL, wherein the
Company acknowledged indebtedness to DFL in the amount of $518,000 and agreed to
issue DFL 3,375,333 shares of its restricted common stock and to pay DFL $10,000
in full and final satisfaction of such indebtedness. The Company has the right
to repurchase the shares until such time as the shares are either registered or
the Rule 144 restriction is lifted. The shares carry registration rights and NBM
must buy back the shares at the earlier of closing on specified amounts of
equity funding or after November 1, 1999. The repurchase price is $0.15 per
share. NBM also committed to issue DFL 600,000 shares of its restricted common
stock as payment for services rendered. No stock has been issued to date. See
Part I, Item 1. "Employees and Consultants"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
In June 1999, the Company entered into an agreement with ECG, wherein the
Company acknowledged indebtedness to ECG in the amount of $126,700 and agreed to
issue ECG 711,334 shares of its restricted common stock and to pay ECG $20,000
in full and final satisfaction of such indebtedness. The Company has the right
to repurchase the stock at a price of $0.15 per share. No stock has been issued
to date. See Part I, Item 1. "Employees and Consultants"; Part I, Item 7.
"Certain Relationships and Related Transactions"; and Part II, Item 4. "Recent
Sales of Unregistered Securities."
In June 1999, the Company entered into an agreement with DFL, wherein the
Company acknowledged an indebtedness by Richard Hernandez ("Hernandez") to DLF
in the amount of $100,000, which indebtedness is secured partially by shares of
the Company's common stock owned by Hernandez. The Company agreed to assume
<PAGE>
joint liability for the indebtedness subsequent to and subject to an agreement
by Hernandez to liquidate his NBM shares. The Company also agreed to issue DFL
125,560 shares of its restricted common stock. No shares have been issued to
date. See Part I, Item 1. "Employees and Consultants"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
In July 1999, the Company issued 1,465,412 shares of its restricted common
stock to two (2) companies and two (2) individuals in exchange for services
rendered or release of debt incurred, which services and debt release were
valued at $366,353. The Company relied upon Section 4(2) of the Act and Rule 506
and Florida code section 517.061(11) and Section 75-71-408 of the Mississippi
code and Section 90.532 of the Nevada code. No state exemption was necessary for
one (1) company, as it is a foreign corporation. See Part II, Item 4. "Recent
Sales of Unregistered Securities."
In July 1999, the Company issued 150,000 shares of its restricted common
stock to Dr. David Vitko, inventor of the Backstroke(TM) and were valued at
$37,500. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 1707.03(X) of the Ohio code. See Part I, Item 7. "Certain Relationships
and Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
In July 1999, the Company issued 870,000 shares of its restricted common
stock to eight (8) persons for past services on the Company's Board of
Directors. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 8-6-11 of the Alabama code, Section 517.061(11) of the Florida code,
Section 51:705 of the Louisiana code, Section 402(b)(9) of the Massachusetts
code, Section 75-71-408 of the Mississippi code and Section 1707.03(X) of the
Ohio code. No state exemption was required for two (2) individuals who are
Canadian residents. See Part I, Item 1. "Employees and Consultants."; and Part
I, Item 5. "Directors, Executive Officers, Promoters and Control Persons -
Executive Officers and Directors."; and Part I, Item 6. "Executive
Compensation."; and Part I, Item 7. "Certain Relationships and Related
Transactions."; and Part II, Item 4. "Recent Sales of Unregistered Securities."
The Company has an employment contract with Mr. Hoyng. Under this contract,
in July 1999, the Company issued 250,000 shares of its restricted Common Stock
to Mr. Hoyng. Mr. Hoyng is entitled to receive 250,000 restricted shares of the
Common Stock annually (for which he is currently entitled to vote and receive
dividends), has the ability to purchase additional shares in the event of any
offering of the Company's stock at 75% of the offering price to maintain his
then current percentage of the Company's outstanding common stock, has an option
to purchase 2,000,000 shares of the restricted common stock of the Company over
the next three (3) years for the average trading price of the Company's common
stock for the last twelve (12) months or the then current market price at the
time the option is exercised, he may convert one-third of his salary to shares
of the Company's restricted common stock at the average trading price of the
Company's common stock for the last twelve (12) months or the then current
market price at the time the option is exercised and is entitled to a transition
bonus of 250,000 shares of the Company's restricted common stock. All shares
carry piggy-back registration rights. The Company relied upon Section 4(2) of
the Act and Rule 506 and Section 359(f)(2)(d) of the Massachusetts Code. See
Part I, Item
<PAGE>
1. "Employees and Consultants"; Part I, Item 4. "Security Ownership of
Certain Beneficial Owners and Management"; Part I, Item 5. "Directors, Executive
Officer, Promoters and Control Persons"; Part I, Item 7. "Certain Relationships
and Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
The Company has an employment contract with Mr. Lozowicki. Mr. Lozowicki is
entitled to receive 187,500 restricted shares of the Common Stock annually (for
which he is currently entitled to vote and receive dividends), has the ability
to purchase additional shares in the event of any offering of the Company's
stock at 75% of the offering price to maintain his then current percentage of
the Company's outstanding common stock, has an option to purchase 400,000 shares
of the restricted common stock of the Company over the next three (3) years for
the average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised and
he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and is entitled to a signing bonus of 100,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the Massachusetts Code. See Part I, Item 1. "Employees and
Consultants"; Part I, Item 4. "Security Ownership of Certain Beneficial Owners
and Management"; Part I, Item 5. "Directors, Executive Officer, Promoters and
Control Persons"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
The Company has an employment contract with Mr. McFarland. Mr. McFarland is
entitled to receive 500,000 restricted shares of the Common Stock annually (for
which he is currently entitled to vote and receive dividends), has the ability
to purchase additional shares in the event of any offering of the Company's
stock at 75% of the offering price to maintain his then current percentage of
the Company's outstanding common stock, has an option to purchase 500,000 shares
of the restricted common stock of the Company over the next three (3) years for
the average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised and
he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and is entitled to a signing bonus of 500,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the Massachusetts Code. See Part I, Item 1. "Employees and
Consultants"; Part I, Item 4. "Security Ownership of Certain Beneficial Owners
and Management"; Part I, Item 5. "Directors, Executive Officer, Promoters and
Control Persons"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
See (b) "Business of Issuer" immediately below for a description of the
Company's business.
(b) Business of Issuer.
<PAGE>
General
The Company was formed in June 1995 and had little or no operations until
October 8, 1998, when it acquired NBMDE. Prior to the exclusive distribution
agreement executed with Bontempi and the acquisition of Flex, NBMDE principally
was involved in the development and marketing of anti-bacterial cremes and
lotions which were designed to reduce the spread of germs through hand to hand
contact.
In March 1997, DJH, now known as MMG, was formed by Mr. Hoyng, the
Company's President and CEO. DJH was approached by Genomic Actives Research &
Development, LLC ("Genomic"), who claimed to own all rights to an anti-bacterial
product called Activ and to be its manufacturer.
In April, 1997, DJH entered into a licensing agreement for the sale and
distribution of Activ. The licensing agreement provided for the formation of a
new entity, Boston Medical Marketing, LLC ("BMM") of which Genomic owned 45%
(but had 10 to 1 voting rights and thereby management control), DJH owned 50%
and American Medical Research, LLC, a Nevada limited liability company ("AMR")
owned 5%. The agreement provided that BMM was to distribute Activ, MMG was to
pay for the inventory and Genomic was to supply Activ and was to receive 35% of
gross profits from sales.
Activ was an anti-bacterial creme whose active ingredients were Nonoxynol-9
and Triclosan. The creme was brownish in color and had a strong odor. Genomic
represented that Activ was antibacterial, waterproof and thereby could reduce
the risk of the spread of germs. Its most effective use was to healthcare
workers and food handlers.
DJH launched an aggressive sales and marketing campaign using its own sales
representatives. Through these efforts, Activ was placed in restaurant chains,
government facilities and other establishments and soon a substantial demand for
the product was generated. However, Genomic's was unable to provide adequate
supply to meet the orders resulting from DJH's sales efforts.
This failure in supply caused DJH to investigate Genomic's role in Activ's
production. DJH learned that the manufacturer of Activ was South Atlantic
Industries ("SAI") and not Genomic. The President of SAI represented that he was
the formulator and owned all of the rights to Activ. It appeared that Genomic
had breached the license agreement not only by misrepresenting the ownership
rights in Activ but by failing to provide suitable and saleable product. DJH
then contracted with SAI for exclusive rights to a new formula
As formulated, its was later found that the Nonoxynol-9 in Activ caused a
stinging reaction in some consumers which could be uncomfortable and painful. In
addition, the Triclosan caused the ingredients to separate when exposed to high
and low temperatures.
In the summer of 1997, SAI developed a new product called Virashield (now
known as Safeshield). Although Virashield contained a smaller percentage of
Nonoxynol-9, it differed from Activ in that did not contain Triclosan which
<PAGE>
caused the product to break down and also contained a new active ingredient
Parachloromentaxylenol (commonly known as "PCMX"). The product's color and odor
were different than Activ.
NBMDE was formed in November 1997 to acquire MMG and to raise money to
acquire other marketable medical or health-related products or companies. SAI
continued to work to improve Virashield.
On November 11, 1997, NBMDE entered into an exclusive agreement with SAI
whereby NBMDE was given the right to market Safeshield worldwide. NBMDE also
received representations and warranties from SAI that it had such rights to
give. The contract is for a period of 100 years and is renewable at the option
of NBMDE. Beginning January 2, 1998, NBMDE is required to purchase a minimum of
$7,500 "bag-in-the-box" units per quarter. (27 ounces per bag). In March 1998,
NBMDE contracted with SAI and SAI assigned all of its right, title and interest
in Virashield to it. Virashield's name was changed to Virushield and then to
Safeshield.
Safeshield is an antimicrobial creme lotion, which moistens and soothes
hands while protecting them. As reformulated, its active ingredient is PCMX. The
Company is unaware of any reports of adverse reactions to Safeshield. It does
not contain Triclosan and thereby is stable in fluctuating heat conditions. The
color and odor are more desirable.
The Company is a party to an action claiming patent infringement by its
Safeshield product. Genomic and BMM have brought suit against NBM and Daniel
Hoyng for violation of 15 U.S.C. 1125(A) - Reverse Passing Off, violation of
Florida Deceptive and Unfair Trade Practices Act, breach of fiduciary duty and
conversion. Genomic and BMM allege that NBM and Hoyng have used and continue to
use confidential proprietary information which is the property of Genomic and
relates to the Activ product. NBM and Hoyng have each filed a motion to dismiss
which are currently pending. Should the case not be dismissed against either NBM
or Hoyng, each have prepared an extensive counter-suit against Genomic, BMM,
William Coury and others. See Part I, Item 1. "Description of Business - (b)
Business of Issuer - Patents, Copyrights and Trademarks" and Part II, Item 2.
"Legal Proceedings."
Since the company's inception, it has expanded its business to include
several different products, all of which are health related.
Medical Products Division ("MPD")
The MPD has the exclusive rights to sell and distribute in the United
States, Mexico and the World-Wide-Web medical, dental and veterinary surgical
instruments produced by Bontempi Snc. and markets over-the-counter healthcare
products and supplies such as Safeshield, VertaSon, VertaVac, VertaLine, Allergy
Guard(TM) and Glutacide(TM) through healthcare distribution channels.
Bontempi Instruments
The Company is the sole distributor in the United States, Mexico and the
<PAGE>
World-Wide-Web of approximately 10,500 precision-quality, German-made, stainless
steel, medical, dental and veterinary instruments under an agreement entered
into in July 1998 with Bontempi. The agreement is valid until the year 2025 and
is an exclusivity contract for the United States, Mexico and the World Wide Web.
Bontempi Snc. holds patents on 3,500 of the instruments.
Bontempi Snc. has a thirty year history throughout Europe and Canada as a
designer, innovator and manufacturer of medical, dental and veterinarian
instruments for surgeons. Bontempi Snc.'s manufacturing facility is in Germany.
The instruments are corrosion resistant, carry a five-year warranty from
manufacturing defects and offer a high quality/price ratio. NBM's sales force
markets these medical instruments directly to dental, medical and veterinarian
professionals. It also offers private label opportunities to selected
distributors.
The Company's MPD began sales efforts in the United States in July, 1998.
MPD's goal in the United States is to capture 10% of the American dental
instrument market by the year 2002. Due to the impact of Health Maintenance
Organizations ("HMO's") in the United States market, additional factors will
impact upon the ability of the Company to gain a substantial market share. The
Company believes that the following HMO factors will impact MPD's sales: (i)
instrument providers often must sacrifice quality to provide instrumentation at
a discount; and (ii) doctors are pressured to see a higher volume of patients
either to receive more monthly fee income or to compensate for the fact that
their fees are capped by the HMO. The Company believes that these factors will
benefit US sales because increased patient volume translates into both
accelerated wear on instruments and the subsequent need for increased inventory
to compensate for this accelerated wear. The Company believes that these factors
and the increased time required to sterilize instruments between patients will
lead to multiple sales of single items to the same account. Current sales are
approximately $100,000 per month.
Bontempi Dental Instruments are used by the following Dental Colleges
and Universities:
Harvard Dental School Boston University, Boston, MA
U. of Alabama, Birmingham, AL U. of Pittsburgh, Pittsburgh, PA
Indiana University U. of W. Ontario, London, Ont.
U. of Brit. Columbia, Vancouver U. of Alberta, Calgary
Guelph U., Guelph, Ont. U. of Toronto
Bontempi instruments also are marketed through the Company's direct sales
channels and through contracts with private label, specialty instrument
manufacturers. Sales success in the United States is achieved through an account
manager sales force which relies on face to face sales and their ability to
place instruments directly into the customer's hands. This is achieved by having
the client place its orders directly with their account manager, thereby
eliminating the middle man and providing a superior level of service, price and
quality. The Company is unique in that it is the only company selling medical
instruments directly to the end user and delivering product directly to the
client's point of sale.
This division's current strategy for increasing sales in the United States
dental market, is to (i) base its approach on the low cost of equipment for new
account managers, (ii) structure a commission only program (iii) provide low
<PAGE>
cost training for account managers,(iv) initiate a competitive compensation
program, (v) institute a structured account manager training cycle, (vi) provide
electronic commerce support, as well as (vii) strong technical support.
To further support sales efforts this division's new marketing strategy
will utilize print media advertising, electronic media, education, sponsorships
and corporate participation in national and state level Chambers of Commerce
Member Education Programs. It also advertises its products in mailers,
newspapers, magazines, on the Company's e-commerce web pages and in other
mediums.
This division has three private label agreements with key industry
suppliers. These agreements are informal in that sales are received in the form
of purchase orders that are submitted to the Company. These private label
agreements provide the company large volume orders for specialized, high value
instruments which compliment the private label firm's existing customer
requirements. See Part I, Item 1. "Description of Business - (b) Business of
Issuer - Sales and Marketing - Distribution of Products - Bontempi Instruments."
The division files sales orders and provides customer service from a fully
automated center located in Taunton, Massachusetts. This center is capable of
immediate response to orders resulting from direct mail, broadcast fax, print
and electronic media as well as distributor trade shows and direct sales
generated purchase orders. To maximize efficiency, the Company employs
company-wide, state-of-the-art automation using a corporate Lotus Notes(TM)
server. This server networks offices and account representatives in the field
can access it through their laptop computers. All product sales and fulfillment
services, financial management, company operations and marketing, product
research and development and inventory management are automated. To ensure
24-hour automated systems service and support availability, NBM contracts with
Microsoft Certified(TM) and Lotus Notes Certified(TM) systems technicians for
hardware and software maintenance. In addition, all computer systems are
internet accessible worldwide and secure.
With the consumer popularity and rapid acceptance of internet based
marketing and sales, international businesses are turning to internet-based
technologies to increase business sales and profitability. The World-Wide-Web
offers the Company a unique opportunity to advance new products more
expeditiously and at a lower start-up cost than previous product launches. The
Company's web site at www.nbmedical.com and the division's at
www.bontempimedical.com allow for real time information and management services
which maximize delivery, marketing, sales, accounting and information services
to both clients and the division's sales force.
In February 1999, the Company entered into an agreement for a term of one
(1) year with Webfoot Marketing Inc. to redesign NBM's website. The Company
committed to issue 40,000 shares of its unrestricted Common Stock and 137,500 of
its restricted Common Stock. The Company also committed to pay $10,000 each
quarter in cash or to issue an equivalent value in unrestricted Common Stock if
the Company could qualify for a registration on Form S-8. Either party can
cancel the contract with 30 days notice. The Company relied on Section 3(b) of
the Act and Rule 504 for the unrestricted Common Stock and Section 4(2) and Rule
506 for the restricted Common Stock and Florida Code Section 517.061(1). See
Part II, Item 4. "Recent Sales of Unregistered Securities."
<PAGE>
The Company provides web-site assistance and marketing research support to
its distributor and private label (OEM). Approximately ten percent (10%) of all
consumer purchases currently are accomplished over the telephone, via facsimile
and/or over the internet. This figure is expected to increase substantially as
the rate of internet commerce increases.
The Company believes that automation and e-commerce will benefit it by
allowing the division's sales force to identify common types of instruments
ordered from certain industry segments and geographical areas, and by
identifying seasonal inventory trends and customer preferences.
Safeshield
The Division markets and distributes Safeshield, an "over-the-counter"
germicidal skin protectant.
Safeshield is manufactured as an oil-in-water emulsion that is hydrophobic
(has a strong affinity for water thereby making the product water repellent)
within minutes of application. When applied to the skin, the water begins to
evaporate forming a barrier on the epithelium (one's skin) which is repellant to
water.
Safeshield repels organic and inorganic acid and base but not hydrofloric
acid fluids. Competing products require the use of two different components to
accomplish this task; one for water based fluids (inorganic) and another for
oil-based (organic) fluids.
When applied, Safeshield allows gaps of 3 to 6 angstroms units in size in
the barrier it creates. An angstrom unit is 1 meter x 10 to the minus 10 power
or one billionth of a meter. These gaps can open 50 to 100 angstroms to allow
sweat to exit and then return to their original size. Some of the smallest
viruses are 1 micron in size. A micron is 1 meter x 10 to the minus power or one
millionth of a meter, therefore significantly larger than the gaps created.
However, even if the barrier gaps expand to 100 angstroms, they are still 10
times smaller than a virus. A virus of this size is in a class of one of the
smallest virons known and most bacteriophages and icosahedrons (20-sided
polygons) are considerably larger. The barrier created by Safeshield is well
within acceptable standards so as to provide protection.
Safeshield bonds itself to the skin and wears off through the natural
shedding of skin cells. The amount of time necessary to shed the Safeshield
barrier depends upon the metabolism of the individual. The recommended frequency
for applications of Safeshield for 100% protection is once every three hours for
most purposes; however, more frequent application is recommended for healthcare
workers.
Safeshield does not protect mucous membranes, wet sores or wounds. It is
not effective against ultraviolet rays, radioactive materials nor mechanical
burns, hydrofluoric acid and some dyes. Safeshield is a work loss preventive,
not a cure.
<PAGE>
The Company has developed a market for Safeshield in the food preparation,
restaurant, and passenger transportation industries. Additionally, the Company
is attempting to develop a market in the safety conscious industries where the
use of latex gloves is required for protection in today's highly contagious
public environments. Latex causes an increased risk of skin disorders such as a
latex intolerance reaction. Safeshield appears to relieve the symptoms of such
reactions while other currently available products do not.
Other products using the Safeshield ingredients are currently in the
research and development stage. These include: Safesoap, Safesoap Plus,
Safeshampoo, Safeclenz and a line of products to compliment the clients of
Bontempi instruments. The successful launch of these products depends upon
several factors including the continued success of current marketing initiatives
and the ability to secure additional capital for expansion, of which there is no
assurance. See Part I, Item 1. "Risk Factors - Need for Additional Capital,
Future Capital Requirements and Uncertainty of Market Acceptance."
o Safesoap is a highly-effective, antimicrobial soap with PCMX for general
use.
o Safesoap Plus with PCMX is being developed as a
hand-washing and sanitizing soap specifically for use in
the federally inspected meat, fish, and poultry
industries.
o Safeshampoo is being developed as a sanitizing shampoo for
use in the medical and food industries as well as for
general consumer application.
o Safeclenz is being developed as an antimicrobial "handi-wipe" which has
the convenience of portability.
In June, 1998, NBMDE entered into a strategic alliance with DermaGuard,
under which DermaGuard acts as the sole distributor for Safeshield in both
domestic and international markets. DermaGuard has an existing network of
brokers, distributors and account managers with accounts in the food service,
medical and retail markets.
Under the terms of a Manufacturing, Distribution and Assignment Agreement,
DermaGuard was granted the exclusive right to manufacture, distribute and sell
any NBMDE product owned, secured, distributed or marketed by NBMDE now or in the
future. In turn, DermaGuard granted NBMDE the right to act as its exclusive
sales agent and representative for all DermaGuard products. The contract is for
a period of three years and it is automatically renewable. In the agreement, NBM
assigned, transferred, conveyed and delivered to DermaGuard the exclusive right
to use the patent, if granted, for Safeshield. The agreement requires minimum
purchase quotas and required an initial order in the amount of $75,000 within
three days of execution. DermaGuard is required to purchase $250,000, $1,000,00
and $2,000,000 of Safeshield's in the first, second and third year of the
agreement. DermaGuard placed an initial order for $630,000 of product in January
1999.
<PAGE>
This agreement later was amended, with the changes retroactive to the date
the agreement was originally executed. As amended, the term was modified to
coincide with the expiration of the Safeshield patent.
Simultaneous with execution of the first distributorship agreement in June
1998, prior to its acquisition with the Company, NBMDE entered into a stock
exchange agreement with DermaGuard whereby NBMDE acquired ten percent (10%) or
700 shares of the issued and outstanding shares of DermaGuard's Common Stock in
exchange for three percent (3%) or 150,000 shares of NBMDE's issued and
outstanding Common Stock. See Part I, Item 1. "Description of Business - (b)
Business of Issuer - Distribution of Products"; and Part II, Item 4. "Recent
Sales of Unregistered Securities."
The agreement was modified a second time on February 3, 1999. In this
amendment, DermaGuard was named the Company's manufacturer, distributor and
seller of (1) any and all germicidal, antiviral, antibacterial, antimicrobial
based items, solutions and formulations and any derivatives thereof as used in
connection therewith; (2) any solutions or formulations which are cosmetics,
barrier creams, lotions, moisturizers and/or skin conditioners, except the
product presently produced and sold under the name AllergyGuard(TM); and (3)
Safeshield, whether now or in the future, owned, secured, distributed and/or
marketed by or on behalf of the Company. Under this amendment, the Company
agreed to pay DermaGuard a minimum of $25,000 per year to help promote the
products. In addition, the Company is required to rebate to DermaGuard three
percent (3%) of the gross revenues from the products sold by DermaGuard, less
the $25,000 minimum, to help promote the products. Under the amendment,
DermaGuard agreed to place minimum orders of $50,000 each, with payment terms of
net 10 days. The term of the agreement was modified, to three years commencing
February 3, 1999, which term is automatically renewable, subject to mutually
agreeable performance requirements. Quotas also were changed in this amendment.
For DermaGuard's prior exclusive customers, the minimums are: $600,000 in the
first year, $1,000,000 in the second year and $2,000,000 in the third year. For
all other customers, including the current exclusive customers, the minimums
are: $5,000,000 in the first year, $7,500,000 in the second year and $8,500,000
in the third year. DermaGuard has the option to comply with either of these two
quotas. The amendment includes a provision that should the Company declare
bankruptcy, or if a receiver or trustee is appointed over a significant portion
of its assets, or if any assignment of the Company's assets is made for the
benefit of creditors, the contract converts to a sales contract by which the
Company transfers and assigns all its rights in Safeshield, including the patent
rights, to DermaGuard, in exchange for DermaGuard's obligation to pay the
Company an amount equal to the net cost per ounce to manufacture and a royalty
equal to the actual manufacturing cost per ounce sold. Notwithstanding this
provision, DermaGuard remains obligated to meet the quotas. Further, DermaGuard
has a right of first refusal should NBM sell its rights in Safeshield. See Part
I, Item 1. "Description of Business - (b) Business of Issuer - Distribution of
Products - Safeshield."
At the time of execution of the exclusive in February 1999, the Company
issued warrants to purchase 1,000,000 shares of the Company's restricted Common
Stock exercisable at $1.00 to DermaGuard. These warrants have piggy-back
registration rights. See Part I, Item 1. "Description of the Business - (b)
Business of Issuer - Distribution of Products" and Part II, Item 4. "Recent
Sales of Unregistered Securities."
<PAGE>
Currently, the Company is working to increase consumer awareness of
Safeshield and its benefits through cooperative marketing support on the
internet, web-based, e-commerce advertising, surveys, direct mail,
telemarketing, trade association co-sponsorships, tradeshow booths, educational
presentations at trade shows and involvement in state-level trade association
activities.
SAI is currently the contract manufacturer of Safeshield. See Part I, Item
1. "Description of Business - (b) Business of Issuer - Sources and Availability
of Raw Materials."
The Company has applied for patent and trademark protection for Safeshield.
See Part I, Item 1. "Description of Business - (b) Business of Issuer - Patents,
Trademarks and Copyrights." Patent rights to Safeshield are the subject of a
pending lawsuit between the Company, Genomic and BMM. SAI assigned whatever
right, title and interest it owned to NBMDE as previously described herein. See
Part II, Item 2. "Legal Proceedings." Safeshield has been registered under an
FDA monograph. See Part I, Item 1. "Description of Business - (b) Business of
Issuer - Governmental Regulation - FDA Approval."
VertaSon, VertaVac, VertaLine and Glutacide(TM)
An additional line of dental products are currently being marketed by the
Company. These products are VertaSon, VertaVac, VertaLine and Glutacide(TM)
consumables and are sold to the dental community through the Company's MPD.
On June 29, 1998, Bontempi, NBMDE and Germiphene Corporation ("GC") entered
into an exclusive distribution agreement whereby Bontempi and NBMDE were given
exclusive distribution rights in the U.S. and Middle East to all products in the
GC catalogue. These products include VertaSon and VertaVac. The agreement has an
automatically renewable one year term.
VertaSon is a three-in-one, safe, fast-acting, non-corrosive, low-foaming
enzymatic cleaning solution that is used to pre-soak dental instruments thereby
minimizing hand-cleansing of such instruments.
VertaVac is a multi-action, dental evacuation system cleaner which
deodorizes a medical environment without harsh or hazardous chemicals or
detergents. The cleaning is safely accomplished by a non-pathogenic,
non-opportunistic Class 1 Bacteria making VertaVac environmentally friendly.
The Company plans also to market such products as VertaLine produced by
Micrilium Laboratories and Glutacide(TM) which is produced by Pharmx Ltd.,
although no contracts are currently in place for either of these products.
VertaLine is a fast acting dental supply tubbing cleaner which is safe to
use in all dental supply tubing applications.
Glutacide(TM) is a sterilizing and disinfecting solution for medical and
dental instruments and devices. It is sporicidal, virucidal, bacteriacidal,
tuberculocidal, pseudomonacidal and fungicidal. It disinfects semi-critical
<PAGE>
instruments and devices in twenty minutes and sterilizes critical instruments in
approximately ten hours.
Allergy Guard(TM)
Allergy-Guard(TM) is produced by Virasept. Virasept originally entered into
an exclusive distribution agreement with NBMDE in August 1998. As a result of
non-payment of an installment of $50,000, Virasept canceled the agreement.
Although the Company is no longer an exclusive distributor for AllergyGuard(TM),
MPD still markets Allergy-Guard(TM) on a non-exclusive basis. Allergy-Guard(TM)
is a topical anti-irritant cream and skin protectant capable of protecting the
skin and dramatically reducing symptoms associated with natural latex and
synthetic polymers. The triple zinc compounds form a rich, gel screen which
creates an effective barrier to protect against contact dermatitis and inhibit
latex sensitization.
In March 1999, the Company issued 800,000 of its restricted Common Stock to
be held in escrow for the benefit of Virasept to secure payment on a promissory
note given in settlement of Virasept's cancellation of the distribution
agreement relative to Allergy Guard(TM). Such shares have not been delivered to
Virasept and remain in escrow. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
FLEX MARKETING DIVISION ("FMD")
The General Manager for the FMD is Ernest Zavoral, a Director and President
of Flex which was incorporated in 1997 and acquired by the Company in November
1998.
FMD's primary business activity is the marketing and direct sales of
products, finding joint venture opportunities with product developers and
inventors, and evaluating new products. The division's business involves the
testing of various proposed new products and generating a product specific
industry viability and evaluation report. One use of such evaluation report is
so that the client may improve upon its product prior to investing substantial
capital in advertising and product rollout. For the products its tests for which
the division is able to secure patent or exclusive rights, it commits a team to
design a marketing and development program for the product.
The initial product for this division is Backstroke(TM) Back Massager for
which it obtained exclusive marketing and distribution rights.
Backstroke(TM) Back Massager
In 1995, Dr. David M. Vitko ("Vitko"), while conducting research on back
therapy, discovered that individuals received positive medical benefits from
acupressure and muscle stimulation, which included increased blood circulation.
After further research, Vitko developed Backstroke(TM) Back Massager
("Backstroke(TM)") which he began to market. The product consists of a mat type
unit with specially designed elements which massage specific arteries and
muscles in the back and spinal cord area. Also it provides strategic stimulation
to the neck, spinal vertebra and shoulder muscles.
<PAGE>
Backstroke(TM) is endorsed by the World Federation of Chiropractic and was
awarded a Silver Medal at INPEX XIII, America's largest invention trade show at
which 1,500 different products from 30 different countries were featured.
In March, 1997, Vitko sold the patent and exclusive marketing, product
development and manufacturing rights for Backstroke(TM) to Flex. An assignment
of patent was recorded by the United States Patent and Trademark Office
("USPTO") in April, 1997. See Part I, Item 1. "Description of Business - (b)
Business of Issuer - Patents, Copyrights and Trademarks." Under the terms of the
agreement, Vitko was to provide consulting services for any promotional events,
advertisements or personal appearances which will help Flex market
Backstroke(TM). Vitko and DV Back Products Inc. were to receive a royalty of 5%
based upon sales for the life of the product.
In July 1998, Vitko commenced a suit against THG Construction Management
Inc., Flex, Zavoral and Hayek in the Court of Common Pleas, Colombiana County,
Ohio, Case No. 98 CV 349 alleging fraud in the inducement, anticipatory breach
of contract and seeking damages and injunctive relief. A release and settlement
agreement was executed on January 13, 1999 whereby Flex assumed a loan from
National City Bank owed by Vitko for an amount up to $265,754 and a cash payment
of $12,591 to reimburse Vitko for the 1998 payments made on such loan. In
exchange, Vitko agreed to a modification in the royalty arrangement to 3% on net
factory sales for the life of the product and 2% on all "upsell" (where the
Company attempts to add to each order additional ancillary products to
compliment the core product being ordered and increase the total dollar purchase
amount) items. Flex also received a right of first refusal on all future
products developed by Vitko and agreed to indemnify Vitko from claims arising
out of the settlement.
Since securing the rights to Backstroke(TM), Flex has redesigned the
product to enhance the overall quality and public appeal of the unit and
developed a marketing and sales campaign that presented Backstroke(TM) in
national as well as international consumer markets. Flex retained industry
experts, Maximum Coverage Media ("MCM") and Green Stone Media, who are jointly
responsible for several major fitness products, to assist Flex in testing the
product's sales potential. The test results supported Flex's belief that the
product had worldwide mass market potential.
In July, 1997 and amended in February 1998, Flex entered into a strategic
alliance agreement for the production and distribution of a television
commercial and instructional and promotional videos for Backstroke with DeVo
Media, Inc ("DMI"). As a part of that agreement, DMI was to produce a thirty
(30) second and a sixty (60) second commercial, as well as a ten (10) minute
instructional training video and a ten minute infomercial looped to a twenty
minute stop. As payment for these services, Flex was to pay DMI $0.35 per unit
sold retail and $0.10 per unit sold wholesale for the life of the product,
payments to be made quarterly. Additionally, DMI was to have a right of first
refusal on all add-on products or subsequent versions of the Backstroke(TM). FMI
guaranteed $280,000 worth of print media placements and $1,200,000 worth of
electric advertising within twelve months of entering the contract.
On April 7, 1999, a suit was filed by DMI against Flex, the Company,
Zavoral and Hayek in the Court of Common Pleas, Mahoning County, Youngstown,
Ohio, Case No. 99 CV 832 claiming fraud and breach of contract and seeking
$136,000 compensatory damages plus prejudgment interest at a rate of 10% percent
<PAGE>
per annum plus $500,000 punitive damages. In May, 1999, Flex, NBM, Zavoral and
Hayek filed answers, affirmative defenses and counterclaims for fraud in the
inducement and breach of contract. The Company believes that it has numerous
defenses to this action. See Part II, Item 2. "Legal Proceedings."
On or about May 30, 1997 Flex entered into a variable rate commercial note
bearing interest at a variable rate of per annum with Cortland Banks for the
maximum amount of $150,000 with an original maturity date of June 1, 1998 so
that the company would sufficient capital to effectively market products. The
last modification to this note was modified in June 1999 to extend the maturity
date to September 1999. Ernest Zavoral, Kim Zavoral and Remon Heyek signed as
guarantors on the note. The current balance of the Note is approximately
$140,000.
Although marketed since 1995, Backstroke(R) ; id not reach a large audience
until the Company developed a world-wide marketing campaign which includes a 30
minute infomercial. In addition, Flex has established relationships with
international marketing firms such as Williams Worldwide and MCM. The Company
believes that these strategic relationship will increase the probability of
positioning Backstroke(R) as the premier worldwide product in the back massager
and body care market markets.
In September, 1998, the Company contracted with Banyan Productions to
produce the currently aired infomercial for the Backstroke(TM), which is
approximately 28 minutes 30 seconds in length. The total production fee was
$49,940. Banyan also helped to write the product's telemarketing scripts. Banyan
continues to provide consulting services on international marketing campaigns
and retail sale of the product. For these services, Banyan receives 3% of the
adjusted gross sales as a royalty which is paid monthly. The term of the
contract is for five (5) years, with royalties ceasing six (6) months after
termination.
The Company's primary marketing approach for Backstroke(R) is based upon
utilizing direct response television advertising directed to the consumer. Many
health and fitness/body care companies now dedicate a majority of their
advertising budget to direct response television, including the producers of Ab
Roller, Nordic Track, Body by Jake (Equipment). Despite the high cost of
television air time, the Company has determined that this method has the highest
potential return per dollar invested. Furthermore, direct response television
marketing has been a successful method to introduce new products to the market.
The Company believes that a successful television campaign for Backstroke(R)
will increase its level of success in the retail store market. Moreover, with
television exposure, the Company believes that it will be able to negotiate more
profitable licensing agreements with international marketers and product
retailers.
The Company's infomercial is the lead activity and "flagship" to the
marketing campaign designed to present the Backstroke(R) as the mass-market's
solution to back pain. Print media, direct mail and short form 120 and 60-second
commercials will follow the infomercial. Following this infomercial and the
"branding" of Backstroke(R), Flex will introduce it to the retail marketplace.
The Company has received considerable consumer response to the infomercial.
<PAGE>
Orders for Backstroke(R) for February and March 1999 were approximately $134,000
and $560,000 respectively. This response represents an average of $1.90 in
orders for every $1.00 spent on advertising. Average infomercials return $1.75
for each $1.00 spent.
Backstroke(TM) offers several benefits to users which enhance the product's
overall marketability. These benefits can be categorized into two major areas:
therapeutic care and price.
Therapeutic Care: Backstroke(TM) provides a deep penetrating acupressure
massage. The massage elements stimulate muscles, arteries and vertebrae which
releases tension and increases circulation. Such massage of the back muscles
releases lactic acids and increase blood flow through the tendons and vertebrae
thereby improving flexibility and muscle strength. Further, users of
Backstroke(TM) are exercising the gluteus, leg, and abdomen muscles while
undergoing a stimulating massage. Backstroke(TM) provides mild lumbar traction
for the lower back and by utilizing the adjustable neck massage rollers, the
unit also provides a safe and effective method for spinal traction for the upper
back.
Price: According to recent market studies conducted on behalf of the
Company, Backstroke(TM), retailing at $59.95 (plus shipping and handling), is
being marketed at an ideal price point for back massage units. Back massage
products which provide therapeutic massage and safe spinal traction are
currently being sold at prices of $200 -$500 per unit and generally are sold in
exclusive retail stores and catalogs. Other products currently on the market
include the Back System retailing at $500, the Massage Table retailing at $200,
the Traction Unit retailing at $179 and the Incline Board retailing at $169. The
Back System provides a good massage, moderate exercise, moderate traction and
minimal flexibility. The Massage Table also provides a good massage, however it
provides no exercise, no traction and no flexibility. The Traction Unit provides
no massage, minimal exercise, good traction and moderate flexibility. The
Incline Board provides no massage, no exercise, good traction and no
flexibility.
ASW Logistics, Inc. ("ASW") served as the Company's storage, shipment,
packaging and credit card processing center. It served the Company in this
capacity since 1997. Under an agreement dated October 1997 and revised April
1998, the Company had available to it 2,500 square feet of storage for
palletized product, as well as 750 square feet of work area for labeling and
shipping preparation. As revised, the cost of this facility was a minimum weekly
payment in the amount of $175 with a handling charge of $1.70 for each basic
unit Backstroke(TM) shipped plus a handling charge of $1.50 for each upsell
item. ASW received an order information from telemarketing phone centers via
electronic download, processed the order through a credit card processing center
and, if the card was approved, shipped the product using United Parcel Service.
This contract was discontinued as of July 1, 1999. Sare Plastics, Inc. ("Sare")
now serves as the Company's fulfillment house.
In November, 1998, the Company contracted for a period of one (1) year with
Blitz Marketing ("Blitz") which is in the business of marketing discount buying
club memberships. The Company received $12.50 for each client which it generates
as a new member for Blitz and receives $10.00 for each renewal. The Blitz
contract was terminated by the Company in March, 1999.
<PAGE>
In December, 1998, the Company contracted with the Aftermarket Company, LLC
("ACL") for inbound telesales services. ACL maintains a telemarketing phone
center which handled inbound calls which resulted from television
advertisements. ACL records the name, address, phone number, credit card
information and order information for product. ACL charged the Company a $2,000
setup fee and receives commissions of the greater of 3% or $3.00 per month, plus
a $1.00 commission as an incentive for each continuity sale made. Additionally,
they charge a talktime rate of $0.02 per second and an informational
announcement time rate of $0.004 per second.
In January, 1999, the Company entered into a Media Funding and Servicing
Fee Agreement with Media Funding Corporation ("Media"), the term of which is a
period of one (1) year. Media advances the monies necessary to purchase
television airtime for advertising three (3) weeks in advance of the actual
airing of the commercial. The cost to the Company is five percent (5%) of the
gross media billings. Media is paid all sums advanced plus the five percent (5%)
directly by the credit card processing company. Under the terms of the
agreement, the Company has entered into a contract with CardService
International to assure payments to Media.
In March 1999, the Company entered into an agreement for a term of one (1)
year with MCM to supply airtime and to act as the Company's agent for the
Backstroke(TM) infomercials. NBM pays 100% of the airtime cost, of which MCM
retains a 10% commission. NBM also issued to MCM 75,000 shares of its common
stock upon execution, which stock carries Piggy-Back Registration rights. NBM
must also issue 50,000 shares for every three month period where the sales to
advertising ratio average exceeds 1.9 to 1. The contract can be terminated on 30
days notice. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 25102(f) of the California Code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In May, 1999, the Company executed an agreement with Fredrickson TV, an
international broker, who will help develop the international market for
Backstroke(TM). Fredrickson TV will receive 12% of net sales to distributors it
recruits under this agreement.
In May,1999, the Company entered into an agreement with M2 Marketing and
Management Services, Inc. ("M2") to oversee and manage the media campaign for
Backstroke(TM). M2 identifies, selects and manages vendors, negotiates fees on
behalf of NBM and reports to NBM frequently. For these services, NBM pays M2
$5,000 per month. The term is indefinite and may be terminated upon thirty (30)
days advance written notice.
In June 1999, the Company signed an Addendum to the M2 contract which
entitles M2 to a maximum of 155,000 shares of its restricted common stock if
certain performance criteria are met before June 2000. In addition, M2 is
entitled to receive one (1) share of NBM's restricted common stock for every
five (5) Backstroke units sold.
In addition to the infomercial, the Company intends to institute a direct
mail and sales campaign for the Backstroke(TM) which the it believes will
generate sales from consumers throughout the United States. In addition, the
Company has an ongoing program to participate in new product trade shows,
fitness/healthcare promotional events and retail mall shows. These events have
generated sales and significant exposure in the industry. Currently, the Company
<PAGE>
is negotiating additional marketing agreements with companies in the
health/fitness market. Until recently, the sales generated were done on a
relatively small budget.
In July 1999, the Company entered into an exclusive marketing and
distribution agreement with Tristar Products, Inc., a Pennsylvania corporation
("Tristar") for its Backstroke(TM) product. Tristar was given the exclusive
right to market and distribute Backstroke(TM) worldwide (subject to certain
limitations) for as long as Tristar continues to meet minimum purchase
requirements of 7,500 units in July, 15,000 units each in August and September
and 20,000 units per month thereafter. Tristar is also entitled to 500,000
shares of the Company's restricted common stock upon execution, which shares
have piggy-back registration rights.
The key parts of Backstroke(TM) are manufactured by Kongent Company Ltd.
("Kongent") which is located in Taiwan. Kongent currently manufactures only the
foam shafts which are shipped for assembly by Sare Plastics, Inc. ("Sare").
Kongent bills the Company on a purchase order basis based upon a written price
quotation. Kongent has signed a confidentiality agreement with the Company to
cover the intellectual property. Although recently Kongent agreed to fully
assemble Backstroke(TM) beginning this summer, no formal contract has been
signed. In the event this arrangement is formalized, the product will enter the
United States fully assembled and ready for packaging.
Sare assembles and packages Backstroke(TM) and ships the finished product
to ASW for shipment to the customer. The cost to the Company is based upon a
written price quotation. Sare bills the Company on a purchase order basis. In
the event the Kongent assembly arrangement is formalized, Sare will continue to
serve as an alternate source of product assembly. See Part I, Item 1.
"Description of Business - (b) Business of Issuer - Sources and Availability of
Raw Materials."
The Company imports its parts from Kongent through Union Transport
Corporation ("Union") which provides all necessary paperwork to customs and
oversees all import matters. Union also is used on a consulting basis for
shipments to Canada. The Company foresees the need to expand its relationship
with Union as it prepares to launch the product internationally.
Business Strategy
The Company's business strategy, which is dependent upon its continuing to
have sufficient cash flow from operations and/or obtaining sufficient additional
financing with which to enhance the commercialization of existing and future
products of the Safeshield product line, the Bontempi surgical instrument line
and also Backstroke(TM) . Its objective is to provide innovative products which
create and maintain a safe environment for healthcare and food preparation, to
enhance the level of surgical care available to medical, dental and veterinary
patients, and to provide wellness products which improve the quality of life.
The Company's revenues are based upon sales of Backstroke(TM) product, sales of
Bontempi surgical instruments and sale of its Safeshield product to DermaGuard.
The Company's revenues are dependent on the volume of sales from its products.
Revenues from sales are recognized in the period in which sales are made.
The Company's gross profit margin will be determined in part by its ability to
<PAGE>
estimate and control direct costs of manufacturing and its ability to
incorporate such costs in the price charged to clients.
The Company's objective is to become a dominant provider of wellness,
medical, dental and veterinary devices and products which improve safety, to
provide an effective method to protect food handlers, healthcare providers and
others from exposure to disease and to provide sufferers from back pain with an
effective and inexpensive method of relief and prevention. To achieve this
objective, and assuming that sufficient funds are available, the Company intends
to: (i) develop international distribution channels and co-marketing alliances
for the Company's products and services; (ii) continue research and development
and acquisitions of synergistic products and companies; and (iii) fine tune
market strategies based upon ongoing evaluations of customer needs, capital
budgeting opportunities and market economy fluctuations.
Management believes that the Company is poised to lead in the ever
developing health and medical safety market, as well as the back fitness
industry and plans to capitalize on the opportunity while providing significant
benefits to its customers. Management expects, in the event the Company
continues to achieve product acceptance, to increase its market penetration
through additional acquisitions and potential merger opportunities with
appropriate bases of business development. However, such expansion presents
certain challenges and risks and there can be no assurance that the Company,
even if it were successful in acquiring other bases of business development,
would be successful in profitably penetrating these potential markets.
Sales and Marketing
The following discussion of the health and wellness industries, as they
relate to the Company's objectives, is of course pertinent only if the Company
is successful in maintaining sufficient cash flow from operations and/or
obtaining sufficient debt and/or equity financing to commercialize its existing
products, to add additional key personnel where needed, and to supplement new
product development. In addition, the Company must be able to generate
significant profits from operations and/or additional financing to continue
expanding the business and/or to fund the anticipated growth, assuming the
Company's proposed expanded business is successful. There can be no assurance
such financing can be obtained or that the Company's proposed expanded business
will be successful.
Background
According to the World Health Organization, forty (40) million people will
be infected with HIV by the year 2000. There are nearly ten (10) million people
worldwide currently infected, including close to one (1) million children. Over
four (4) million Americans carry the HIV virus.
Auto Immune Deficiency Syndrome ("AIDS") is now the top killer of men age
17 to 54 in the United States. The CDC and the National Institutes of Health
("NIH") have focused a great deal of effort and research into improving
occupational safety and decreasing the risk of bloodborne pathogens in the
healthcare and food handling settings. There are over two (2) dozen diseases
that have been involved in documented transmission by way of exposure. Over one
<PAGE>
and a quarter million (1,250,000) Americans have chronic Hepatitis B and when
their blood is exposed to a healthcare worker's intact skin, the transmission
rate is thirty percent (30%). Since operating room personnel, dentists and
surgeons are in particular high risk categories, the Company has committed
itself to developing products to decrease the potential for deadly viral
transmission.
Market Overview, Size and Occupational Safety
The Company's MPD seeks to provide solutions to meet the needs in the food
handling and healthcare settings. Value is built into the Company's Safeshield,
VertSon, VertaVac, Verta Line, Glutacide(TM) and Allergy Guard(TM) products
("Safety Pharmaceuticals") by reducing costs of preventive goods such as gloves,
time needed to change gloves and/or reapply barrier creme and occupational
exposures and patient risks. Currently used safety measures are inadequate, with
an unbelievable 23% exposure rate documented even in known or suspected HIV
cases. Hepatitis C is a new, incurable threat and HIV is now the number one
cause of death in 25 to 44 year-olds in the United States. Significant resources
are devoted to occupational risks, with over $3 billion expended annually in the
United States on sharps injuries and bloodborne exposures. According to the
Canadian Medical Association Journal, treating one HIV-infected healthcare
worker may cost in excess of $500,000. In addition to the risk of exposure,
significant pressures have been made to reduce costs in the healthcare industry.
With the increased prevalence of HIV, hepatitis and other deadly diseases,
OSHA has set increasingly strong standards. Despite the standard use of
protective gloves and clothing, dentists and surgeons are at a particularly high
risk. According the United States Department of Health and Human Services,
healthcare workers contract more than 15,000 bloodborne infections from
occupational exposure per year, resulting in 300 deaths and thousands of
illnesses. A Yale University study found that visible contact with patient's
blood occurred in 63% of surgical cases. At current rates, researchers from
major medical institutions have estimated the lifetime career risk of
occupational HIV infractions for surgeons as high as 20%, depending on the
patient population. Despite this data, HIV is overshadowed by Hepatis B and C
which are 100 times more infective.
A large body of research and statistical evidence has been accumulated over
the last ten (10) years regarding the significant risk of bloodborne disease.
Similar kinds of risks exist regarding the transmission of disease. Since the
AIDS virus was discovered and blood testing became available in 1985, even
greater awareness has been focused on these problems. The Company has focused
its efforts on identifying occupational risks which can be minimized by the use
of its Safety Pharmaceuticals.
As noted, the bloodborne pathogens which have received the most attention
are AIDS and Hepatitis. There are an estimated ten (10) million people infected
with the AIDS virus worldwide, and because of the nature of the disease, it is
impossible to determine infected individuals with certainty, even with blood
tests. Hepatitis is even more widespread and, according to medical experts, much
more contagious. These diseases and others are transmitted by contact with blood
or bodily fluids and reports of infection through needlesticks, sharps injuries,
and skin to skin contact are accumulating. The American Hospital Association, in
1992, estimated that as many as 60 healthcare workers may become infected
annually with HIV as a result of occupational exposure. There have been
<PAGE>
estimates as high as 12,000 Hepatitis B infections annually to healthcare
workers. A newer form of Hepatitis, Hepatitis C, is rapidly becoming even more
important and more serious.
OSHA now has strict guidelines for personal protective equipment, such as
gloves, gowns, and eye wear. However, with a reported rate of glove perforation
in surgery of up to 50% and concerns regarding the prevention of bloodborne
pathogen transmission, healthcare professionals, workers and employers
requesting more protection.
The cost of these types of exposures is also a significant factor in the
Company's business. The direct financial burden that facilities bear for medical
evaluation and follow-up after an employee has been exposed to a disease is
astronomical. Factors such as worker's lost time and potential liability
litigation and indirect costs such as time lost from work, medical expense and
potential liability loss are forcing administrators to try to limit any chance
of the exposure of their employees. Surprisingly, there have been few
significant advances in new technology regarding bloodborne pathogens. The
Company is focusing its research on expanding the public's awareness of the
benefits of a barrier creme which will reduce or eliminate the spread of
infections.
The Company's initial product, Safeshield was designed primarily to reduce
the risk of exposure and/or cross contamination of infectious disease. This has
been expanded by its current line of Safety Pharmaceuticals. More efficient,
reliable and affordable medical devices are offered to the healthcare industry
through the Company's Bontempi line of instruments.
Customer demand for the Company's products and services is expected to be
stimulated further by recent scientific data suggesting that the risks related
to these hazards were originally underestimated. In addition, new serious viral
diseases are discovered regularly.
Healthcare and food handling companies are under increasing pressure to
evaluate and adopt the use of safety-related technology. New regulations and
federal guidelines will encourage any efficient means of improving safety,
especially with regard to HIV transmission. Because of the size and demands of
these markets, the Company believes that this is an area of potentially
significant growth if it can continue to strengthen the market niche is has
created.
Health awareness and fitness concern is also increasing among an overweight
and under-exercised population in the United States. The consumer market for
massagers and related products has consistently grown during the last 20 years.
Consumers have supported the industry by purchasing electric massage wands,
chairs and manual devices. Furthermore, the overall growth of the healthcare,
wellness and physical fitness industry have complimented the sales of massage
related devices. Industries that provide products that enhance the body or
provide a feeling of wellbeing have grown significantly due to an increase in
consumer demand.
The growth and improvement of direct response marketing and sales via
infomercials, home shopping networks and commercials has had a positive impact
on the massager industry. Manufacturers and retailers increasingly are utilizing
alternative forms of retailing; such as, television shopping and infomercials,
merchandising massagers with other home comfort items and promoting the products
<PAGE>
as a year-round category. Unit sales, estimated at 4.6 million, are predicted to
rise 4% to 10% throughout the entire category.
Currently in the United States, more than 60% of all infomercials feature
products related to physical fitness, healthcare or body care. These products
range from exercise devices to diet plans and self-improvement programs.
Consumers are increasingly more interested in improving their quality of life by
enhancing physical appearance or overall well-being. Manufacturers and retailers
have responded to this surge in interest by offering more products at various
price points. Prior to the mid 80's, the products were marketed to high income
individuals as "specialty" or "exclusive" items only distributed in specific
retail stores or catalogs. Typically, these products were distributed and
marketed as gift items with most of the sales occurring in the 4th quarter of
the year. Because of the increase in demand, sales are now growing throughout
the year and the products have become year-round items.
Major manufacturers and retailers who formerly specialized in general home
electronics are now manufacturing and marketing body care devices including:
massagers, aromatherapy machines, foot spas and exercise equipment. The
manufacturers and retailers that have shifted some of their efforts into the
healthcare and body care industries include: Panasonic, Conair, Sears, Pergament
Home Centers and Century 21 Department Stores.
Markets - MPD
The primary healthcare markets for the Company's Safety Pharmaceuticals and
Bontempi instruments include hospitals, healthcare facilities, surgeons, nurses,
technologists in procedure-oriented specialties, including obstetricians,
dentists, emergency room personnel and other medical professionals. The total
global medical products and devise market is $100 billion annually and such
market is growing at the rate of 18% to 25% per year.
The initial target market areas for the Company's Safety Pharmaceuticals
and Bontempi instruments are in the major metropolitan centers in the United
States and Mexico. Entry into these target areas is expected by the Company to
significantly ease general market penetration.
The Company plans to begin to export its Safeshield product worldwide to
markets including Europe, South America and Asia, the Middle East and the
Pacific Rim under its agreement with DermaGuard. There can be no assurance that
its existing distribution arrangements will sustain this expansion nor that new
distribution arrangements can be established. See Part I, Item 1. "Description
of Business - (b) Business of Issuer - Distribution of Products."
All of the Company's Bontempi devices have competition from the major
device manufacturers, although the Company believes that the Bontempi
instruments are far superior in design and quality. Additionally, Bontempi holds
over 300 patents on exclusive instruments, many of which are not available from
any other manufacturer. Safeshield too has competitors who manufacture barrier
creme lotions, although all require two part application to achieve the same
benefits and some contain ingredients which irritate the hands, have gaps in
protection and/or must be reapplied frequently or which break down at hot and
cold temperatures. There is a natural tendency to want to rid oneself of gloves,
<PAGE>
gowns, shields and other products of that type which inhibit free movement and
limit the practitioner's sense of touch and to focus on innovative, safety
related products such as Safeshield which is inexpensive and long-lasting.
The market for the Company's Safety Pharmaceuticals is divided into three
(3) segments: healthcare workers, food handling and customer service industries
and individual consumers.
The primary healthcare market for these products include hospitals,
dentists, surgeons and dental technicians, surgical nurses and other facilities
which require a sterile environment. Secondary end user markets include
out-patient clinics, dental offices, emergency medical services, fire and rescue
organizations, medical offices and laboratories. This segment of the Company's
market will be the ultimate user of both the medical devices and Safety
Pharmaceuticals and it is particularly defined by the need for protection
against bloodborne diseases from body fluids.
The service industry market is comprised of meat packing houses, food
processing facilities and restauranteurs who must limit the exposure of their
employees to various diseases, as well as prevent cross-contamination of
customers. Safeshield is a cost-effective, long-lasting product that will
eliminate the need for less effective products such as gloves or anti-bacterial
soaps.
Individual consumers, such as hikers, hunters, campers and other who are
conscious of the rapid spread of disease represent a large potential market
worldwide. Safeshield and the expanded line of Safeshield products can be
utilized in the home to protect against the infections from bacteria and viruses
encountered everyday. The increasing awareness of food contamination alone
increases the potential of this market.
Markets - FMD
FMD is marketing Backstroke(TM) as a therapeutic back care product which is
targeted towards consumers between the ages of 25 - 65. The product's price and
ability to provide relief from back pain and lack of mobility provides
mass-marketing potential worldwide.
More than 100 million Americans suffer from back pain or physical
impairments caused by or aggravated by weak back muscles. Backstroke(TM)
increases vital circulation and enhances muscle strength regardless of the
user's level of physical fitness.
Distribution of Products - Safeshield Products
In June, 1998, NBMDE entered into a strategic alliance with DermaGuard,
under which DermaGuard acts as the sole distributor for Safeshield in both
domestic and international markets. DermaGuard has existing network of brokers,
distributors and account managers with accounts in the food service, medical and
retail markets.
Under the terms of a Manufacturing, Distribution and Assignment Agreement,
DermaGuard was granted the exclusive right to manufacture, distribute and sell
any NBMDE product owned, secured, distributed or marketed by NBMDE now or in the
<PAGE>
future. In turn, DermaGuard granted NBMDE the right to act as its exclusive
sales agent and representative for all DermaGuard products. The contract is for
a period of three years and it is automatically renewable. In the agreement, NBM
assigned, transferred, conveyed and delivered to DermaGuard the exclusive right
to use the patent, if granted, for Safeshield. The agreement requires minimum
purchase quotas and required an initial order in the amount of $75,000 within
three days of execution. DermaGuard is required to purchase $250,000, $1,000,00
and $2,000,000 of Safeshield's in the first, second and third year of the
agreement. DermaGuard placed an initial order for $630,000 of product in January
1999.
This agreement later was amended, with the changes retroactive to the date
the agreement was originally executed. As amended, the term was modified to
coincide with the expiration of the Safeshield patent.
Simultaneous with execution of the first distributorship agreement in June
1998, prior to its acquisition with the Company, NBMDE entered into a stock
exchange agreement with DermaGuard whereby NBMDE acquiried ten percent (10%) or
700 shares of the issued and outstanding shares of DermaGuard's Common Stock in
exchange for three percent (3%) or 150,000 shares of NBMDE's issued and
outstanding Common Stock. See Part II, Item 4. "Recent Sales of Unregistered
Securities."
The agreement was modified a second time on February 3, 1999. In this
amendment, DermaGuard was named the Company's manufacturer, distributor and
seller of (1) any and all germicidal, antiviral, antibacterial, antimicrobial
based items, solutions and formulations and any derivatives thereof as used in
connection therewith; (2) any solutions or formulations which are cosmetics,
barrier creams, lotions, moisturizers and/or skin conditioners, except the
product presently produced and sold under the name AllergyGuard(TM); and (3)
Safeshield, whether now or in the future, owned, secured, distributed and/or
marketed by or on behalf of the Company. Under this amendment, the Company
agreed to pay DermaGuard a minimum of $25,000 per year to help promote the
products. In addition, the Company is required to rebate to DermaGuard three
percent (3%) of the gross revenues from the products sold by DermaGuard, less
the $25,000 minimum, to help promote the products. Under the amendment,
DermaGuard agreed to place minimum orders of $50,000 each, with payment terms of
net 10 days. The term of the agreement was modified to three years commencing
February 3, 1999, which term is automatically renewable, subject to mutually
agreeable performance requirements. Quotas also were changed in this amendment.
For DermaGuard's prior exclusive customers, the minimums are: $600,000 in the
first year, $1,000,000 in the second year and $2,000,000 in the third year. For
all other customers, including the current exclusive customers, the minimums
are: $5,000,000 in the first year, $7,500,000 in the second year and $8,500,000
in the third year. DermaGuard has the option to comply with either of these two
quotas. The amendment includes a provision that should the Company declare
bankruptcy, or if a receiver or trustee is appointed over a significant portion
of its assets, or if any assignment of the Company's assets is made for the
benefit of creditors, the contract converts to a sales contract by which the
Company transfers and assigns all its rights in Safeshield, including the patent
rights, to DermaGuard, in exchange for DermaGuard's obligation to pay the
Company an amount equal to the net cost per ounce to manufacture and a royalty
equal to the actual manufacturing cost per ounce sold. otwithstanding this
provision, DermaGuard remains obligated to meet the quotas. Further, DermaGuard
<PAGE>
has a right of first refusal should NBM sell its rights in Safeshield.
At the time of execution of the exclusive in February 1999, the Company
issued warrants to purchase 1,000,000 shares of the Company's restricted Common
Stock exercisable at $1.00 to DermaGuard. These warrants have piggy-back
registration rights. See Part II, Item 4. "Recent Sales of Unregistered
Securities."
Distribution of Products - Bontempi Instruments
The MPD has three private label agreements with key industry suppliers for
its Bontempi Instruments. These agreements are informal in that sales are
received in the form of purchase orders that are submitted to the Company. These
private label agreements provide the company large volume orders for
specialized, high value instruments which compliment the private label firm's
existing customer requirements.
Status of Publicly Announced Products and Services
Bontempi instruments are available through the Company in the United
States, Mexico and the World-Wide-Web.
The first Safeshield order has been received from DermaGuard and is
currently being processed by the Company. The Company has contracted for product
packaging and labeling and is expected to fill the order in July, 1999.
The Company's research and development of other Safeshield products is
dependent on revenues from sales of its current products and also upon raising
additional capital (of which there can be no assurance).
Backstroke(TM) currently is available through its infomercial and by its
direct marketing. The Company expects to sell the Backstroke(TM) in retail
stores when profit margins show signs of weakening. The retail market is
expected to support the product for several years thereafter.
Competition
In each of the Company's lines of business, the Company faces competition
from large, well-established companies with considerably greater financial,
marketing, sales and technical resources than those available to the Company.
Additionally, many of the Company's present and potential competitors have
research and development capabilities that may allow such competitors to develop
new and improved products which may compete with the Company's products. The
Company's products could be rendered obsolete or made uneconomical by the
development of new products, technological advances affecting the cost of
production, or marketing or pricing actions by one or more of the Company's
competitors. The Company's business, financial condition or results of
operations could be materially adversely affected by one or more of such
developments. There can be no assurance that the Company will be able to compete
<PAGE>
successfully against current or future competitors or that competition will not
have an material adverse effect on the Company's business, financial condition
or results of operations.
Bontempi Instruments
The Company's Bontempi instruments line of business is highly competitive.
There are numerous other manufacturers and distributors, all of which are larger
and have greater financial resources and more sales representatives than the
Company. The Company's material competitors in the dental supplies area are
Dentsply, Sybron International Corporation, Premier Dental, Hu- Friedy, Coltene
Whaledent, American Eagle, Nordent, Moyco Technologies, Inc, Patterson Dental
Co. and Miltex. In the area of dental, medical and veterinary products, the
Company's principal competitor is Henry Schein, Inc.
The Company believes that since many of these companies are master
distributors for manufacturers that the exclusive distribution rights of the
Company in the Bontempi instruments provides a competitive edge, especially on
those instruments which are unique in design. Bontempi's products are
manufactured from the highest grade German steel and are designed for maximum
maneuverability and precision. They are competitively priced and offer a
warranty from manufacturing defects. Additionally, Bontempi maintains patents
for over 300 instruments and devices.
Safety Pharmaceutcials
The Company's principal competitors for its Safeshield product are Keri
Lotion, DermaShield, DermaPlus, Purell, BactiGuard, SafetyDerm and Syderma, all
of which are manufactured by major pharmaceutical companies which have major
distributors in place. Most of the Company's competitors are large,
well-established pharmaceutical, chemical, cosmetic or heath care companies with
considerably greater financial, marketing, sales and technical resources than
those available to the Company. The pharmaceutical industry is characterized by
intense competition and rapid product development and technological change.
In addition all latex glove manufacturers, soaps, surgical scrub solutions,
alcohol gels and barrier lotions inherently compete with the Safeshield product.
However, latex gloves protect only the person wearing them; soaps and surgical
scrubs are effective but extremely short-lived; alcohol gels and barrier lotions
are effective at killing some bacteria, but both have a harsh effect on the skin
with frequent use and such gels and lotions do not provide a time-activated
waterproof barrier.
The Company believes that Safeshield, with its waterproof protective
barrier, gentleness to the skin and virtual kill on contact results, provides
the Company with the ability to compete with current products available in the
marketplace.
Backstroke(TM)
The back massager industry includes several products most of which are
electric wands and mats that vibrate muscles. Several large appliance companies
<PAGE>
have entered the therapy and fitness market including Panasonic, Conair, Sears,
Pergament Home Centers and Century 21 Department Stores. In addition, the Great
American Backrub Store, Inc. has created a franchise retail store concept which
concentrates on back rubs and sells back and stress related products. Many of
the available products fail to provide adequate acupressure and circulation; two
key factors to effective massage therapy. Furthermore, several products do not
provide therapy to the vertebrae or mild traction, which enhances flexibility
and mobility. The Company believes that the therapeutic effects and price
provide Backstroke(TM) with the ability to effectively compete.
The back massage market for the Company's Backstroke(TM) product is highly
competitive. It is characterized by frequent introduction of new products, often
accompanied by major advertising and promotional programs, including
infomercials. The Company believes that the principal competitive factors
affecting its business include price, quality, brand name recognition, product
innovation and customer service. The Company competes in the U.S. with
recreational and exercise activities offered by health clubs, as well as with
number of domestic manufacturers, domestic direct importers, foreign companies
exporting products to the U.S. and, in its direct sales efforts, with major
retailers and distributors. Competitors in these areas include Precor, Inc., CML
Group Inc. (under the NordicTrack brand), Icon Fitness Corporation and
LifeFitness Inc. In Europe, the Company will compete principally with Tunturi,
Inc., and Kettler International Inc., a number of Asian importers and some of
its domestic competitors.
The Company's products also indirectly compete with outdoor fitness,
sporting goods and other recreational products. Competitors in these product
areas include Huffy Corporation, Canstar Sports Inc. (a subsidiary of Nike
Inc.), Reebok International Ltd. and Rollerblade, Inc. Certain competitors are
better capitalized than the Company and may have greater financial and other
resources than those available to the Company. In addition, there are no
significant technological, manufacturing or marketing barriers to entry into the
fitness equipment or the exercise accessory markets, although many companies in
the industry, including the Company, have sought and received numerous patents
in an effort to protect their competitive position.
Sources and Availability of Raw Materials
The ingredients for Safeshield, Allergy-Guard(TM) and Glutacide(TM) are
readily available from numerous third party suppliers. SAI is the contract
manufacturer of Safeshield. Allergy- Guard(TM) is supplied under an
non-exclusive agreement with Virasept. The Company expects no problem with the
availability of any one component.
VertaSon and VertaVac are provided to the Company under an agreement with
Germiphene, while Glutacide(TM) is provided by Micrilian. Each is made from
ingredients which are readily available from a number of suppliers.
Bontempi instruments are ordered directly from the manufacturer under an
exclusive distribution agreement. They are made from a specific grade of German
steel which is readily available for purchase from numerous suppliers.
<PAGE>
Backstroke(TM), which is manufactured by Kongent and assembled by Sare,
consists of steel rods, foam rubber balls and plastic, all of which are readily
available from third party suppliers.
Sare assembles and packages Backstroke(TM) and ships the finished product
to ASW for shipment to the customer. In the event the Kongent assembly
arrangement is formalized, Sare will continue to serve as an alternate source of
product assembly.
Dependence on one or few customers
Safeshield is distributed exclusively by DermaGuard through a broad network
of brokers, distributors and account managers to numerous accounts. All sales of
Safeshield depend upon the success of DermaGuard's sales efforts.
The DermaGuard agreement, as revised, is for three years commencing
February 3, 1999, which term is automatically renewable, subject to mutually
agreeable performance requirements. DermaGuard has the following production
quotas: for DermaGuard's prior exclusive customers, the minimums are: $600,000
in the first year, $1,000,000 in the second year and $2,000,000 in the third
year and for all other customers, including the current exclusive customers, the
minimums are: $5,000,000 in the first year, $7,500,000 in the second year and
$8,500,000 in the third year. DermaGuard has the option to comply with either of
these two quotas.
A majority of the Company's Bontempi instruments sales are a result of
private label arrangements.
All of the Company's other products do not depend on any one or few
customers.
Research and Development
The Company believes that research and development is an important factor
in its future growth. The Company currently engages in a continuing product
research, but will not seek to develop other products until such time as it has
adequate financing from operation or third party sources, neither of which is
assured.
Patents, Copyrights and Trademarks
Patents and trademarks are significant to the conduct of the Company's
business. The Company owns one (1) patent and one (1) trademark on one (1)
product. Patented and trademarked by Dr. Vitko, it was assigned to the Company.
In addition, the Company is the exclusive distributor of Bontempi's patented
instruments.
The Company's patent is United States Patent No. 5,352,188, issued on
October 4, 1994 for Backstroke(TM). The patent was filed on February 4, 1993 by
Dr. David Vitko and covers a combined back and neck stimulator and
rehabilitation device. The patent was assigned to Flex and recorded at the USPTO
in April, 1997. The patent is for a term of seventeen (17) years from the
issuance date.
<PAGE>
In addition, a patent application was filed on February 11, 1998 by Roger
Perry, inventor of Safeshield, which application has been assigned to the
Company. The application covers an improved antimicrobial barrier composition.
It has been rejected however by the USPTO. The Company plans to refile an
amended application.
Bontempi holds patents on over 3,500 instruments and devices, for which the
Company is the exclusive distributor in the United States, Mexico and the
World-Wide-Web.
Dr. Vitko filed on September 2, 1993 for trademark registration with the
United States Patent and Trademark Office for Backstroke(TM). This trademark was
registered on June 28, 1994.
The Company filed on September 25, 1998 for trademark registration with the
USPTO for Safeshield and its design. This trademark has not yet been registered.
As of May 7, 1999, final review prior to publication has been completed and the
application will be published for opposition.
The Company filed two(2) applications September 25, 1998 for trademark
registration with the USPTO for NBM including its design and the phrase
"topically applied antimicrobial barrier composition." These trademarks have not
yet been registered. As of May 14, 1999, the applications were approved by the
examining attorney for publication for opposition. The actual date of
commencement of which will be published in approximately 60 days.
The Company filed on November 18, 1998 for trademark registration with the
USPTO for Bontempi including its design and the phrase "medical instruments."
This application has not been assigned for review.
The Company is a party to an action claiming patent infringement by its
Safeshield product. Genomic and BMM have brought suit against NBM and Daniel
Hoyng for violation of 15 U.S.C. 1125(A) - Reverse Passing Off, violation of
Florida Deceptive and Unfair Trade Practices Act, breach of fiduciary duty and
conversion. Genomic and BMM allege that NBM and Hoyng have used and continue to
use confidential proprietary information which is the property of Genomic and
relates to the Activ product. NBM and Hoyng have each filed a motion to dismiss
which are currently pending. Should the case not be dismissed against either NBM
or Hoyng, each have prepared an extensive counter-suit against Genomic, BMM,
William Coury and others. See Part II, Item 2. "Legal Proceedings."
Governmental Regulation
FDA Approval
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the development, manufacture and marketing
of the Company's Safety Pharmaceutical products. It is anticipated that
<PAGE>
virtually all of the products distributed through the Company's MPD will require
regulatory approval by governmental agencies prior to commercialization.
Many of the Company's Bontempi products are regulated as medical devices.
Prior to entering commercial distribution, all medical devices must undergo FDA
review under one or two basic review procedures: a Section 510(K) premarket
notification ("510(K)") or a premarket approval application ("PMA").
A 510(K) notification is generally a relatively straightforward filing
submitted to demonstrate that the device in question is "substantially
equivalent" to another legally marketed device. Approval under this procedure is
typically granted within ninety (90) days if the product qualifies, however,
this procedure may take longer.
When the product does not qualify for approval under the 510(K) procedure,
the manufacturer must file a PMA which shows that the product is safe and
effective based on extensive clinical testing among several diverse testing
sites and population groups, and shows acceptable sensitivity and specificity.
This requires much more extensive prefiling testing than does the 510(K)
procedure and involves a significantly longer FDA review after the date of
filing.
In the past, the Bontempi products have been cleared by the FDA under the
501(K) expedited form of pre-market review or have not required FDA approval.
While the industry had for several years experienced lengthy delays in the FDA
approval process, more recently, the timeliness of the FDA's review has
improved. Timely product approval is important to the Company's maintaining
and/or obtaining a technological competitive advantage. Other than FDA product
approval waiting periods, the Company has not encountered any other unusual
regulatory impediments to the introduction of new products.
The following Bontempi medical devices have been approved by the FDA and
categorized as follows:
<TABLE>
<CAPTION>
DESCRIPTION MEDICAL DEVICE PRODUCT CODE
LISTING NUMBER
<S> <C> <C>
Amalgam Carrier A8077547 76E-KI
Amalgam Scraper, A807526 76E-KH
Modeling Inst.
Amalgam Pluggers A807518 76E-KR
Bowl, Canister, A807549 76E-KZ
Sharpening Accessories
Cement Spatula A807527 79G-AF
Chisel A807531 76E-MM
<PAGE>
Crown Remover A807537 76E-IS
Curette A807543 76E-MK
Curette, Spoon A807544 76E-MK
Elevators, various A807519 76E-MJ
Excavator A807542 76E-KC
Explorer A807529 76E-KB
Forcep, Tooth Extractor A807516 76E-MG
Forcep, Dressing, various A807517 76E-FL
Gauge Measuring Inst. A807530 76E-IL
Handle, Dental A807546 76E-JB
Instrument
Hemostat, dental A807520 76E-MD
Knife, Microknife A807545 76E-JZ
Matrix Roll, Matrix Band A807533 76D-ZN
Mirrors & Handles A807538 76E-AX
Orthodontic Pliers, Utility A807535 76E-JY
Instruments
Osteotome A807550 76E-MM
Periodontal Chisel A807524 76E-ML
Periodontic Files, Spoon A807539 76E-MR
Periosteal, Elevator A807525 76E-MJ
Plastic Filling Instrument A807521 76E-IY
Probes, Spreaders A807529 76E-KK
Retractor A807548 76E-IG
Rongeurs A807534 76E-MH
Robber Dam Punch, A807532 76E-JG
Forcep
Rubber Dam Clamp A807523 76E-EF
<PAGE>
Scaler A807540 76E-LB
Scissors A807541 76E-GN
Scissors Micro & Needle A807536 76E-GN
Holders
Suction, Aspirator A807522 76E-BR
Ortho Plier A807552 JEX
</TABLE>
The Company's Safeshield product does not require FDA approval as it is
formulated and marketed under an FDA monograph which allows for the sale of
products without approval on the condition that only certain ingredients are
included and only certain representations are made in the labeling. See 50 Fed.
Reg. .31402 (June 17, 1994). The Company's goal is to obtain FDA approval of
Safeshield so that it can extend the claims it is permitted to state pursuant to
the terms of the monograph. The Company projects that such approval will cost
approximately $2 million, for which it would require additional funding. There
can be no assurance that such funding will be available and if available that it
will be on terms acceptable to the Company.
Overseas, the degree of government regulation affecting the Company's
expansion of its Safety Pharmaceutical products varies considerably among
countries, ranging from stringent testing and approval procedures in certain
locations to simple registration procedures in others, while in some countries
there is virtually no regulation of the sale of the Company's products. The
Company has not attempted to meet any such regulations for its products and
therefore has no experience as to whether or not it will encounter material
delays or unusual regulatory impediments in marketing its products
internationally. Establishment of uniform regulations for European Economic Area
nations took place on January 1, 1995. The new regulations will subject the
Company to a single regulatory scheme for all of the participating countries. At
such time as the Company expands into these markets, it will be required to take
the necessary steps designed to assure ongoing compliance with these new, more
rigorous regulations. The Company expects that it will be able to market its
Safeshield products in Europe with a single registration applicable to all
participating countries. The Company also is establishing procedures to respond
to various local regulatory requirements existing in all other international
markets in which it intends to market its products.
State and Local Licensing Requirements
Other than the governmental regulatory schemes listed above, the Company is
not subject to any other state or local regulations which apply to the operation
and business of the Company.
Effect of Probable Governmental Regulation on the Business
The Company is not currently engaged in the development of any product
<PAGE>
which would be categorized as therapeutic. Under the current regulatory scheme,
in the event any product of the Company were defined as therapeutic, then such
therapeutic product will be subject to regulation by the FDA and will require
FDA approval before it may be commercially marketed for human therapeutic use in
the United States. Obtaining FDA approval for therapeutic products has
historically been a costly and time consuming process. The Company is not aware
of any other probable governmental regulations which could affect its business.
Cost of Research and Development
At the current time, none of the costs associates with research and
development are bourne directly by the customer; however there is no guarantee
that such costs will not be bourne by customers in the future and, at the
current time, the Company does not know the extent to which such costs will be
bourne by the customer, if at all.
Cost and Effects of Compliance with Environmental Laws
The Company's business is not subject to regulation under the state and
Federal laws regarding environmental protection and hazardous substances
control, including the Occupational Safety and Health Act, the Environmental
Protection Act, and Toxic Substance Control Act. The Company is unaware of any
bills currently pending in Congress which could change the application of such
laws so that they would affect the Company.
Employees and Consultants
At July 31, 1999, the Company employed seventeen (17) persons. None of
these employees are represented by a labor union for purposes of collective
bargaining. The Company considers its relations with its employees to be
excellent.
The Company has employment agreements with its Chairman, President and CEO,
Daniel Hoyng, with its Vice President of Operations, Marek Lozowicki, with its
Chief Financial Officer and Treasurer, Barry McFarland, with its Director, COO,
President of Flex and Division Manager of FMD, Ernest Zavoral and with Raymond
Volpe, the Company's Project Manager who oversees the MPD.
In November 1997, prior to its acquisition by the Company, NBMDE entered
into a share exchange agreement with MMG. The exchange was made whereby NBMDE
issued 499,000 shares of its restricted common stock to the principals of DJH,
which included an issuance of 394,375 shares to Daniel Hoyng, the Company's
Chairman, President and CEO. See Part I, Item 4. "Security Ownership of
<PAGE>
Certain Beneficial Owners and Management"; Part I, Item 5. "Directors, Executive
Officer, Promoters and Control Persons"; Part I, Item 7. "Certain Relationships
and Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
In late 1997, NBMDE entered into a Consulting Agreement with DAG, for which
NBMDE paid commissions in the form of cash and stock to DAG in connection with
an offering of NBMDE's 12% bonds and warrants. The Agreement was declared null
and void ab initio by the Company in June 1999, at which time the Company
entered into agreements with DFL and ECG. See Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
Mr. Volpe's contract is for one (1) year and is for a salary of $65,000
commencing June 25, 1998. In addition, Mr. Volpe is entitled to a bonus of 5% of
gross margin on all sales up to $1,000,000 in sales and 10% of gross margin on
all sales greater than $1,000,000 and a $2,000 per month bonus for achieving
projected profit/loss projections. See Part I, Item 4 Security Ownership of
Certain Beneficial Owners and Management; and Part I, Item 5. "Directors,
Executive Officers, Promoter and Control Persons - Employee Contracts and
Agreement."
On July 17, 1998, prior to its acquisition by the Company, NBMDE entered
into an Exclusive Distribution Agreement with both BMC-US and BMC-CAN. In
exchange for the exclusive rights to sell Bontempi Snc. instruments in the U.S.,
Mexico and though the World Wide Web. As part of this Agreement, NBMDE was to
pay $307,999 which was convertible to shares of NBMDE's restricted common stock
and to issue 2,374,999 shares of its restricted common stock to Bontempi and its
shareholders, including 658,333 shares to Victor Bianchi, currently serving as a
Director of the Company. Bontempi and its shareholders converted the remaining
$258,000 of the amount due pursuant to a notice of conversion dated October 10,
1998 to 3,225,000 shares of the Company's restricted common stock. The Company
relied upon Section 4(2) of the Act and Rule 506 and Section 402(b)(9) of the
Massachusetts Code. See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management; Part I, Item 5. "Directors, Executive Officer,
Promoters and Control Persons"; Part I, Item 7. "Certain Relationships and
Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
In February 1998, prior to its acquisition by the Company, NBMDE entered
into a Consulting Agreement with Equity to provide financial public relations
consulting services in exchange for $60,000 annually and 1.5% of the issued and
outstanding stock of the company, which at that time was estimated at 75,000
shares. The term of the contract was for a period of one (1) year. In December
1998, after its acquisition of NBMDE, the Company terminated this agreement. As
part of a settlement agreement, the Company issued 175,000 shares of its
unrestricted Common Stock valued at $7,000 to Equity and Equity executed a full
and general release for all claims.. See Part I, Item 7. "Certain Relationships
and Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
On May 21, 1998, NBMDE, prior to its acquisition by the Company, entered
into a Consulting Agreement with Rothschild and Mayflower, whereby Rothschild
and Mayflower agreed to provide a fully trading public company to NBMDE in
exchange for issuance of 650,000 shares
<PAGE>
of NBMDE's Common Stock which were to be converted into 400,000 (200,000
each) restricted shares in the new public company and a commitment to issue an
additional 225,000 (112,500 each) unrestricted shares in the new public company
after acquisition. See Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
On October 9, 1998, prior to changing its name, the Company entered into a
Consulting Agreement with Good Works, Inc. to provide corporate growth
development consulting services to the Company in exchange for issuance of
500,000 shares of the Company's Common Stock. See Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
On October 9, 1998, prior to changing its name, the Company entered into a
Consulting Agreement with Rothschild whereby Rothschild agreed to provide
corporate growth development consulting services as a media consultant to the
Company in exchange for issuance of 250,000 shares of the Company's Common
Stock. See Part I, Item 7. "Certain Relationships and Related Transactions"; and
Part II, Item 4. "Recent Sales of Unregistered Securities."
In November 1998, the Company issued a total of 100,000 shares of its
restricted Common Stock to two (2) individuals. It issued 75,000 shares to
Richard Alfieri in exchange for services and 25,000 shares to one (1) individual
who should have received the property distribution made in October, 1998, but
who did not receive his shares. These shares were valued at $4,000 ($3,000 was
attributable to Mr. Alfieri's services.). See Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
On November 21, 1998, the Company entered into a share exchange agreement
with Flex and its shareholders whereby the Company exchanged 400,000 (200,000
each) shares of its restricted common stock with Ernest Zavoral and Remon Heyek
for 100% of the issued and outstanding shares of Flex. Following the exchange,
Flex became a wholly-owned subsidiary of the Company. These shares were valued
at $248,000. The President of Flex, Ernest Zavoral, remained with the
Company as the President of Flex and received 400,000 shares of the restricted
common stock of the Company. Mr. Zavoral is entitled to receive 150,000
restricted shares of the Common Stock annually (for which he is currently
entitled to vote and receive dividends), has the ability to purchase additional
shares in the event of any offering of the Company's stock at 75% of the
offering price to maintain his then current percentage of the Company's
outstanding common stock, has an option to purchase 750,000 shares of the
restricted common stock of the Company over the next three (3) years for the
average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised and
he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised. All shares carry piggy-back registration rights. The Company
relied upon Section 4(2) of the Act and Rule 506 and Section 1707.03(X) of the
Ohio Code. See Part I, Item 4. "Security Ownership of Certain Beneficial Owners
and Management"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
<PAGE>
On February 1, 1999, the Company entered into another Consulting Agreement
with Equity to provide financial public relations consulting services in
exchange for $30,000 payable over six (6) months. The term of the contract was
for a period of six (6) months. The Company had previously issued 175,000 shares
of its stock in December 1998 for services rendered which were valued at $7,000.
The contract was terminated by NBM in March of 1999. As part of the settlement,
Equity was paid $7,5000 and executed a full and general release. See Part I,
Item 7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
On February 11, 1999, the Company entered into a Consulting Agreement with
GFC Communications Corp. to provide public and financial communication
consulting services to the Company in exchange for $5,000 per month. The term of
the contract was for a period of one (1) year, but provided for termination on
30 days notice. NBM could elect to pay the fee with unrestricted common stock.
The contract was terminated by the Company in April 1999. See Part I, Item 7.
"Certain Relationships and Related Transactions."
Effective May 5, 1999 and ending on November 11, 1999, the Company entered
into a Consulting Agreement with Buying Power Network to provide financial
public relations consulting services to the Company in exchange for $50,000 for
the first month, $35,000 for the second month and $25,000 for the third month,
with subsequent months to be agreed upon, each payable in cash or by issuance of
unrestricted shares of Common Stock with equivalent value. The contract was
terminated as of June 1, 1999. In exchange for services rendered by Buying Power
Network the first month, the Company issued 500,000 shares of its restricted
Common Stock valued at $50,000 to Joyce Research Group, of which Buying Power
Network is a division. The Company relied upon Section 4(2) of the Act and Rule
506 and Florida Code Section 517.061(11). See Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
In June 1999, the Company entered into an agreement with DFL, wherein the
Company acknowledged indebtedness to DFL in the amount of $518,000 and agreed to
issue DFL 3,375,333 shares of its restricted common stock and to pay DFL $10,000
in full and final satisfaction of such indebtedness. The Company has the right
to repurchase the shares until such time as the shares are either registered or
the Rule 144 restriction is lifted. The shares carry registration rights and NBM
must buy back the shares at the earlier of closing on specified amounts of
equity funding or after November 1, 1999. The repurchase price is $0.15 per
share. NBM also committed to issue DFL 600,000 shares of its restricted common
stock as payment for services rendered. No stock has been issued to date. See
Part I, Item 7. "Certain Relationships and Related Transactions"; and Part II,
Item 4. "Recent Sales of Unregistered Securities."
In June 1999, the Company entered into an agreement with ECG, wherein the
Company acknowledged indebtedness to ECG in the amount of $126,700 and agreed to
issue ECG 711,334 shares of its restricted common stock and to pay ECG $20,000
in full and final satisfaction of such indebtedness. The Company has the right
to repurchase the stock at a price of $0.15 per share. No stock has been issued
to date. See Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
<PAGE>
In June 1999, the Company entered into an agreement with DFL, wherein the
Company acknowledged an indebtedness by Hernandez to DLF in the amount of
$100,000, which indebtedness is secured partially by shares of the Company's
common stock owned by Hernandez. The Company agreed to assume joint liability
for the indebtedness subsequent to and subject to an agreement by Hernandez to
liquidate his NBM shares. The Company also agreed to issue DFL 125,560 shares of
its restricted common stock. No shares have been issued to date. See Part I,
Item 7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In July 1999, the Company issued 870,000 shares of its restricted common
stock to eight (8) persons for past services on the Company's Board of
Directors. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 8-6-11 of the Alabama code, Section 517.061(11) of the Florida code,
Section 51:705 of the Louisiana code, Section 402(b)(9) of the Massachusetts
code, Section 75-71-408 of the Mississippi code and Section 1707.03(X) of the
Ohio code. No state exemption was required for two (2) individuals who are
Canadian residents. See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management."; and Part I, Item 5. "Directors, Executive
Officers, Promoters and Control Persons - Executive Officers and Directors.";
and Part I, Item 6. "Executive Compensation."; and Part I, Item 7. "Certain
Relationships and Related Transactions."; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
The Company has an employment contract with Mr. Hoyng. Under this contract,
in July 1999, the Company issued 250,000 shares of its restricted Common Stock
to Mr. Hoyng. Mr. Hoyng is entitled to receive 250,000 restricted shares of the
Common Stock annually (for which he is currently entitled to vote and receive
dividends), has the ability to purchase additional shares in the event of any
offering of the Company's stock at 75% of the offering price to maintain his
then current percentage of the Company's outstanding common stock, has an option
to purchase 2,000,000 shares of the restricted common stock of the Company over
the next three (3) years for the average trading price of the Company's common
stock for the last twelve (12) months or the then current market price at the
time the option is exercised, he may convert one-third of his salary to shares
of the Company's restricted common stock at the average trading price of the
Company's common stock for the last twelve (12) months or the then current
market price at the time the option is exercised and is entitled to a transition
bonus of 250,000 shares of the Company's restricted common stock. All shares
carry piggy-back registration rights. The Company relied upon Section 4(2) of
the Act and Rule 506 and Section 359(f)(2)(d) of the Massachusetts Code. See
Part I, Item 4. "Security Ownership of Certain Beneficial Owners and
Management"; Part I, Item 5. "Directors, Executive Officer, Promoters and
Control Persons"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
The Company has an employment contract with Mr. Lozowicki. Mr. Lozowicki is
entitled to receive 187,500 restricted shares of the Common Stock annually (for
which he is currently entitled to vote and receive dividends), has the ability
to purchase additional shares in the event of any offering of the Company's
stock at 75% of the offering price to maintain his then current percentage of
the Company's outstanding common stock, has an option to purchase 400,000 shares
of the restricted common stock of the Company over the next three (3) years for
the average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised
<PAGE>
and he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and is entitled to a signing bonus of 100,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the Massachusetts Code. See Part I, Item 4. "Security Ownership
of Certain Beneficial Owners and Management"; Part I, Item 5. "Directors,
Executive Officer, Promoters and Control Persons"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
The Company has an employment contract with Mr. McFarland. Mr. McFarland is
entitled to receive 500,000 restricted shares of the Common Stock annually (for
which he is currently entitled to vote and receive dividends), has the ability
to purchase additional shares in the event of any offering of the Company's
stock at 75% of the offering price to maintain his then current percentage of
the Company's outstanding common stock, has an option to purchase 500,000 shares
of the restricted common stock of the Company over the next three (3) years for
the average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised and
he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and is entitled to a signing bonus of 500,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the Massachusetts Code. See Part I, Item 4. "Security Ownership
of Certain Beneficial Owners and Management"; Part I, Item 5. "Directors,
Executive Officer, Promoters and Control Persons"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
Facilities
The Company maintains its executive offices at 43 Taunton Green, 3rd Floor,
Taunton, MA 02780. Its telephone number is (508) 884-8820 and its facsimile
number is (508) 880-5208.
The Company leases approximately three thousand (3,000) square feet for its
executive offices from Mello Investment Trust. The lease is for a term of three
(3) years commencing December 1, 1997 and ending November 30, 2000. The Company
may, in its sole discretion, extend the lease for a fourth and fifth year. The
Company pays monthly rent in the amount of $3,100 and the lease is on a triple
net basis. The Company believes that the leased property is sufficient for its
requirements for the next several years. See Part I, Item 3. "Description of
Property."
The Company also leases approximately four hundred (400) square feet
additional space at 43 Taunton Green on the 2nd floor from Mello Investment
Trust. The lease term commenced February 1, 1998 and expires in August 31, 1999.
The Company paid $4,500 as a lump sum upon execution of the lease. The lease is
on a triple net basis. The Company believes that the property is sufficient for
its requirements for the next several years.
<PAGE>
The Company has several business related activities in the State of
Florida, including its legal counsel, accounting firm. It maintains an apartment
in Ft. Lauderdale, Florida for its executives. The lease term is for a period of
one (1) year and expires in March 2000. The Company pays monthly rent in the
amount of $1,118. The Landlord is responsible for all maintenance. In addition
the Company rents furniture for the apartment.
The Company headquarters also serves as the telephone customer service
center for Backstroke(TM). This service center handles over 100 calls each day.
Risk Factors
Before making an investment decision, prospective investors in the
Company's Common Stock should carefully consider, along with other matters
referred to herein, the following risk factors inherent in and affecting the
business of the Company.
1. History of Losses. Although the Company has been in business since June
21, 1995 it was in the development stage until recently when it began commercial
shipments of the Backstroke(TM). As of June 30, 1998, the Company had total
assets of $1,631,001, a net loss of $9,778,455 on revenues of $2,845 and
stockholders deficit of $2,616,705. As of June 30, 1999, the Company had total
assets of $8,261,073, a net loss of $6,769,079 on revenues of $2,774,486 and
stockholders equity of $5,360,839. Due to the Company's operating history and
limited resources, among other factors, there can be no assurance that
profitability or significant revenue will occur in the future. Moreover, the
Company expects to continue to incur operating losses through at least June 30,
2000, and there can be no assurance that losses will not continue thereafter.
The ability of the Company to establish itself as a going concern is dependent
upon the receipt of additional funds from operations or other sources to
continue those activities. The Company is subject to all of the risks inherent
in the operation of a development stage business and there can be no assurance
that the Company will be able to successfully address these risks. See Part I,
Item 1. "Description of Business."
2. Minimal Assets. Working Capital and Net Worth. As of June 30, 1999, the
Company's total assets in the amount of $8,261,073, consisted, principally, of
the sum of $31,248 in cash, $13,762 in deposits and $198,222 in inventory. As a
result of its minimal assets and a net loss from operations, in the amount of
$6,769,079, as of June 30, 1999, the Company had a net worth of $5,360,839.
Further, there can be no assurance that the Company's financial condition will
improve. Even though management believes, without assurance, that it will obtain
sufficient capital with which to implement its expansion plan, the Company is
not expected to proceed with its expansion without an infusion of capital. In
order to obtain additional equity financing, management may be required to
dilute the interest of existing shareholders or forego a substantial interest of
its revenues, if any. See Part I, Item 1. "Description of Business"
3. Need for Additional Capital. Without an infusion of capital or profits
from operations, the Company is not expected to proceed with its expansion
<PAGE>
as planned. Accordingly, the Company is not expected to overcome its history of
losses unless sales continue at the current levels and/or additional equity
and/or debt financing is obtained. While the Company anticipates the receipt of
increased operating revenues, such increased revenues cannot be assured.
Further, the Company may incur significant unanticipated expenditures which
deplete its capital at a more rapid rate because of among other things, the
stage of its business, its limited personnel and other resources and its lack of
a widespread client base and market recognition. Because of these and other
factors, management is presently unable to predict what additional costs might
be incurred by the Company beyond those currently contemplated. The Company has
no identified sources of additional capital funds, and there can be no assurance
that resources will be available to the Company when needed. See Part I, Item 1.
"Description of Business - (b) Business of Issuer."
4. Dependence on Management. The possible success of the Company is
expected to be largely dependent on the continued services of its Founder,
Chairman, President and CEO, Daniel Hoyng, its President and General Manager of
the Medical Products Division, Raymond Volpe and its President and General
Manager of the Flex Marketing Division, Ernest Zavoral. Virtually all decisions
concerning the marketing, distribution and sales of the Company's products and
services will be made or significantly influenced by the Company's officers.
These officers are expected to devote only such time and effort to the business
and affairs of the Company as may be necessary to perform their responsibilities
as executive officers. The loss of the services of any of these officers, but
particularly Daniel Hoyng, would adversely affect the conduct of the Company's
business and its prospects for the future. The Company presently has employment
agreements with Daniel Hoyng and Raymond Volpe and holds no key-man life
insurance on the lives of, and has no other agreement with any of these
officers. See Part I, Item 1. "Description of Business - (b) Business of Issuer
and Part I, Item 5. "Directors, Executive Officers, Promoters and Control
Persons."
5. Limited Distribution Capability. The Company's success depends in large
part upon its ability to distribute its products and services. As compared to
the Company, which lacks the financial, personnel and other resources required
to compete with its larger, better-financed competitors, virtually all of the
Company's competitors have much larger budgets for securing customers. Although
the Company has entered into the DermaGuard distribution agreement and
DermaGuard has placed an order for in excess of $600,000 of product, it has
produced only limited revenues to date. And, although currently producing
significant monthly income, the Company's infomercial for Backstroke(TM) may not
continue to produce such income. Depending upon the level of operating capital
or funding obtained by the Company, management believes, without assurance, that
it will be possible for the Company to attract additional customers for its
products and services. However, in the event that only limited funds are
available from operations or obtained, the Company anticipates that its limited
finances and other resources may be a determinative factor in the decision to go
forward with planned expansion. Until such time, if ever, as the Company is
successful in generating sufficient cash flow from operations or securing
additional capital, of which there is no assurance, it intends to continue
marketing its products through its current distribution arrangement. However,
the fact that these arrangement have not thus far produced significant revenue
may adversely impact the Company's chances for success. See Part I, Item 1.
"Description of Business," (b) "Business of Issuer - Sales and Marketing-
Distribution of Products."
<PAGE>
6. High Risks and Unforeseen Costs Associated with the Company's Expanded
Entry into the Medical and Health Device and Product Industries. There can be no
assurance that the costs for the establishment of a client base for its Bontempi
instruments or Safety Pharmaceutcial products and services will not be
significantly greater than those estimated by Company management or that more
airtime will not be needed to promote Backstroke(TM). Therefore, the Company may
expend significant unanticipated funds or significant funds may be expended by
the Company without development of a commercial market for its products. There
can be no assurance that cost overruns will not occur or that such cost overruns
will not adversely affect the Company. Further, unfavorable general economic
conditions and/or a downturn in customer confidence could have an adverse affect
on the Company's business. Additionally, competitive pressures and changes in
customer mix, among other things, which management expects the Company to
experience in the uncertain event that it achieves commercial viability, could
reduce the Company's gross profit margin from time to time. Accordingly, there
can be no assurance that the Company will be capable of establishing itself in a
commercially viable position in local, state, nationwide and international
medical device and exposure reporting information markets. See Part I, Item 1.
"Description of Business," (b) "Business of Issuer."
7. Dependency on Securing a Suitable Strategic Partner. The Company's
ability to establish an adequate customer base at a level sufficient to meet the
larger competition depends in part upon the ability of the Company to capitalize
on its distribution agreement with DermaGuard with regard to Safeshield and to
establish a joint venture agreement with a suitable partner for its Bontempi
medical devices and Safety Pharmaceutical line. The Company has no tentative
agreements with any strategic partner for expansion of its Bontempi medical
device business. There can be no assurance that a qualified strategic
arrangement will be found at the levels which management believes are possible.
Further, even if the Company receives sufficient cash flow from operations or
proceeds from equity and/or debt financing or otherwise, thus enabling it to go
forward with its planned expansion of its Bontempi medical device business and
Safety Pharmaceutical products, it will nevertheless be dependent upon the
availability of a qualified strategic partner to progress at the levels which
the Company believes are necessary. Safeshield has only been in the marketplace
as a test product for the past year and appears to be meeting expectations;
however, its market acceptance has not yet been determined. Backstroke(TM) had
limited acceptance as originally marketed, which the Company believes was due to
the price. Backstroke(TM) has been redesigned and has been re-released at a
price more in keeping with fitness devices which seems to be bourne out by the
level of sales in the first quarter 1999. Although management believes that the
acceptance of its products and services will continue to find the market
acceptance, there can be no assurance that this will be so. See Part I, Item 1.
"Description of Business," (b) Business of Issuer - Sales and Marketing."
8. Significant Customer and Product Concentration. With the exception of
Backstroke(TM), to date, a limited number of customers and distributors have
accounted for substantially all of the Company's revenues with respect to
product sales. Although the company entered into an exclusive distribution
agreement with DermaGuard for Safeshield and believes it can more effectively
distribute its Bontempi instruments in the United States, Mexico and the
WorldWide-Web, there is no assurance that the Company will be able to obtain
adequate distribution of its products to the intended end user. Most medical,
dental and veterinary clinics receive their instruments and supplied from large
<PAGE>
medical product distributors. Most medical product distributors carry an
extensive line of products (some of which they manufacture themselves) which
they make available to end users (hospitals, surgeons, healthcare workers) and
various of these products may compete with each other as to function, price or
other factors. The Company's ability to achieve revenues in the future will
depend in significant part upon its ability to obtain orders from, maintain
relationships with and provide support to, existing and new distributors, as
well as the condition of its distributors. As a result, any cancellation,
reduction or delay in orders by or shipments to any customer or the inability of
any customer to finance its purchases of the Company's products may materially
adversely affect the Company's business, financial condition and results of
operations. There can be no assurance that the Company's revenues will increase
in the future or that the Company will be able to support or attract customers.
See "Part I, Item. 1. "Description of Business - (b) Business of Issuer - Sales
and Marketing - Distribution of Products; and - Dependence on Major Customers"
and Part I, Item 2. Management's Discussion and Analysis of Financial Condition
or Plan of Operation - Revenues."
9. Fluctuations in Results of Operations. The Company has experienced and
may in the future experience significant fluctuations in revenues, gross margins
and operating results. In addition, a single order for Safeshield scheduled for
shipment in a fiscal quarter can represent a significant portion of the
Company's potential sales for such quarter. As with many developing businesses,
the Company expects that some orders may not materialize or delivery schedules
may have to be deferred as a result of changes in customer requirements, among
other factors. As a result, the Company's operating results for a particular
period to date have been and may in the future be materially adversely affected
by a delay, rescheduling or cancellation of even one purchase order. Moreover,
purchase orders are often received and accepted substantially in advance of
shipment, and the failure to reduce actual costs to the extent anticipated or an
increase in anticipated costs before shipment could materially, adversely affect
the gross margins for such order, and as a result, the Company's results of
operations. Moreover, a majority of the Company's anticipated orders could be
canceled since orders are expected to be made substantially in advance of
shipment, and even though the Company's contracts do not typically provide that
orders may be canceled, if an important distributor wishes to cancel an order,
the Company may be compelled, due to competitive conditions, to accede to such
request. As a result, backlog, if any, will not necessarily be indicative of
future sales for any particular period. Furthermore, a substantial portion of
net sales may be realized near the end of each quarter. A delay in a shipment
near the end of a particular quarter, due, for example, to an unanticipated
shipment rescheduling, to cancellations or deferrals by customers or to
unexpected manufacturing difficulties experienced by the Company, may cause net
revenues in a particular quarter to fall significantly below the company's
expectations and may materially adversely affect the Company's operating results
for such quarter.
A large portion of the Company's expenses are fixed and difficult to reduce
should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new products and technologies could cause
customers to defer purchases of the Company's products or a reevaluation of
products under development, which would materially adversely affect the
Company's business, financial condition and results of operations. Additional
factors that may cause the Company's revenues, gross margins and results of
operations to vary significantly from period to period include: product
<PAGE>
development, patent processing, FDA processing, mix of products sold;
manufacturing efficiencies, costs and capacity; price discounts; market
acceptance and the timing of availability of new products by the Company or its
customers, usage of different distribution and sales channels; warranty and
customer support expenses; customization of systems; and general economic and
political conditions. In addition, the Company's results of operations are
influenced by competitive factors, including the pricing and availability of and
demand for, competitive products. All of the above factors are difficult for the
company to forecast, and these or other factors could materially adversely
affect the Company's business, financial condition and results of operations. As
a result, the Company believes that period-to-period comparisons are not
necessarily meaningful and should not be relied upon as indications of future
performance. See Part I, Item. 2. "Management's Discussion and Analysis of
Financial Condition or Plan of Operation."
10. Potential for Unfavorable Interpretation of Government Regulation. The
Company is subject to FDA regulations governing its products, to the extent
applicable. The Company will not be subject to additional regulation unless it
elects to produce therapeutic drugs, in which case the Company will be required
to conduct extensive clinical trials for FDA clearance which are not required
for the Company's products at this time. In such event the Company shall have
all of the uncertainties such clinical trials present including the risk of loss
of substantial capital in the event a product never receives the required
approvals.
Medical products are subject to extensive regulation by the FDA, in some
case by state and local laws and by foreign laws and international treaties. The
Company's products must conform to a variety of domestic and international
requirements. In order for the Company to sell its products in a jurisdiction,
it must obtain regulatory approval and comply with different regulations in each
jurisdiction. The delays inherent in this governmental approval process may
cause the cancellation, postponement or rescheduling of the purchase by the
Company's customers, which in turn may have a material adverse effect on the
sale of such products by the Company to such customers. The failure to comply
with current or future regulations or changes in the interpretation of existing
regulations could result in the suspension or cessation of product sales. Such
regulations or such changes in interpretation could require the Company to
modify its products and incur substantial costs to comply with such
time-consuming regulations and changes.
The regulatory environment in which the Company operates is subject to
change. Regulatory changes, which are affected by political, economic and
technical factors, could significantly impact the Company's operations by
restricting development efforts by the Company and its customers, making current
products obsolete or increasing the opportunity for additional competition. Any
such regulatory changes could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company might deem
it necessary or advisable to alter or modify its products to operate in
compliance with such regulations. Such modifications could be extremely
expensive and, especially if subject to regulatory review and approval,
time-consuming. See Part I, Item 1. "Description of Business," (b) "Business of
Issuer Governmental Regulation."
11. No Assurance of Product Quality. Performance and Reliability. The
Company expects that its distributor and their customers will continue to
establish demanding specifications for quality, performance and reliability.
<PAGE>
Although the Company attempts to only deal with manufacturers who adhere to good
manufacturing practice standards, there can be no assurance that problems will
not occur in the future with respect to quality, performance, reliability and
price. If such problems occur, the Company could experience increased costs,
delays in or cancellations or rescheduling of orders or shipments and product
returns and discounts, any of which would have a material adverse effect on the
Company's business, financial condition or results of operations.
12. Future Capital Requirements. The Company's future capital requirements
will depend upon many factors, including the development of new medical and
health products, requirements to maintain adequate manufacturing facilities, the
progress of the Company's research and development efforts, expansion of the
Company's marketing and sales efforts and the status of competitive products and
services. The Company believes that it will require additional funding in order
to fully exploit its plan for operations. There can be no assurance, however,
that the Company will secure such additional financing. There can be no
assurance that any additional financing will be available to the Company on
acceptable terms, or at all. If additional funds are raised by issuing equity
securities, further dilution to the existing stockholders will result. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate its research and development or manufacturing programs or
obtain funds through arrangements with partners or others that may require the
Company to relinquish rights to certain of its existing or potential products or
other assets. Accordingly, the inability to obtain such financing could have a
material adverse effect on the Company's business, financial condition and
results of operations. See Part I, Item 2. "Management's Discussion and Analysis
of Financial Condition or Plan of Operation."
13. Uncertainty Regarding Protection of Proprietary Rights. The Company
attempts to protect its intellectual property rights through patents,
trademarks, secrecy agreements, trade secrets and a variety of other measures.
However, there can be no assurance that such measures will provide adequate
protection for the Company's trade secrets or other proprietary information,
that additional disputes with respect to the ownership of its intellectual
property rights will not arise, that the Company's trade secrets or proprietary
technology will not otherwise become known or be independently developed by
competitors or that the Company can otherwise meaningfully protect its
intellectual property rights. There can be no assurance that any patent owned by
the Company will not be invalidated, circumvented or challenged, that the rights
granted thereunder will provide competitive advantages to the Company or that
any of the Company's pending or future patent applications will be issued with
the scope of the claims sought by the Company, if at all. Furthermore, there can
be no assurance that others will not develop similar products, duplicate the
Company's products or design around the patents owned by the Company or that
third parties will not assert intellectual property infringement claims against
the Company. In addition, there can be no assurance that foreign intellectual
property laws will adequately protect the Company's intellectual property rights
abroad. The failure of the Company to protect its proprietary rights could have
a material adverse effect on its business, financial condition and results of
operations.
Litigation may be necessary to protect the Company's intellectual property
rights and trade secrets, to determine the validity of and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance
<PAGE>
that infringement, invalidity, right to use or ownership claims by third parties
or claims for indemnification resulting from infringement claims will not be
asserted in the future. If any claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party's
intellectual property rights. There can be no assurance, however, that a license
will be available under reasonable terms or at all. In addition, should the
Company decide to litigate such claims, such litigation could be extremely
expensive and time consuming and could materially adversely affect the Company's
business, financial condition and results of operations, regardless of the
outcome of the litigation. See Part I, Item 1. Description of Business - (b)
Business of Issuer - Patents, Copyrights and Trademarks."
14. Ability to Grow. The Company expects to grow through one or more
strategic alliances, acquisitions, internal growth and by granting licenses for
products which are not within the focuses defined by management. There can be no
assurance that the Company will be able to create a greater market presence, or
if such market is created, to expand its market presence or successfully enter
other markets. The ability of the Company to grow will depend on a number of
factors, including the availability of working capital to support such growth,
existing and emerging competition, one or more qualified strategic alliances and
the Company's ability to maintain sufficient profit margins in the face of
pricing pressures. The Company must also manage costs in a changing regulatory
environment, adapt its infrastructure and systems to accommodate growth within
the niche market which it has created.
The Company also plans to expand its business, in part, through
acquisitions. Although the Company will continuously review potential
acquisition candidates, it has not entered into any agreement, understanding or
commitment with respect to any additional acquisitions at this time. There can
be no assurance that the Company will be able to successfully identify suitable
acquisition candidates, complete acquisitions on favorable terms, or at all, or
integrate acquired businesses into its operations. Moreover, there can be no
assurance that acquisitions will not have a material adverse effect on the
Company's operating results, particularly in the fiscal quarters immediately
following the consummation of such transactions, while the operations of the
acquired business are being integrated into the Company's operations. Once
integrated, acquisitions may not achieve comparable levels of revenues,
profitability or productivity as at then existing Company products or otherwise
perform as expected. The Company is unable to predict whether or when any
prospective acquisition candidate will become available or the likelihood that
any acquisitions will be completed. The Company will be competing for
acquisition and expansion opportunities with entities that have substantially
greater resources than the Company. In addition, acquisitions involve a number
of special risks, such as diversion of management's attention, difficulties in
the integration of acquired operations and retention of personnel, unanticipated
problems or legal liabilities, and tax and accounting issues, some or all of
which could have a material adverse effect on the Company's results of
operations and financial condition. (See Part I, Item 1. "Description of
Business (b) "Business Issuer.")
15. Potential Legal Liability. Providers of medical devices and products
may be subject to claims relating to their product. Management has adopted and
implemented policies and guidelines to reduce its exposure to these risks;
principally in the area of its initial product research and development.
However, the failure of any product to meet such policies and guidelines may
<PAGE>
result in governmental intervention, negative publicity, injunctive relief and
the payment by the Company of money damages or fines. There can be no assurance
that the Company will not experience such problems. (See - 8. "Potential for
Unfavorable Interpretation of Government Regulations" and Part I, Item 1.
"Description of Business" (b) "Business of Issuer-Government Regulation.")
At such time as the Company enters into licensing agreements for certain
products which it feels are not a proper mix but deserve exploitation, the
Company may be subject to claims asserting that it is vicariously liable for the
damages allegedly caused by the products produced by the licensees. Generally,
liability for the acts or inactions of its licensees are based on agency and
products liability concepts. The Company intends for its license agreements to
state that the parties are not agents and that the licensees control the
manufacturer and production of the product and that any modifications are the
sole responsibility of the licensee. Despite these efforts to minimize the risk
of liability, there can be no assurance that a claim will not be made against
the Company.
16. Competition. The medical products and device industry is highly
competitive, with several major companies involved. The Company will be
competing with larger competitors in international, national, regional and local
markets. In addition, the Company may encounter substantial competition from new
market entrants. Many of the Company's competitors have significantly greater
name recognition and have greater marketing, financial and other resources than
the Company. There can be no assurance that the Company will be able to complete
effectively against such competitors in the future. (See Part I. Item 1.
"Description of Business," (b) "Business of Issuer-Competition.")
17. Requirement for Response to Rapid Technological Change and Requirement
for Frequent New Product Introductions. The market for medical and health
products and services is subject to rapid technological change, frequent new
product introductions and enhancements, product obsolescence and changes in
end-user requirements. The Company's ability to be competitive in this market
will depend in significant part upon its ability to successfully develop,
introduce and sell new innovative proprietary products, services and
enhancements thereof on a timely and cost-effective basis that respond to
changing customer requirements. Any success of the Company in developing new and
enhanced products and services will depend upon a variety of factors, including
new product selection, timely and efficient compliance with and completion of
the regulatory process (FDA), timely and efficient completion of design, timely
and efficient implementation of manufacturing and assembly process, its cost
reduction program and the development, completion, performance, quality and
reliability and development of competitive products and services by competitors.
The Company may experience delays from time to time in completing development
and introduction of new products and services. Moreover, there can be no
assurance that the Company will be successful in selecting, developing,
manufacturing and marketing new products and services. There can be no assurance
that defects will not be found in the Company's products and services after
commencement of commercial shipments, which could result in the loss of or delay
in market acceptance. The inability of the Company to introduce in a timely
manner new products and services that contribute to revenues could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Part I, Item. 1. "Description of Business (b)
Business of Issuer - Competition."
<PAGE>
18. Possible Adverse Affect of Fluctuations in the General Economy and
Business of Customers. Historically, the general level of economic activity has
significantly affected the demand for new, disposable products. As demands for
economy have increased, reusable products have seen a resurgence of demand.
There can be no assurance that an economic downturn would not adversely affect
the demand for the Company's products and services. Further, hospitals and other
healthcare facilities have been required to adopt cost effective policies which
may cause them to reject any new product, notwithstanding the need to protect
workers from exposure to disease. There can be no assurance that such cost
cutting factors will not adversely affect the development and market penetration
of Safeshield.
19. Lack of Working Capital Funding Source. Other than revenues from the
sale of its products, which revenues have yet to produce a significant net
profit, the Company has no current source of working capital funds, and should
the Company be unable to secure additional financing on acceptable terms, its
business, financial condition, results of operations and liquidity would be
materially adversely affected.
20. Dependence on Contract Manufacturers; Reliance on Sole or Limited
Sources of Supply. As of the date hereof, the Company has no internal
manufacturing capacity. The Company has been utilizing contract manufacturers to
produce its products. In the case of Backstroke(TM), Kongent and in the case of
Safeshield, the Company has an agreement with SAI. The Company may also rely on
outside vendors to manufacture certain components. Certain necessary components
and services anticipated to be necessary for the manufacture of the Company's
products could be required to be obtained from a sole supplier or a limited
group of suppliers. There can be no assurance that the Company's contract
manufacturers, will be sufficient to fulfill the Company's orders.
Should the Company be required to rely solely on contract manufacturers and
a limited group of suppliers, such increasing reliance involves several risks,
including a potential inability to obtain an adequate supply of finished
products and required components, and reduced control over the price, timely
delivery, reliability and quality of finished products and components. The
Company does not believe that it is currently necessary to have any long-term
supply agreements with its manufacturers or suppliers but this may change in the
future. The Company has from time to time experienced and may in the future
experience delays in the delivery of and quality problems with its products and
certain components from vendors. Certain of the Company's suppliers have
relatively limited financial and other resources. Any inability to obtain timely
deliveries of acceptable quality or any other circumstances that would require
the Company to seek alternative sources of supply, or to manufacture its
finished products internally, could delay the Company's ability to ship its
products which could damage relationships with current or prospective customers
and have a material adverse effect on the Company's business, financial
condition and operating results. See "Part I, Item 1. "Description of Business -
(b) Business of Issuer."
21. Declining Average Selling Prices. The Company believes that average
selling prices and gross margins for its products may decline in the long term
as such products are in use in the market, as volume price discounts in existing
and future contracts take effect and as competition intensifies, among other
<PAGE>
factors, especially with regard to its Backstroke(TM) product. To offset
declining average selling prices, the Company believes that it must successfully
introduce and sell new products and services or adaptations of products and
services on a timely basis, develop new products and services with features that
can be sold at higher average selling prices and reduce the costs thereof
through design improvements, component cost reduction and in-house
manufacturing, among other actions. Eventually, the Backstroke(TM) will be
introduced to the retail market. To the extent that new products and services
are not developed in a timely manner, do not achieve customer acceptance or do
not generate higher average selling prices, and the Company is unable to offset
declining average selling prices, the Company's gross margins will decline, and
such decline will have a material adverse effect on the Company's business,
financial condition and results of operations. The Company believes that the
re-design of Backstroke(TM) will result in a reduction in costs. See "Part I,
Item. 1. "Description of Business - (b) Business of Issuer - MPD - Research and
Development" and Part I, item. 2. "Management's Discussion and Analysis of
Financial Condition or Plan of Operations - Research and Development."
22. Uncertainty of Market Acceptance. The future operating results of the
Company depend to a significant extent upon the continued development of
products and services deemed necessary, useful, convenient, affordable and
competitive by medical professionals, healthcare workers and health conscious
individuals. There can be no assurance that the Company has the ability to
continuously introduce propriety products and services into the marketplace
which will achieve the market penetration and acceptance necessary for the
Company to grow and become profitable on a sustained basis, especially given the
fierce competition that exists from companies more established and well financed
than the Company. See "Part I, Item 1. "Description of Business -(b) Business of
Issuer - Competition."
To date, substantially all of the Company's product sales have been to
customers within the United States, Mexico and the World-Wide-Web with only a
small or relatively no portion of such sales generated internationally. The
Company's future results of operations will be dependent in significant part on
its ability to penetrate markets in the United States and foreign countries in
which the Company has not yet established a meaningful presence. There can be no
assurance that the Company will be successful in penetration these additional
markets.
23. International Operations; Risks of Doing Business in Developing
Countries. Substantially all of the Company's revenues from product sales to
date have been made to customers located inside of the United States. The
Company anticipates that international sales will, as a result of various
distribution agreements entered into, account for more of its revenues from
product sales for the foreseeable future. The Company's international sales may
be denominated in foreign or United States currencies. The Company does not
currently engage in foreign currency hedging transactions. As a result, a
decrease in the value of foreign currencies relative to the United States dollar
could result in losses from transactions denominated in foreign currencies. With
respect to the Company's international sales that are United States
dollar-denominated, such a decrease could make the Company's products less
price-competitive. Additional risks inherent in the Company's international
business activities include changes in regulatory requirements, costs and risks
of local customers in foreign countries, availability of suitable export
financing, timing and availability of export licenses, tariffs and other trade
barriers, political and economic instability, difficulties in staffing and
<PAGE>
managing foreign operations, difficulties in managing distributors, potentially
adverse tax consequences, foreign currency exchange fluctuations, the burden of
complying with a wide variety of complex foreign laws and treaties and the
possibility of difficulty in accounts receivable collections. Some of the
Company's customer purchase agreements may be governed by foreign laws, which
may differ significantly from U.S. laws. Therefore, the Company may be limited
in its ability to enforce its rights under such agreements and to collect
damages, if awarded. There can be no assurance that any of these factors will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
Some of the Company's potential markets consist of countries that have not
yet developed the technological and medical know-how to properly utilize the
Company's products, in which event the development of demand for the Company's
products in those countries will be limited or delayed. In doing business in
some of these markets, the Company may also face economic, political and foreign
currency fluctuations that are more volatile than those commonly experienced in
the United States and other areas. See "Part I, Item 1. "Description of Business
- - (b) Business of Issuer - Sales and Marketing - Distribution of Products."
24. No Dividends. While payments of dividends on the Common Stock rests
with the discretion of the Board of Directors, there can be no assurance that
dividends can or will ever be paid. Payment of dividends is contingent upon,
among other things, future earnings, if any, and the financial condition of the
Company, capital requirements, general business conditions and other factors
which cannot now be predicted. It is highly unlikely that cash dividends on the
Common Stock will be paid by the Company in the foreseeable future. See Part I,
Item 8. "Description of Securities - Description of Common Stock - Dividend
Policy."
25. No Cumulative Voting. The election of directors and other questions
will be decided by a majority vote. Since cumulative voting is not permitted and
a majority of the Company's outstanding Common Stock constitute a quorum,
investors who purchase shares of the Company's Common Stock may not have the
power to elect even a single director and, as a practical matter, the current
management will continue to effectively control the Company. See Part I, Item 8.
"Description of Securities - Description of Common Stock."
26. Control by Present Shareholders. The present shareholders of the
Company's Common Stock will, by virtue of their percentage share ownership and
the lack of cumulative voting, be able to elect the entire Board of Directors,
establish the Company's policies and generally direct its affairs. Accordingly,
persons investing in the Company's Common Stock will have no significant voice
in Company management, and cannot be assured of ever having representation on
the Board of Directors. See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management."
27. Potential Anti-Takeover and Other Effects of Issuance of Preferred
Stock May Be Detrimental to Common Shareholders. Potential Anti-Takeover and
Other Effects of Issuance of Preferred Stock May Be Detrimental to Common
Shareholders. The Company is authorized to issue shares of preferred stock.
("Preferred Stock") One series of preferred stock has been issued to date, which
series contains 10 to 1 conversion and 10 to 1 voting rights. The issuance of
Preferred Stock does not require approval by the shareholders of the Company's
<PAGE>
Common Stock. The Board of Directors, in its sole discretion, has the power to
issue shares of Preferred Stock in one or more series and to establish the
dividend rates and preferences, liquidation preferences, voting rights,
redemption and conversion terms and conditions and any other relative rights and
preferences with respect to any series of Preferred Stock. Holders of Preferred
Stock may have the right to receive dividends, certain preferences in
liquidation and conversion and other rights; any of which rights and preferences
may operate to the detriment of the shareholders of the Company's Common Stock.
Further, the issuance of any shares of Preferred Stock having rights superior to
those of the Company's Common Stock may result in a decrease in the value of
market price of the Common Stock provided a market exists, and additionally,
could be used by the Board of Directors as an anti-takeover measure or device to
prevent a change in control of the Company. See Part I, Item 1. "Description of
Securities Description of Preferred Stock."
28. No Secondary Trading Exemption. Secondary trading in the Common Stock
will not be possible in each state until the shares of Common Stock are
qualified for sale under the applicable securities laws of the state or the
Company verifies that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. There can
be no assurance that the Company will be successful in registering or qualifying
the Common Stock for secondary trading, or availing itself of an exemption for
secondary trading in the Common Stock, in any state. If the Company fails to
register or qualify, or to obtain or verify an exemption for the secondary
trading of, the Common Stock in any particular state, the shares of Common Stock
could not be offered or sold to, or purchased by, a resident of that state. In
the event that a significant number of states refuse to permit secondary trading
in the Company's Common Stock, a public market for the Common Stock will fail to
develop and the shares could be deprived of any value. The Company when it was
known as Growth was listed in Standard and Poor's Standard Corporation Records
on April 20, 1998.
29. Possible Adverse Effect of Penny Stock Regulations on Liquidity of
Common Stock in any Secondary Market. Although trading volume indicates that a
secondary trading market has developed to a certain extent for the shares of
Common Stock of the Company, the Common Stock is expected to come within the
meaning of the term "penny stock" under 17 CAR 240.3a51-1 because such shares
are issued by a small company; are low-priced (under five dollars); and are not
traded on NASDAQ or on a national stock exchange. The SEC has established risk
disclosure requirements for broker-dealers participating in penny stock
transactions as part of a system of disclosure and regulatory oversight for the
operation of the penny stock market. Rule 15g-9 under the Securities Exchange
Act of 1934, as amended, obligates a broker-dealer to satisfy special sales
practice requirements, including a requirement that it make an individualized
written suitability determination of the purchaser and receive the purchaser's
written consent prior to the transaction. Further, the Securities Enforcement
Remedies and Penny Stock Reform Act of 1990 require a broker-dealer, prior to a
transaction in a penny stock, to deliver a standardized risk disclosure
instrument that provides information about penny stocks and the risks in the
penny stock market. Additionally, the customer must be provided by the
broker-dealer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and the salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. For so long as the Company's Common Stock is considered
penny stock, the penny stock regulations can be expected to have an adverse
<PAGE>
effect on the liquidity of the Common Stock in the secondary market, if any,
which develops.
Item 2. Management's Discussion and Analysis or Plan of Operation
Discussion and Analysis
NBMDE was formed for the initial purpose of combating the potential spread
of germs through hand to hand contact. The founding philosophy arose from a
concern regarding the occupational risks of healthcare workers. Its initial
product, Safeshield (originally called Virashield) for which patent protection
is being sought, forms a long lasting antimicrobial, waterproof barrier on the
skin. Since inception, NBMDE and now the Company, has broadened its mission from
purely pharmaceuticals to include a line of medical instruments. Since the
acquisition, the Company has further expanded into the area of health, wellness
and fitness products.
The Company was in the development stage until October 1998 when the Share
Exchange took place between NBMDE and the Company. NBMDE has yet to begin
commercial shipment of Safeshield, although it has substantial recent sales of
its Backstroke(TM) product. From inception through June 30, 1999, the Company
generated revenues of approximately $2,777,331 from a limited number of
customers. Since inception through June 30, 1999, the Company has generated
cumulative losses of approximately $16,547,534. Although the Company has
experienced a significant percentage growth in revenues and gross profit from
October 1998 to date, the Company does not believe prior growth rates are
indicative of future operating results, especially in light of the fact that the
Company's Backstroke(TM) product has a finite lifespan. Due to the Company's
operating history and limited resources, among other factors, there can be no
assurance that profitability or significant revenues on a quarterly or annual
basis will occur in the future.
The Company is currently marketing the Backstroke(TM) product, Safeshield
and all approximately 10,500 Bontempi medical, dental and veterinary
instruments, expects to introduce other products by the end of 1999, and expects
to continue to invest significant resources in several new products and
enhancements prior to 2000.
Since execution of the agreement with DermaGuard, and receipt of the
initial order for Safeshield in the amount of $630,000, the Company's MPD has
begun to make preparations for a period of growth, which may require it to
significantly increase the scale of its operations. This increase will include
the hiring of additional personnel in all functional areas and will result in
significantly higher operating expenses. The increase in operating expenses is
expected to be matched by a concurrent increase in revenues. However, the
Company's net gain may not continue even if revenues increase and operating
expenses may still continue to increase. Expansion of the Company's operations
may cause a significant strain on the Company's management, financial and other
resources. The Company's ability to manage recent and any possible future
growth, should it occur, will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures and controls. There
can be no assurance that significant problems in these areas will not occur. Any
<PAGE>
failure to expand these areas and implement and improve such systems, procedures
and controls in an efficient manner at a pace consistent with the Company's
business could have a material adverse effect on the Company's business,
financial condition and results of operations. As a result of such expected
expansion and the anticipated increase in its operating expenses, as well as the
difficulty in forecasting revenue levels, the Company expects to continue to
experience significant fluctuations in its revenues, costs and gross margins,
and therefore its results of operations. See Part I, Item 1. "Description of the
Business - (b) Business of the Issuers - Risk Factors - Fluctuations in Results
of Operations".
Since the acquisition of Flex and formation of the Flex Marketing Division,
the Company has experienced significant growth, which may require it to
substantially increase the scale of its operations. This increase will include
the hiring of additional personnel in all functional areas and will result in
significantly higher operating expenses. The increase in operating expenses is
expected to be matched by a concurrent increase in revenues. However, the
Company's net gain may not continue even if revenues increase and operating
expenses may still continue to increase. Expansion of the Company's operations
may cause a significant strain on the Company's management, financial and other
resources. The Company's ability to manage recent and any possible future
growth, should it occur, will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures and controls. There
can be no assurance that significant problems in these areas will not occur. Any
failure to expand these areas and implement and improve such systems, procedures
and controls in an efficient manner at a pace consistent with the Company's
business could have a material adverse effect on the Company's business,
financial condition and results of operations. As a result of such expected
expansion and the anticipated increase in its operating expenses, as well as the
difficulty in forecasting revenue levels, the Company expects to continue to
experience significant fluctuations in its revenues, costs and gross margins,
and therefore its results of operations. See Part I, Item 1. "Description of the
Business - (b) Business of the Issuers - Risk Factors - Fluctuations in Results
of Operations".
Since NBMDE's Exclusive Distribution Agreement, Bontempi instruments have
begun to be marketed in the Bontempi international catalogue. The Company also
has begun to make preparations for a period of growth, which may require it to
significantly increase the scale of its operations. This increase will include
the hiring of additional personnel in all functional areas and will result in
significantly higher operating expenses. The increase in operating expenses is
expected to be matched by a concurrent increase in revenues. However, the
Company's net gain may not continue even if revenues increase and operating
expenses may still continue to increase. Expansion of the Company's operations
may cause a significant strain on the Company's management, financial and other
resources. The Company's ability to manage recent and any possible future
growth, should it occur, will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures and controls. There
can be no assurance that significant problems in these areas will not occur. Any
failure to expand these areas and implement and improve such systems, procedures
and controls in an efficient manner at a pace consistent with the Company's
business could have a material adverse effect on the Company's business,
financial condition and results of operations. As a result of such expected
expansion and the anticipated increase in its operating expenses, as well as the
<PAGE>
difficulty in forecasting revenue levels, the Company expects to continue to
experience significant fluctuations in its revenues, costs and gross margins,
and therefore its results of operations. See Part I, Item 1. "Description of the
Business - (b) Business of the Issuers - Risk Factors - Fluctuations in Results
of Operations".
Results of Operations - Full Fiscal Years
Revenues
To date, a limited number of customers and distributors have accounted for
substantially all of the Company's revenues with respect to Safeshield and
Bontempi product sales. The Company will focus its selling efforts with regard
to its Safeshield product on the DermaGuard arrangement. DermaGuard proposes to
sell Safeshield to restaurant chains, hospitals, government agencies and others
with the objective of having Safeshield become internationally recognized as a
superior antimicrobial lotion/creme product. The Company will focus its selling
efforts with regard to its Bontempi products on a number of skilled
representatives who will focus on both large chains and sole proprietorships.
The Company will continue to market its Backstroke(TM) product through the use
of infomercials until such method becomes unprofitable. At such time, the
Company intends to introduce the Backstroke(TM) in the retail market.
Although the Company has entered into an exclusive distributorship
agreement with DermaGuard, only one order for Safeshield in the amount of
$630,000 has been received to date. Furthermore, the MPD has sold only a limited
number of instruments to a few main customers. Therefore, there is no assurance
that the Company will be able to obtain adequate distribution of its products to
the intended end user. Many medical product distributors exist for the
distribution of products similar to those distributed by the Company. They carry
an extensive line of products (some of which they manufacture themselves) which
they make available to end users (hospitals, surgeons, healthcare workers).
Competition by these distributors may seriously impede the Company's ability to
distribute the Company's products to end users.
The Company's ability to achieve revenues in the future will depend in
significant part upon its ability to obtain orders from, maintain relationships
with and provide support to, existing and new customers, as well as the
condition of its customers. As a result, any cancellation, reduction or delay in
orders by or shipments to any customer or the inability of any customer to
finance its purchases of the Company's products may materially adversely affect
the Company's business, financial condition and results of operations. There can
be no assurance that the Company's revenues will increase in the future. In
addition, the Company expects that the average selling price of the
Backstroke(TM) product will also decline as the product matures. Accordingly,
the Company's ability to maintain or increase revenues will depend in part upon
its ability to increase unit sales volumes of its other products and to
introduce and sell new or improved products at prices sufficient to compensate
for reduced revenues resulting from declines in the average selling price of the
Company's more mature products. See Part I, Item 1. "Description of the Business
- - (b), Business of the Issuers - Risk Factors - Significant Customer and Product
Concentration; Fluctuations in Results of Operations; Declining Average Selling
Prices and International Operations; Risks of Doing business in Developing
Countries."
<PAGE>
Gross Profit
On the product side of its business, the Company's cost of revenues
consists primarily of costs related to contracted manufacturing and advertising
expenses. For the year ended June 30, 1999, gross profit was $1,876,741 or
approximately 67.6% of product sales. For the year ended June 30, 1998, the
Company's gross profit was $2,268 or approximately 79.7% of product sales. Such
improvement is associated with the introduction of Backstroke(TM), as well as
marketing and sales efforts related to the Bontempi line, but there can be no
assurance that such improvements will continue.
To the extent the Company is unable to introduce new products with similar
margins, the Company's gross margins and results of operations could be
materially adversely affected. The Company's gross profit may also be affected
by a variety of other factors, including mix of products and services sold;
production, reliability or quality problems; price competition; and warranty
expenses and discounts.
Operating Expenses
Sales and Marketing: These expenses consist of advertising, meetings and
conventions and entertainment related to product exhibitions and the related
travel expenses. In fiscal 1999, the Company has spent approximately $2,696,393
on sales and marketing expenses. In fiscal 1999, the Company increased its
advertising particularly with reference to Backstroke(TM). The Company intends
to invest significant resources to expand its sales and marketing effort,
including the hiring of additional personnel and to establish the infrastructure
necessary to support future operations. The Company expects that such expenses
in 2000 will increase in absolute dollars as compared to 1999.
General and Administrative: These expenses consist primarily of the general
and administrative expenses for salaries, contract labor and other expenses for
management and finance and accounting, legal and other professional services
including ongoing expenses as a publicly owned Company related to legal,
accounting and other administrative services and expenses. Since inception, the
Company has spent approximately $6,766,059 on general and administrative
expenses. For the years ended June 30, 1999 and June 30, 1998, general and
administrative expenses were $4,625,636 and $2,140,423, respectively. The
Company expects general and administrative expenses to increase in absolute
dollars in 2000 as compared to 1999, as the Company continues to expand its
operations.
Research and Development: These expenses consist primarily of costs
associated with personnel and equipment costs and field/clinical trials. The
Company's research and development activities include the development of new
Safeshield products as well as products that will replace the Backstroke(TM)
once the product has achieved its maximum potential.
<PAGE>
During 1999, research and development expenses increased as the Company
concentrated on Safeshield. The Company intends to continue to invest
significant resources to continue the development of new products and expects
that research and development expenses in 2000 will increase in absolute dollars
as compared to 1999.
Interest and Other Income (Expense), Net: On November 28, 1998, the Company
executed a 10% convertible note in the amount of $750,000 in favor of TK and
issued a warrant to purchase 200,000 shares of the Company's Common Stock. The
Note was convertible into restricted shares of the Company's Common Stock and
has registration rights. The warrant is exercisable at $0.48 per share and has
piggy-back registration rights. The exercise period commences 30 days following
the effective date of a registration statement covering such warrants. The Note
has since been converted into 8,000,000 shares of restricted common stock of the
Company in full and final satisfaction of the Note.
As part of a Settlement Agreement executed in January 1999 between Flex
Marketing, Inc. and David M. Vitko, individually, as president of D.V. Back
Products, Inc. and as General Manager of Backstroke, Ltd., an Ohio Limited
Partnership, Flex agreed to assume a debt by Back Products in favor of National
City Bank in the amount of $265,754 and to pay Vitko $12,000 in installments
bearing 8% interest per annum
The Company signed a Promissory Note in the amount of $50,000 in favor of
Virasept Pharmaceuticals, Inc. in March 1999 as settlement of amounts owed to
Virasept in connection with the cancellation of the exclusive an distributorship
agreement. The terms require payments in the amount of $1,000 weekly for 12
weeks and then a balloon payment in the amount of $38,000. In lieu of the
balloon payment, Virasept has to agreed to accept weekly payments in the amount
of $1,000. The Company issued 800,000 of its restricted Common Stock to be held
in escrow for the benefit of Virasept to secure payment on the note. The Company
is in default in payment under this arrangement, and Virasept may elect to sue
for the entire balance in lieu of taking the escrowed shares. The parties are in
discussion as to a potential further settlement arrangement. See Part II, Item
4. "Recent Sales of Unregistered Securities."
The Company entered into a Settlement Agreement with James McInerney and
Auckland Trust Co. Limited as Trustee for First Pacific Master Superannuation
Fund whereby NBM must pay them $50,000 by August 6, 1999 toward the repayment of
a bond in the principal amount of $525,000 made in 1998. All other bondholders
in NBMDE converted their bonds to shares of restricted Common Stock in
connection with the share exchange between the Company and NBMDE. See Part II,
Item 2. "Legal Proceedings" and Part II, Item 4, "Recent Sales of Unregistered
Securities".
The Company has signed interest bearing promissory notes on which they make
weekly payments in favor of its officers and directors for unpaid back salaries
<PAGE>
and expenses, including Mr. Hoyng for $17,604, Mr. Volpe for $4,809 and Mr.
Zavoral for $73,056 and signed ten (10) additional notes totaling $233,098 to
certain other creditors.
The Company did not report foreign currency gains or losses for the year
ended June 30, 1999 since the contracts negotiated with Bontempi were all
negotiated in American currency and the Company had no other foreign
transactions. In the event that the Company contracts with a foreign entity for
the purchase of its products, the Company may in the future be exposed to the
risk of foreign currency gains or losses depending upon the magnitude of a
change in the value of a local currency in an international market. The Company
does not currently engage in foreign currency hedging transactions, although it
may implement such transactions in the future.
Financial Condition, Liquidity and Capital Resources
At June 30, 1999, the Company had assets totaling $8,261,073 and
liabilities totaling $2,900,234. Since the Share Exchange in October of 1998,
the Company has financed its operations and met its capital requirements through
sales of its products, common stock offerings aggregating approximately
$5,121,832, through borrowing from current shareholders and through the $750,000
convertible note.
Operating activities used net cash of $4,480,310 and $2,769,999 in 1999 and
1998, respectively.
At June 30, 1999, the Company had a working capital deficiency of
approximately $2,109,641, including $547,361 of accounts receivable and $198,222
of inventory.
The Company's principal commitments for capital expenditures are those
associated with manufacturing and marketing of Backstroke(TM), manufacturing the
Safeshield product and repayment of its short-term indebtedness. See Part I,
Item 1. "Description of the Business - (b) Business of Issuer."
In addition, the Company is spending considerable time and expense on the
development of new Safeshield products, as well as a replacement product for the
Backstroke(TM) should sales diminish. The sources of funds to meet these
commitments will be partially made through cash on hand, revenues generated by
each of the Company's divisions, and other revenues which the Company believes
it will generate over the five (5) year term. See Part I, Item 1. "Description
of Business - (b) Business of Issuer."
The Company's future capital requirements will depend upon many factors,
including the continued success of Backstroke(TM), its current products and new
products, the extent and timing of acceptance of the Company's products and
services in the market, requirements to maintain adequate manufacturing
arrangements, the progress of the Company's research and development efforts,
expansion of the Company's marketing and sales efforts, the Company's results of
operations and the status of competitive products and services. The Company
believes that cash on hand, cash flow from operations, if any, and funds
available from Backstroke(TM) will be adequate to fund its operations for at
<PAGE>
least the next twelve months. There can be no assurance, however, that the
Company will not require additional financing prior to such date to fund its
operations. In addition, the Company may require additional financing after such
date to fund its operations. There can be no assurance that any additional
financing will be available to the Company on acceptable terms, or at all, when
required by the Company. If additional funds are raised by issuing equity
securities, further dilution to the existing stockholders will result. If
additional funds are raised by issuing debt securities future interest expense
will be incurred. If adequate funds are not available, the Company may be
required to delay, scale back the development of new or improved products or to
scale back or eliminate one or more of its research and development programs or
obtain funds through arrangements with partners or others that may require the
Company to relinquish rights to certain of its products or potential products or
other assets that the Company would not otherwise relinquish. Accordingly, the
inability to obtain such financing could have a material adverse effect on the
Company's business, financial condition and results of operations.
It is the Company's intention to pursue additonal debt and or equity
financing in the range of $2,000,000 to $5,000,000 during the remaining part of
calendar year 1999, however, there can be no assurace that they will be
successful in their efforts. NBM believes that cash flows generated from
operations and borrowing capacity, combined with proceeds from future debt or
equity finacning, will provide adequate flexibility for funding the Company's
working capital obligations.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may recognize the date using 00 as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.
The Company determined that the Year 2000 impact is not material to NBM and
that it will not impact its business, operations or financial condition since
all of the internal software utilized by the Company has the capability of being
upgraded to support Year 2000 versions.
The Company believes that it has disclosed all required information
relative to Year 2000 issues relating to its business and operations. However,
there can be no assurance that the systems of other companies on which the
Company's systems rely also will be timely converted or that any such failure to
convert by another company would not have an adverse affect on the Company's
systems.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
<PAGE>
Form 10-SB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), demand
for the Company's products and services, expansion and growth of the Company's
business and operations, and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
or developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-SB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
Item 3. Description of Property
The Company maintains its executive offices at 43 Taunton Green, 3rd Floor,
Taunton, MA 02780. Its telephone number is (508) 884-8820 and its facsimile
number is (508) 880-5208.
<PAGE>
The Company leases approximately three thousand (3,000) square feet for its
executive offices from Mello Investment Trust. The lease is for a term of three
(3) years commencing December 1, 1997 and ending November 30, 2000. The Company
may, in its sole discretion, extend the lease for a fourth and fifth year. The
Company pays monthly rent in the amount of $3,100 and the lease is on a triple
net basis. The Company believes that the leased property is sufficient for its
requirements for the next several years. See Part I, Item 3. "Description of
Property."
The Company also leases approximately four hundred (400) square feet
additional space at 43 Taunton Green on the 2nd floor from Mello Investment
Trust. The lease term commenced February 1, 1998 and expires on August 31, 1999.
The Company paid $4,500 as a lump sum upon execution of the lease. The lease is
on a triple net basis. The Company believes that the property is sufficient for
its requirements for the next several years.
The Company has several business related activities in the State of
Florida, including its legal counsel, accounting firm, and Backstroke(TM)
service center. It maintains an apartment in Ft. Lauderdale, Florida for its
executives. The lease term is for a period of one (1) year and expires in March
2000. The Company pays monthly rent in the amount of $1,118. The Landlord is
responsible for all maintenance. In addition the Company rents furniture for the
apartment. The Landlord is responsible for all maintenance.
The Company headquarters also serves as the telephone customer service
center for Backstroke(TM). This service center handles over 100 calls each day.
The Company owns no real property and its personal property consists of
furniture, fixtures and equipment, prototype molds and leasehold improvements
with an original cost of $758,685 on June 30, 1999.
The Company currently employs its capital reserves in a business checking
account. Activity is monitored on a weekly basis.
Item 4. Security Ownership of Certain Beneficial Owners and Management:
The following table sets forth information as of July 31, 1999, regarding
the ownership of the Company's Common Stock by each shareholder known by the
Company to be the beneficial owner of more than five percent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the share of Common Stock
beneficially owned.
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Title of Amount and Nature of Percent of
Beneficial Owner Class Beneficial Owner Class
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Daniel J. Hoyng (1)(2)(3) Common 1,598,600
3.3%
Barry McFarland(4) None 0
0%
Victor Bianchi (5) Common 1,324,166
2.7%
Raymond Volpe(6) Common 335,000
0.7%
Ernest Zavoral (7) Common 662,956
1.4%
Marek Lozowicki(8) Common 300,000
0.6%
Robert Sciacca Common 395,000
0.8%
Clinton Smith(9) Common 110,000
0.2%
Thomson Kernaghan & Common 8,000,000
Co., Ltd. 16.4%
All Executive Officers and Common 4,725,722
9.7%
</TABLE>
Directors as a Group
(eight(8) persons)(8)
----------
(1) The address for each of the above is c/o National Boston Medical Inc., 43
Taunton Green, 3rd Floor, Taunton, MA 02780. In July 1999, the Company
issued 870,000 shares of its restricted common stock to eight (8) persons
for past services on the Company's Board of Directors. The Company relied
upon Section 4(2) of the Act and Rule 506 and Section 8-6-11 of the Alabama
code, Section 517.061(11) of the Florida code, Section 51:705 of the
Louisiana code, Section 402(b)(9) of the Massachusetts code, Section
75-71-408 of the Mississippi code and Section 1707.03(X) of the Ohio code.
No state exemption was required for two (2) individuals who are Canadian
residents. See Part I, Item 5. "Directors, Executive Officers, Promoters
and Control Persons - Executive Officers and Directors."; and Part I, Item
6. "Executive Compensation."; and Part I, Item 7. "Certain Relationships
<PAGE>
and Related Transactions."; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
(2) In November 1997, prior to its acquisition by the Company, NBMDE entered
into a share exchange agreement with MMG. The exchange was made whereby
NBMDE issued 499,000 shares of its restricted common stock to the
principals of DJH, which included an issuance of 394,375 shares to Daniel
Hoyng, the Company's President, Chairman and CEO. The Company has an
employment contract with Mr. Hoyng. See Part I, Item 5. "Directors,
Executive Officer, Promoters and Control Persons"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales
of Unregistered Securities."
(3) The Company has an employment contract with Mr. Hoyng. Under this contract,
in July 1999, the Company issued 250,000 shares of its restricted Common
Stock to Mr. Hoyng. Mr. Hoyng is entitled to receive 250,000 restricted
shares of the Common Stock annually (for which he is currently entitled to
vote and receive dividends), has the ability to purchase additional shares
in the event of any offering of the Company's stock at 75% of the offering
price to maintain his then current percentage of the Company's outstanding
common stock, has an option to purchase 2,000,000 shares of the restricted
common stock of the Company over the next three (3) years for the average
trading price of the Company's common stock for the last twelve (12) months
or the then current market price at the time the option is exercised, he
may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for
the last twelve (12) months or the then current market price at the time
the option is exercised and is entitled to a transition bonus of 250,000
shares of the Company's restricted common stock. All shares carry
piggy-back registration rights. The Company relied upon Section 4(2) of the
Act and Rule 506 and Section 359(f)(2)(d) of the Massachusetts Code. See
Part I, Item 5. "Directors, Executive Officer, Promoters and Control
Persons"; Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
(4) The Company has an employment contract with Mr. McFarland. Mr. McFarland is
entitled to receive 500,000 restricted shares of the Common Stock annually
(for which he is currently entitled to vote and receive dividends), has the
ability to purchase additional shares in the event of any offering of the
Company's stock at 75% of the offering price to maintain his then current
percentage of the Company's outstanding common stock, has an option to
purchase 500,000 shares of the restricted common stock of the Company over
the next three (3) years for the average trading price of the Company's
common stock for the last twelve (12) months or the then current market
price at the time the option is exercised and he may convert one-third of
his salary to shares of the Company's restricted common stock at the
average trading price of the Company's common stock for the last twelve
(12) months or the then current market price at the time the option is
exercised and is entitled to a signing bonus of 500,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506
<PAGE>
and Section 359(f)(2)(d) of the Massachusetts Code. See Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item
7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
(5) On July 17, 1998, prior to its acquisition by the Company, NBMDE entered
into an Exclusive Distribution Agreement with both BMC-US and BMC-CAN. In
exchange for the exclusive rights to sell Bontempi Snc. instruments in the
U.S., Mexico and though the World Wide Web. As part of this Agreement,
NBMDE was to pay $307,999 which was convertible to shares of NBMDE's
restricted common stock and to issue 2,374,999 shares of its restricted
common stock to Bontempi and its shareholders, including 658,333 shares to
Victor Bianchi, currently serving as a Director of the Company. Bontempi
and its shareholders converted the remaining $258,000 of the amount due
pursuant to a notice of conversion dated October 10, 1998 to 3,225,000
shares of the Company's restricted common stock. The Company relied upon
Section 4(2) of the Act and Rule 506 and Section 402(b)(9) of the
Massachusetts Code. See Part I, Item 5. "Directors, Executive Officer,
Promoters and Control Persons"; Part I, Item 7. "Certain Relationships and
Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
(6) Mr. Volpe's contract is for one (1) year and is for a salary of $65,000
commencing June 25, 1998. In addition, Mr. Volpe is entitled to a bonus of
5% of gross margin on all sales up to $1,000,000 in sales and 10% of gross
margin on all sales greater than $1,000,000 and a $2,000 per month bonus
for achieving projected profit/loss projections. See Part I, Item 5.
"Directors, Executive Officers, Promoter and Control Persons - Employee
Contracts and Agreement."
(7) On November 21, 1998, the Company entered into a share exchange agreement
with Flex and its shareholders whereby the Company exchanged 400,000
(200,000 each) shares of its restricted common stock with Ernest Zavoral
and Remon Heyek for 100% of the issued and outstanding shares of Flex.
Following the exchange, Flex became a wholly-owned subsidiary of the
Company. These shares were valued at $248,000. The President of Flex,
Ernest Zavoral, remained with the Company as the President of Flex and
received 400,000 shares of the restricted common stock of the Company. Mr.
Zavoral is entitled to receive 150,000 restricted shares of the Common
Stock annually (for which he is currently entitled to vote and receive
dividends), has the ability to purchase additional shares in the event of
any offering of the Company's stock at 75% of the offering price to
maintain his then current percentage of the Company's outstanding common
stock, has an option to purchase 750,000 shares of the restricted common
stock of the Company over the next three (3) years for the average trading
price of the Company's common stock for the last twelve (12) months or the
then current market price at the time the option is exercised and he may
convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for
the last twelve (12) months or the then current market price at the time
the option is exercised. All shares carry piggy-back registration rights.
<PAGE>
The Company relied upon Section 4(2) of the Act and Rule 506 and Section
1707.03(X) of the Ohio Code. See Part I, Item 7. "Certain Relationships and
Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
(8) The Company has an employment contract with Mr. Lozowicki. Mr. Lozowicki is
entitled to receive 187,500 restricted shares of the Common Stock annually
(for which he is currently entitled to vote and receive dividends), has the
ability to purchase additional shares in the event of any offering of the
Company's stock at 75% of the offering price to maintain his then current
percentage of the Company's outstanding common stock, has an option to
purchase 400,000 shares of the restricted common stock of the Company over
the next three (3) years for the average trading price of the Company's
common stock for the last twelve (12) months or the then current market
price at the time the option is exercised and he may convert one-third of
his salary to shares of the Company's restricted common stock at the
average trading price of the Company's common stock for the last twelve
(12) months or the then current market price at the time the option is
exercised and is entitled to a signing bonus of 100,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 359(f)(2)(d) of the Massachusetts Code. See Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item
7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
(9) Clinton Smith owns warrants to purchase 20,000 shares of the Company's
Common Stock pursuant to a bond and warrant offering which was completed on
or about June 30, 1998. In the event all such options to purchase were
exercised, this group would own a total of 4,745,722 shares of the
Company's Common Stock which would represent 9.7% of the total shares of
Common Stock outstanding. See Part II, Item 4. "Recent Offerings of
Unregistered Securities."
There are no arrangements which may result in the change of control of the
Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons:
Executive Officers and Directors
Set forth below are the names, ages, positions, with the Company and
business experiences of the executive officers and directors of the Company.
<TABLE>
<CAPTION>
Name Age Position(s) with Company
<S> <C> <C>
Daniel J. Hoyng 36 Chairman, President and Chief
Executive Officer
<PAGE>
Ernest Zavoral 42 Director, Chief Operating Officer,
President of Flex and Division
Manager of FMD
Barry McFarland 48 Chief Financial Officer, Treasurer
Marek Lozowicki 36 Vice-President - Information
Technology
And Secretary
Raymond Volpe 49 Division Manager of MPD
Victor Bianchi 44 Director
Robert Sciacca 54 Director
Clinton Smith 40 Director
</TABLE>
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Directors. The officers and directors will
devote such time and effort to the business and affairs of the Company as may be
necessary to perform their responsibilities as executive officers and/or
directors of the Company.
In July 1999, the Company issued 870,000 shares of its restricted common
stock to eight (8) persons for past services on the Company's Board of
Directors. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 8-6-11 of the Alabama code, Section 517.061(11) of the Florida code,
Section 51:705 of the Louisiana code, Section 402(b)(9) of the Massachusetts
code, Section 75-71-408 of the Mississippi code and Section 1707.03(X) of the
Ohio code. No state exemption was required for two (2) individuals who are
Canadian residents. See Part I, Item 6. "Executive Compensation - Compensation
of Directors."; and Part I, Item 7. "Certain Relationships and Related
Transactions."; and Part II, Item 4. "Recent Sales of Unregistered Securities."
Family Relationships
There are no family relationships between or among the executive officers
and directors of the Company.
Business Experience
Daniel J. Hoyng, age 36, currently serves as Chairman, President and CEO.
He has served as Chairman since August 1997, President since 1997 and CEO since
1997, although he served part of that time January 1999 to May 1999 as a co-CEO
with Mr. Thomas Collins who has since left the Company. Mr. Hoyng formed DJH in
March 1997 and NBMDE in November 1997. Before working for the Company, DJH and
NBMDE, in 1996 and 1997, he was the Vice-President of Sales for Companion Radio,
<PAGE>
where he managed a sales force dedicated to introducing the company's products
to the nursing home industry. From 1992 to1996, Mr. Hoyng was the Divisional
Director of Healthcare Services Group, Inc., where he was responsible for the
implementation of a sales and marketing campaign for the Northeast Division of
the company. Over a four year period, Mr. Hoyng helped his division to grow from
$13 million to $22 million. Mr. Hoyng graduated from Saint Joseph's College with
a B.S. of Communications and Theater Arts in 1985.
Barry McFarland, age 48, currently serves as the Chief Financial Officer
and Treasurer of the Company. He has over twenty-five years of experience in
corporate finance and general management. Most recently, he served as CFO and VP
of operations for NUWAY Corporation, a start-up manufacturer of moist tissue
products for retail distribution. He was previously VP of Finance and Chief
Operating Officer for International Treasury Systems, Inc., a software
development and systems integrator of foreign exchange trading systems. He also
served as a corporate senior financial analyst for the Gillette company, then as
division controller and director of Finance for two separate $100 Million dollar
divisions of Computer Vision Corporation. Mr. McFarland holds a B.S. degree in
finance, Cum Laude, from Boston College.
Victor Bianchi, age 44, currently serves as a director of the Company. He
has served in this capacity since July, 1998, the date of the exclusive
distribution agreement granted NBM by Bontempi. He has served as President of
Bontempi Medical Corporation since 1995. He concentrates on building strategic
alliances within the dental, medical and veterinary industries and manages the
Bontempi office and staff. Between 1979 and 1995, he was the co-owner of Data
Network Xperts ("DNX"). DNX began as a support service to the interconnect
industry. In the mid 1980's, with the introduction of LAN's and the
Client/Server online platforms, DNX migrated to the commercial electronic data
exchange. He speaks fluent Italian and is the liaison between the Company and
Bontempi Italy (owner of all Bontempi instruments). Mr. Bianchi completed his
commercial communications degree in Italy.
Raymond Volpe, age 49, currently serves as the Division Manager for MPD. He
has served in this capacity since June 1997. He was the Divisional
Vice-President of Healthcare Services Group between the years of 1993 and 1996.
In that capacity, he trained, recruited and hired regional marketing directors.
He procured long-term facilities as customers, he conducted motivational
seminars for staff in a long term care environment. Prior to his employment with
Healthcare Services Group and between the years of 1995 and 1997, he served as
the Executive Vice-President of Caremor Corporation, where he facilitated
training sessions for caregivers and providers in the field of dementia. He also
facilitated contracts with national book chains and distributors for dementia
specific books marketed by Caremor. Additionally, he conducted motivational
programs for those individuals whose family and friends were dementia victims.
Mr. Volpe has a B.S. degree in Education from the University of Scranton and a
Masters degree in history from Iona College. He also earned a Certificate of
Advanced Study in Administration and Supervision from New Paltz State
University, NY.
Ernest Zavoral, age 42, currently serves as a Director, President of Flex
and Division Manager of the FMD. He has served the Company in these capacities
since the acquisition of Flex by the Company in November 1998. Mr. Zavoral was
the President of Flex Marketing, Inc. from 1997. That company provided guidance
<PAGE>
to individuals and entities on how to bring their newly invented products to the
marketplace. Mr. Zavoral is experienced in the marketing and sales industries
and has gained invaluable experience in infomercial related marketing by
bringing the Backstroke(TM) to the marketplace. Prior to his employment with
Flex, he was the President of Freedom Laces which were sold through Wal-Mart
stores. From 1993 to 1996, Mr. Zavoral was employed by Environmental
Professionals & Associates. as the Vice-President of Operations. In that
capacity he concentrated on permitting and environmental operations. Prior to
his employment with Environmental Professionals & Associates, Mr. Zavoral was
the Vice-President of Operations for EMAS where he also concentrated on
permitting and environmental operations. Mr. Zavoral attended Grove City
College.
Marek Lozowicki, age 36, currently serves as the Vice President -
Information Technology and as the Secretary of the Company. He has served the
Company in this capacity since November 1998 and has worked for the Company
since October 1997. He is responsible for implementing and maintaining
information and communication systems (voice and data), database management and
electronic commerce. Prior to this, between July 1997 and October 1997, he
worked for Medical Marketing Group as a Systems Manager. His responsibilities
included installing, configuring and maintaining the company computer network
and other information systems (voice and data). Between March 1996 and October
1997, Mr. Lozowicki was employed by Portraits International, Inc. as their
Northeast Region Manager. While there, he oversaw all aspects of the photography
contract assignments , and associated obligations including retail and school
sectors. He was involved in the implementation of new digital previewing systems
in the premium glamour sector utilized by chain stores such as Bloomingdales.
Other responsibilities included ongoing hiring, training and overseeing the
department staff of over fifteen employees, equipment and material inventory
control, quality assurance and the customer satisfaction assurance program.
During his last months of employment, he also worked for Medical Marketing
Group. Prior to Portraits International, Inc., between August 1992 and March
1996, he worked for AFP, Inc. as a photography manager for the Northeast region.
His responsibilities were similar to those at Portraits International, Inc. Mr.
Lozowicki attended school in Poland, where he received the equivalent of a B.A.
degree in Philosophy. While there he also completed two years of graduate work
in Theology. Upon arriving in the U.S. he completed another one year of graduate
work in Theology.
Dr. Robert Sciacca, age 54, currently serves as a Director of the Company.
He has served on the Board since August 1998. For the past 17 years, Dr. Sciacca
has been the president and chief executive officer of Alabama Ear, Nose and
Throat Associates, a medical specialty practice employing twelve (12) health
professionals. It is a full service ear, nose, throat and otolaryngic allergy
practice. He is also an officer and Board member of Riverchase Medical
Developers, a group of four (4) health professionals in the Birmingham
community. Dr. Sciacca sits on the Medical Advisory Board. Dr. Sciacca received
his B.S. degree from North Dakota State and his M.D. Degree from the University
of Alabama at Birmingham in 1978.
Clinton Smith, age 40, currently serves as a Director of the Company. He
has served in this capacity since August 1998. In addition to serving on the
Board of Directors, Mr. Smith is partner and co-owner of Roby & Smith, a New
Orleans based law firm. The firm is a full service law firm with a concentration
in litigation. He has been retained to represent the Company in some legal
<PAGE>
matters. Prior to Roby & Smith, he was a partner at Bryan & Jupiter (formerly
Bryan, Jupiter, Lewis & Blanson), another New Orleans law firm. There he was a
litigation attorney practicing in the areas of education/school law, commercial
law, workers' compensation and tort defense. He was so employed since 1989. Mr.
Smith received his B.A. degree from Morehouse College in 1982 and his J.D.
degree from Tulane University in 1987.
Medical Advisory Board
In addition to the officers and directors of the Company, NBM has a medical
advisory board which has provided advisory input on products, research and
educational projects for the Company. All of the members are inactive members of
this board who can be called on to address issues which arise in ongoing
research and development projects. Active/Inactive status depends upon the level
of participation in the Company's current activities. Medical Advisory Board
members receive no salaries for their services but are compensated for any
reasonable out of pocket expenses incurred on behalf of the Company. Each of the
Medical Advisory Board members is a shareholder of the Company. Included on such
board are the following:
R. DON BALE, MD
Obstetrics & Gynecology
MICHAEL F. BLUM, MD
Orthopaedic Surgeon
R. DON BRYAN, MD
Otolaryngology Head & Neck Surgery
WILLIAM BRYANT, MD
Orthopedic Surgeon
PAMELA S. DARR, MD
Radiologist
LARRY DEEP, DMD
Cosmetic & Implant Dentistry
AARON DeMEYERE, MD
Obstetrics & Gynecology
NASROLLAH ESLAMI, MD
Neurology
STEPHEN C. HEEGER, DO
Family Practice
PATRICK HUNTER, II, MD
<PAGE>
Urology
JOHN ISSIS, MD
General Surgeon
AVRAHAM KADAR, MD
Immunology, Allergy & Asthma
FRED KHALOUF, D.O.
Anesthesiology
PAUL KLEIN, OD, FAAO
Optometry
JOE MASSA, DDS
General Dentistry
ROBERT J. McDONOUGH, DDS
Oral & Maxillofacial Surgery
NORBERT MING, MD
Otolaryngology & Plastic & Reconstructive Surgery
WILLIAM L. NEQUETTE, DDS
General Dentistry And Educator
RAKESH R. PATEL, DO
Physical, Rehabilitation, Industrial And Sports Medicine
DONALD C. PATTERSON, MD
Obstetrics And Gynecology
JOSEPH A. PENNER, MD
Dermatology & Dermatologic Surgery
HARRY L. PHILLIPS, MD
Family Practice
CHARLES H. PIPPITT, JR., MD
Oncology & Gynecology
DON ROBERTS, MD
Gastroenterology & Internal Medicine
J. SCOTT ROBERTSON, MD
<PAGE>
Otolaryngology and Head & Neck Surgery
JACK L. SCHAEFFER, OD
Optometrist
WALTER R. SIEMIAN, MD
Plastic And Reconstructive Surgery
PERRY W. SMITH, MD
Anesthesiology
RICHARD S. STEPHEN, MD
Obstetrics & Gynecology
MICHAEL D. STORCH, MD
Plastic And Reconstructive Surgery
JOSEPH L. STORY, MD
Family Medicine
Item 6. Executive Compensation
<TABLE>
<CAPTION>
Name Year LT LT All
and Post Annual Annual Annual Comp Comp LTIP Other
Comp Comp Comp Rest Options Payouts (1)(2)
Salary(1) Bonus($) Other Stock
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel J. $125,000 (3) (3)
Hoyng, 1998 $175,000 $20,000
Chairman, $20,000
President 1999
and CEO (3)
- -----------------------------------------------------------------------------------------------------
Ernest (4) (4)
Zavoral, 1998 $75,000 $20,000
COO,
President of 1999 $100,000 $20,000
Flex,
Director and
Division
Manager of
FMD(4)
- -----------------------------------------------------------------------------------------------------
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barry (5) (5)
McFarland; 1999 $125,000 $20,000
Chief
Financial
Officer,
Treasurer(5)
- -----------------------------------------------------------------------------------------------------
Marek (6) (6)
Lozowicki, 1998 $65,000 $20,000
Vice
President 1999 $75,000 $12,000
Information
Technology
and
Secretary(6)
- -----------------------------------------------------------------------------------------------------
(7)
Raymond 1998 $65,000 $6,000
Volpe,
Division
Manager
MPD(7)
</TABLE>
(1) All other compensation includes certain health and life insurance benefits
paid by the Company on behalf of its employee.
(2) In July 1999, the Company issued 870,000 shares of its restricted common
stock to eight (8) persons for past services on the Company's Board of
Directors. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 8-6-11 of the Alabama code, Section 517.061(11) of the Florida
code, Section 51:705 of the Louisiana code, Section 402(b)(9) of the
Massachusetts code, Section 75-71-408 of the Mississippi code and Section
1707.03(X) of the Ohio code. No state exemption was required for two (2)
individuals who are Canadian residents. See Part I, Item 7. "Certain
Relationships and Related Transactions."; and Part II, Item 4. "Recent
Sales of Unregistered Securities."
(3) The Company has an employment contract with Mr. Hoyng. Under this contract,
in July 1999, the Company issued 250,000 shares of its restricted Common
Stock to Mr. Hoyng. Mr. Hoyng is entitled to receive 250,000 restricted
shares of the Common Stock annually (for which he is currently entitled to
vote and receive dividends), has the ability to purchase additional shares
in the event of any offering of the Company's stock at 75% of the offering
price to maintain his then current percentage of the Company's outstanding
common stock, has an option to purchase 2,000,000 shares of the restricted
common stock of the Company over the next three (3) years for the average
<PAGE>
trading price of the Company's common stock for the last twelve (12) months
or the then current market price at the time the option is exercised, he
may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for
the last twelve (12) months or the then current market price at the time
the option is exercised and is entitled to a transition bonus of 250,000
shares of the Company's restricted common stock. All shares carry
piggy-back registration rights. The Company relied upon Section 4(2) of the
Act and Rule 506 and Section 359(f)(2)(d) of the Massachusetts Code. See
Part I, Item 7. "Certain Relationships and Related Transactions"; and Part
II, Item 4. "Recent Sales of Unregistered Securities."
(4) On November 21, 1998, the Company entered into a share exchange agreement
with Flex and its shareholders whereby the Company exchanged 400,000
(200,000 each) shares of its restricted common stock with Ernest Zavoral
and Remon Heyek for 100% of the issued and outstanding shares of Flex.
Following the exchange, Flex became a wholly-owned subsidiary of the
Company. These shares were valued at $248,000. The President of Flex,
Ernest Zavoral, remained with the Company as the President of Flex and
received 400,000 shares of the restricted common stock of the Company. Mr.
Zavoral is entitled to receive 150,000 restricted shares of the Common
Stock annually (for which he is currently entitled to vote and receive
dividends), has the ability to purchase additional shares in the event of
any offering of the Company's stock at 75% of the offering price to
maintain his then current percentage of the Company's outstanding common
stock, has an option to purchase 750,000 shares of the restricted common
stock of the Company over the next three (3) years for the average trading
price of the Company's common stock for the last twelve (12) months or the
then current market price at the time the option is exercised and he may
convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for
the last twelve (12) months or the then current market price at the time
the option is exercised. All shares carry piggy-back registration rights.
The Company relied upon Section 4(2) of the Act and Rule 506 and Section
1707.03(X) of the Ohio Code. See Part I, Item 7. "Certain Relationships and
Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
(5) The Company has an employment contract with Mr. McFarland. Mr. McFarland is
entitled to receive 500,000 restricted shares of the Common Stock annually
(for which he is currently entitled to vote and receive dividends), has the
ability to purchase additional shares in the event of any offering of the
Company's stock at 75% of the offering price to maintain his then current
percentage of the Company's outstanding common stock, has an option to
purchase 500,000 shares of the restricted common stock of the Company over
the next three (3) years for the average trading price of the Company's
common stock for the last twelve (12) months or the then current market
price at the time the option is exercised and he may convert one-third of
his salary to shares of the Company's restricted common stock at the
average trading price of the Company's common stock for the last twelve
(12) months or the then current market price at the time the option is
<PAGE>
exercised and is entitled to a signing bonus of 500,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 359(f)(2)(d) of the Massachusetts Code. See Part I, Item 7.
"Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
(6) The Company has an employment contract with Mr. Lozowicki. Mr. Lozowicki is
entitled to receive 187,500 restricted shares of the Common Stock annually
(for which he is currently entitled to vote and receive dividends), has the
ability to purchase additional shares in the event of any offering of the
Company's stock at 75% of the offering price to maintain his then current
percentage of the Company's outstanding common stock, has an option to
purchase 400,000 shares of the restricted common stock of the Company over
the next three (3) years for the average trading price of the Company's
common stock for the last twelve (12) months or the then current market
price at the time the option is exercised and he may convert one-third of
his salary to shares of the Company's restricted common stock at the
average trading price of the Company's common stock for the last twelve
(12) months or the then current market price at the time the option is
exercised and is entitled to a signing bonus of 100,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 359(f)(2)(d) of the Massachusetts Code. See Part I, Item 7.
"Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
(7) Mr. Volpe's contract is for one (1) year and is for a salary of $65,000
commencing June 25, 1998. In addition, Mr. Volpe is entitled to a bonus of
5% of gross margin on all sales up to $1,000,000 in sales and 10% of gross
margin on all sales greater than $1,000,000 and a $2,000 per month bonus
for achieving projected profit/loss projections. See Part I, Item 5.
"Directors, Executive Officers, Promoter and Control Persons - Employee
Contracts and Agreement."
Employee Contracts and Agreements
The Company has entered into Employee Agreements with only a limited number
of its officers and directors, but intends to enter into formal contracts with
each of them in the near future.
Key Man Life Insurance
The Company intends to apply for Key Man Life Insurance and
Officer/Director Insurance upon becoming a reporting company under the 1934 Act.
Employee and Consultants Stock Option Plans
<PAGE>
There is currently no employee nor consultant stock option plan in place,
although the Company plans to submit such a plan or plans to the shareholders at
the next annual meeting.
Compensation of Directors
In the past, the Company has awarded each of its Directors 10,000 shares of
its Restricted Common Stock for service on the Board. NBM intends to issue the
same number of shares in future months, although no formal plan is in place.
In July 1999, the Company issued 870,000 shares of its restricted common
stock to eight (8) persons for past services on the Company's Board of
Directors. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 8-6-11 of the Alabama code, Section 517.061(11) of the Florida code,
Section 51:705 of the Louisiana code, Section 402(b)(9) of the Massachusetts
code, Section 75-71-408 of the Mississippi code and Section 1707.03(X) of the
Ohio code. No state exemption was required for two (2) individuals who are
Canadian residents. See Part I, Item 7. "Certain Relationships and Related
Transactions."; and Part II, Item 4. "Recent Sales of Unregistered Securities."
Item 7. Certain Relationships and Related Transactions
In November 1997, prior to its acquisition by the Company, NBMDE entered
into a share exchange agreement with MMG. The exchange was made whereby NBMDE
issued 499,000 shares of its restricted common stock to the principals of DJH,
including an issuance of 394,375 shares to Daniel Hoyng, the Company's President
and CEO. The Company has an employment contract with Mr. Hoyng. See Part II,
Item 4. "Recent Sales of Unregistered Securities."
In late 1997, NBMDE entered into a Consulting Agreement with DAG, for which
NBMDE paid commissions in the form of cash and stock to DAG in connection with
an offering of NBMDE's 12% bonds and warrants. The Agreement was declared null
and void ab initio by the Company in June 1999, at which time the Company
entered into agreements with DFL and ECG. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In February 1998, prior to its acquisition by the Company, NBMDE entered
into a Consulting Agreement with Equity to provide financial public relations
consulting services in exchange for $60,000 annually and 1.5% of the issued and
outstanding stock of the company, which at that time was estimated at 75,000
shares. The term of the contract was for a period of one (1) year. In December
1998, after its acquisition of NBMDE, the Company terminated this agreement. As
part of a settlement agreement, the Company issued 175,000 shares of its
unrestricted Common Stock valued at $7,000 to Equity and Equity executed a full
and general release for all claims. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In February 1998, the Company's predecessor, Frozen Assets, entered into a
share exchange agreement with Growth, whereby Frozen Assets canceled 2,500,000
shares of its restricted common stock and exchanged 1,200,000 of its convertible
preferred stock (which stock contained 10 to 1 conversion and voting rights) for
all of the outstanding capital stock of Growth, which then became a wholly-owned
<PAGE>
subsidiary of Frozen Assets. Growth is currently inactive and its corporate
charter has been revoked by the state of Nevada. See Part II, Item 4. "Recent
Sales of Unregistered Securities.")
On March 24, 1998, the Company entered into a share exchange agreement with
Fragrance Florida, whereby the Company exchanged 1,200,000 of its convertible
preferred stock (which stock contained 10 to 1 conversion and voting rights) for
all of the outstanding capital stock of Fragrance Florida, which then became a
wholly-owned subsidiary of the Company. On June 4, 1998, the Company amended its
Articles of Incorporation changing its name to Fragrance Express, Inc. Although
the parent and its subsidiary Fragrance Florida bore the same name, they did not
share the same state of incorporation, so no consent was necessary. See Part II,
Item 4. "Recent Sales of Unregistered Securities."
On May 21, 1998, NBMDE, prior to its acquisition by the Company, entered
into a Consulting Agreement with Rothschild and Mayflower whereby Rothschild and
Mayflower agreed to provide a fully trading public company to the Company in
exchange for issuance of 650,000 shares of NBMDE's Common Stock which were to be
converted into 400,000 (200,000 each) restricted shares in the new public
company and a commitment to issue an additional 225,000 (112,500 each)
unrestricted shares in the new public company after acquisition. See Part II,
Item 4. "Recent Sales of Unregistered Securities."
On July 17, 1998, prior to its acquisition by the Company, NBMDE entered
into an Exclusive Distribution Agreement with both BMC-US and BMC-CAN. In
exchange for the exclusive rights to sell Bontempi Snc. instruments in the U.S.,
Mexico and though the World Wide Web. As part of this Agreement, NBMDE was to
pay $307,999 which was convertible to shares of NBMDE's restricted common stock
and to issue 2,374,999 shares of its restricted common stock to Bontempi and its
shareholders, including 658,333 shares to Victor Bianchi, currently serving as a
Director of the Company. Bontempi and its shareholders converted the remaining
$258,000 of the amount due pursuant to a notice of conversion dated October 10,
1998 to 3,225,000 shares of the Company's restricted common stock. The Company
relied upon Section 4(2) of the Act and Rule 506 and Section 402(b)(9) of the
Massachusetts Code. See Part II, Item 4. "Recent Sales of Unregistered
Securities."
On October 8, 1998, the Company entered into a share exchange agreement
with NBMDE, which wholly-owned two dormant subsidiaries, MMG, Inc., a
Massachusetts corporation formed in March 1997 and Virushield Inc., a
Massachusetts corporation formed in December, 1997. Prior to the closing of the
share exchange, the Company conducted a pre-share exchange 4 to 1 reverse split
of its common stock and a 20 to 1 reverse split of its preferred stock. The
Company then issued 14,988,614 shares of its restricted common stock to NBMDE's
shareholders in a 1 for 1 exchange for all of the issued and outstanding shares
of NBMDE. The predecessor of NBMDE was MMG. At the time of the share exchange,
NBMDE became a wholly-owned subsidiary of the Company. As a result of this
acquisition, warrants to purchase 1,922,800 shares of NBMDE's restricted Common
Stock exercisable at $1.25 and warrants to purchase 402,000 shares of NBMDE's
restricted Common Stock exercisable at $2.50, were converted to an equal number
of warrants to purchase restricted Common Stock of the Company, which Company
warrants are exercisable for three (3) years from the date of their issuance.
<PAGE>
On October 15, 1998, the Company amended its Articles of Incorporation changing
its name to National Boston Medical, Inc. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
On October 9, 1998, prior to changing its name, the Company entered into a
Consulting Agreement with Good Works, Inc. to provide corporate growth
development consulting services to the Company in exchange for issuance of
500,000 shares of the Company's Common Stock. See Part II, Item 4. "Recent Sales
of Unregistered Securities."
On October 9, 1998, prior to changing its name, the Company entered into a
Consulting Agreement with Rothschild whereby Rothschild agreed to provide
corporate growth development consulting services as a media consultant to the
Company in exchange for issuance of 250,000 shares of the Company's Common
Stock. See Part II, Item 4. "Recent Sales of Unregistered Securities."
In November 1998, the Company issued a total of 100,000 shares of its
restricted Common Stock to 75,000 shares to Richard Alfieri in exchange for
services and 25,000 shares to one (1) individual who should have received the
property distribution made in October, 1998, but did not receive his shares.
These shares were valued at $4,000 ($3,000 was attributable to Mr. Alfieri's
services.) See Part II, Item 4. "Recent Sales of Unregistered Securities."
On November 21, 1998, the Company entered into a share exchange agreement
with Flex and its shareholders whereby the Company exchanged 400,000 (200,000
each) shares of its restricted common stock with Ernest Zavoral and Remon Heyek
for 100% of the issued and outstanding shares of Flex. Following the exchange,
Flex became a wholly-owned subsidiary of the Company. These shares were valued
at $248,000. The President of Flex, Ernest Zavoral, remained with the Company as
the President of Flex and received 400,000 shares of the restricted common stock
of the Company. Mr. Zavoral is entitled to receive 150,000 restricted shares of
the Common Stock annually (for which he is currently entitled to vote and
receive dividends), has the ability to purchase additional shares in the event
of any offering of the Company's stock at 75% of the offering price to maintain
his then current percentage of the Company's outstanding common stock, has an
option to purchase 750,000 shares of the restricted common stock of the Company
over the next three (3) years for the average trading price of the Company's
common stock for the last twelve (12) months or the then current market price at
the time the option is exercised and he may convert one-third of his salary to
shares of the Company's restricted common stock at the average trading price of
the Company's common stock for the last twelve (12) months or the then current
market price at the time the option is exercised. All shares carry piggy-back
registration rights. The Company relied upon Section 4(2) of the Act and Rule
506 and Section 1707.03(X) of the Ohio Code. See Part II, Item 4. "Recent Sales
of Unregistered Securities."
Effective January 20, 1999, the Company entered into an agreement to
spinoff Fragrance Florida and its wholly-owned subsidiary, Fragrance Express of
Florida, Inc. Pursuant to this agreement, NBM was to return all issued and
outstanding stock of Fragrance Florida at such time as Fragrance Florida became
a wholly-owned subsidiary of Telenetworx in exchange for (i) the issuance of 15%
of the issued and outstanding stock of Telenetworx; (ii) a demand note from
<PAGE>
Fragrance Florida payable to the Company in the amount of $700,000 bearing
interest at the rate of 10% per annum and secured by a third mortgage on
property located in Athens, Georgia and (iii) an irrevocable agreement for a
period of sixty (60) days for the Company to have the right to refinance the
Athens' property, the proceeds of which would liquidate the demand note. To
date, neither the Telenetworx stock nor the demand note have been delivered to
the Company. See Part II, Item 4. "Recent Sales of Unregistered Securities."
On February 1, 1999, the Company entered into another Consulting Agreement
with Equity to provide financial public relations consulting services in
exchange for $30,000 payable over six (6) months. The term of the contract was
for a period of six (6) months. The Company had previously issued 175,000 shares
of its stock in December 1998 for services rendered which were valued at $7,000.
The contract was terminated by NBM in March of 1999. As part of the settlement,
Equity was paid $7,5000 and executed a full and general release. See Part II,
Item 4. "Recent Sales of Unregistered Securities."
On February 11, 1999, the Company entered into a Consulting Agreement with
GFC Communications Corp. to provide public and financial communication
consulting services to the Company in exchange for $5,000 per month. The term of
the contract was for a period of one (1) year, but provided for termination on
30 days notice. NBM could elect to pay the fee with unrestricted common stock.
The contract was terminated by the Company in April 1999.
Effective May 5, 1999 and ending on November 11, 1999, the Company entered
into a Consulting Agreement with Buying Power Network to provide financial
public relations consulting services to the Company in exchange for $50,000 for
the first month, $35,000 for the second month and $25,000 for the third month,
with subsequent months to be agreed upon, each payable in cash or by issuance of
unrestricted shares of Common Stock with equivalent value. The contract was
terminated as of June 1, 1999. In exchange for services rendered by Buying Power
Network the first month, the Company issued 500,000 shares of its restricted
Common Stock valued at $50,000 to Joyce Research Group, of which Buying Power
Network is a division. The Company relied upon Section 4(2) of the Act and Rule
506 and Florida Code Section 517.061(11). See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In June 1999, the Company entered into an agreement with DFL, wherein the
Company acknowledged indebtedness to DFL in the amount of $518,000 and agreed to
issue DFL 3,375,333 shares of its restricted common stock and to pay DFL $10,000
in full and final satisfaction of such indebtedness. The Company has the right
to repurchase the shares until such time as the shares are either registered or
the Rule 144 restriction is lifted. The shares carry registration rights and NBM
must buy back the shares at the earlier of closing on specified amounts of
equity funding or after November 1, 1999. The repurchase price is $0.15 per
share. NBM also committed to issue DFL 600,000 shares of its restricted common
stock as payment for services rendered. No stock has been issued to date. See
Part II, Item 4. "Recent Sales of Unregistered Securities."
In June 1999, the Company entered into an agreement with ECG, wherein the
Company acknowledged indebtedness to ECG in the amount of $126,700 and agreed to
issue ECG 711,334 shares of its restricted common stock and to pay ECG $20,000
in full and final satisfaction of such indebtedness.The Company has the right to
<PAGE>
repurchase the stock at a price of $0.15 per share. No stock has been issued to
date. See Part II, Item 4. "Recent Sales of Unregistered Securities."
In June 1999, the Company entered into an agreement with DFL, wherein the
Company acknowledged an indebtedness by Hernandez to DLF in the amount of
$100,000, which indebtedness is secured partially by shares of the Company's
common stock owned by Hernandez. The Company agreed to assume joint liability
for the indebtedness subsequent to and subject to an agreement by Hernandez to
liquidate his NBM shares. The Company also agreed to issue DFL 125,560 shares of
its restricted common stock. No shares have been issued to date. See Part II,
Item 4. "Recent Sales of Unregistered Securities."
In July 1999, the Company issued 150,000 shares of its restricted common
stock to Dr. David Vitko, inventor of the Backstroke(TM) and were valued at
$37,500. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 1707.03(X) of the Ohio code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In July 1999, the Company issued 870,000 shares of its restricted common
stock to eight (8) persons for past services on the Company's Board of
Directors. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 8-6-11 of the Alabama code, Section 517.061(11) of the Florida code,
Section 51:705 of the Louisiana code, Section 402(b)(9) of the Massachusetts
code, Section 75-71-408 of the Mississippi code and Section 1707.03(X) of the
Ohio code. No state exemption was required for two (2) individuals who are
Canadian residents. See Part II, Item 4. "Recent Sales of Unregistered
Securities."
The Company has an employment contract with Mr. Hoyng. Under this contract,
in July 1999, the Company issued 250,000 shares of its restricted Common Stock
to Mr. Hoyng. Mr. Hoyng is entitled to receive 250,000 restricted shares of the
Common Stock annually (for which he is currently entitled to vote and receive
dividends), has the ability to purchase additional shares in the event of any
offering of the Company's stock at 75% of the offering price to maintain his
then current percentage of the Company's outstanding common stock, has an option
to purchase 2,000,000 shares of the restricted common stock of the Company over
the next three (3) years for the average trading price of the Company's common
stock for the last twelve (12) months or the then current market price at the
time the option is exercised, he may convert one-third of his salary to shares
of the Company's restricted common stock at the average trading price of the
Company's common stock for the last twelve (12) months or the then current
market price at the time the option is exercised and is entitled to a transition
bonus of 250,000 shares of the Company's restricted common stock. All shares
carry piggy-back registration rights. The Company relied upon Section 4(2) of
the Act and Rule 506 and Section 359(f)(2)(d) of the Massachusetts Code. See
Part II, Item 4. "Recent Sales of Unregistered Securities."
The Company has an employment contract with Mr. Lozowicki. Mr. Lozowicki is
entitled to receive 187,500 restricted shares of the Common Stock annually (for
which he is currently entitled to vote and receive dividends), has the ability
to purchase additional shares in the event of any offering of the Company's
stock at 75% of the offering price to maintain his then current percentage of
<PAGE>
the Company's outstanding common stock, has an option to purchase 400,000 shares
of the restricted common stock of the Company over the next three (3) years for
the average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised and
he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and is entitled to a signing bonus of 100,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the Massachusetts Code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
The Company has an employment contract with Mr. McFarland. Mr. McFarland is
entitled to receive 500,000 restricted shares of the Common Stock annually (for
which he is currently entitled to vote and receive dividends), has the ability
to purchase additional shares in the event of any offering of the Company's
stock at 75% of the offering price to maintain his then current percentage of
the Company's outstanding common stock, has an option to purchase 500,000 shares
of the restricted common stock of the Company over the next three (3) years for
the average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised and
he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and is entitled to a signing bonus of 500,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the Massachusetts Code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
Item 8. Description of Securities
Description of Capital Stock
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, $0.001 par value per share and 10,000,000 shares of Preferred
Stock, $0.001 par value per share. As of July 31, 1999, the Company has
48,801,870 shares of its Common Stock outstanding and 52,377 of its Preferred
Stock outstanding.
Description of Common Stock
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and non-assessable shares. Cumulative voting in the election of
directors is not permitted; which means that the holders of a majority of the
issued and outstanding shares of Common Stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
<PAGE>
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any, to be distributed to holders of the Preferred Stock. All shares of the
Company's Common Stock issued and outstanding are fully-paid and nonassessable.
Dividend Policy
Holders of shares of Common Stock are entitled to share pro rata in
dividends and distribution with respect to the Common Stock when, as and if
declared by the Board of Directors out of funds legally available therefore,
after requirements with respect to preferential dividends on, and other matters
relating to, the Preferred Stock, if any, have been met. The Company has not
paid any dividends on its Common Stock and intends to retain earnings, if any,
to finance the development and expansion of its business. Future dividend policy
is subject to the discretion of the Board of Directors and will depend upon a
number of factors, including future earnings, capital requirements and the
financial condition of the Company.
Description of Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or more
series as may be determined by the Board of Directors. The voting powers and
preferences, the relative rights of each such series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have preemptive
rights.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Company's Common and Preferred
Stock is Alpha Tech Stock Transfer which is located at 4505 South Wasatch Blvd.,
Suite 205, Salt Lake City, UT 84124, telephone (801) 278-1777, facsimile (801)
277-8888.
PART II.
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters.
a) Market Information.
The Common Stock of the Company currently trades on the OTC Bulletin Board
under the symbol "NBMX" and has since November 30, 1998. Originally it traded
under the symbol "CRUZ" between May 21, 1998 and July 16, 1998. It traded under
the symbol "FGRX" between July 20, 1998 and October 27, 1998. It traded under
the symbol "NBMXD" between October 30, 1998 and November 27, 1998. The high, low
and average bid information for each quarter since June 1998 to the present are
as follows:
<PAGE>
Quarter High Bid Low Bid Average Bid
Second Quarter 1998 3/8 .10 .2375
Third Quarter 1998 1/4 .01 .13
Fourth Quarter 1998 2 1/16 1.03125
First Quarter 1999 .35 1/16 .20625
Second Quarter 1999 3/16 0 .09375
Please note that over-the-counter market quotations have been provided
herein. The quotations reflect inter-dealer prices, without retail markup,
mark-down or commission and may not represent actual transactions.
(b) Holders.
As of July 31, 1999 the Company has 369 shareholders of record of its
48,801,870 outstanding shares of Common Stock, 31,207,618 of which are
restricted Rule 144 shares and 17,594,252 of which are free-trading. As of the
date hereof, the Company has outstanding options to purchase 3,324,800 shares of
Common Stock. Of the Rule 144 shares, no shares have been held by affiliates of
the Company for more than one (1) year.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 2. Legal Proceedings
On February 10, 1999, James McInerney and Auckland Trust Co. Limited as
Trustee for First Pacific Master Superannuation Fund filed suit in the Superior
Court of Commonwealth of Massachusetts (trial court), Civil Action Number
C99-00198. As a result, NBM's accounts were attached ex-parte at BankBoston,
N.A., Fleet Bank, N.A. and Merrill Lynch Corp. until a Discharge of Trustee
Process and Attachment was filed March 11, 1999.
Mr. McInerney is the sole bondholder from the NBMDE offering who did not
convert his outstanding debt to shares of the Company's common stock. Although
his Note was not payable for three (3) years, Mr. McInerney demanded immediate
payment of all amounts owed. The Company made several unsuccessful attempts to
pay the amount owed ($525,000), but had insufficient cash flow and was unable to
raise such funds. Thereafter, Mr. McInerney filed this action.
A hearing has been scheduled for August 6, 1999 on Plaintiff's Motion for
an Injunction which contains a request for an order stating that monies received
by Company be placed in escrow. The hearing will be canceled pending performance
on a settlement.
On May 21, 1999, a Settlement Agreement was entered into under which NBM
must pay Mr. McInerney $50,000 by August 6, 1999. Once this amount has been
paid, Mr. McInerney will enter a dismissal with prejudice and execute a General
Release.
<PAGE>
On April 5, 1999, Randall E. Perez, an individual, a/k/a Randy Perez filed
Case # 99-08545 CA 10 in the General Jurisdiction Division in the Circuit Court
of the 11th Judicial Circuit in and for Dade County, Florida against NBM(NV) and
NBMDE for Breach of Contract, Conversion and Unjust Enrichment. Mr. Perez is a
former employee, officer and director of NBM. NBM and Mr. Perez disputed the
amount due him upon termination of his employment. The matter has since been
settled. A settlement agreement has been filed with the Court. The Court will
retain jurisdiction over the matter to enforce the terms of the settlement
agreement.
In 1998, Genomic filed a lawsuit in the United States District Court for
the Middle District of Florida against Garrick Perry and SAI which contends that
Genomic had a contractual relationship with SAI and that SAI produced Safeshield
for NBM using the proprietary confidential formula owned by Genomic. Genomic
also contends that Safeshield test numbers and data are identical to the tests
conducted on Genomic's product and that the use of that testing data by SAI (or
NBM) is unauthorized.
The Company is a party to an action claiming patent infringement by its
Safeshield product. Genomic and BMM have brought suit against NBM and Daniel
Hoyng for violation of 15 U.S.C. 1125(A) - Reverse Passing Off, violation of
Florida Deceptive and Unfair Trade Practices Act, breach of fiduciary duty and
conversion. Genomic and BMM allege that NBM and Hoyng have used and continue to
use confidential proprietary information which is the property of Genomic and
relates to the Activ product. NBM and Hoyng have each filed a motion to dismiss
which are currently pending. Should the case not be dismissed against either NBM
or Hoyng, each have prepared an extensive counter-suit against Genomic, BMM,
William Coury and others.
On April 7, 1999, DeVo Media, Inc. filed a suit in the Court of Common
Pleas, Mahoning County, Youngstown, Ohio, Case No. 99 CV 832 against Flex, NBM,
Zavoral and Hayek for fraud and breach of contract seeking $136,000 compensatory
damages, prejudgment interest at a rate of 10% percent per annum and $500,000 in
punitive damages. The action stems from a contract entered into on July 10,
1997, which was later modified on February 10, 1998. In May 1999, Flex, NBM,
Zavoral and Hayek filed answer, affirmative defenses and counterclaims for fraud
in the inducement and breach of contract. The Company believes that it has
numerous defenses to this action.
On June 10, 1999 American National Lithographers and Engravers, Inc. d/b/a
American National Ltd. ("National") filed suit in the Circuit Court of Dade
County, Florida, Civil Action Number 99-13897 against the Company which contends
that the Company owes National $19,273.38 for printing costs. The total amount
in dispute exclusive of fees and costs is $19,273.38. The Company has filed its
answer, affirmative defenses and a counterclaim in response to the complaint.
The Company believes that it has several defenses to the claims listed in the
complaint and does not consider the lawsuit to be material.
Item 3. Changes in and Disagreements with Accountants
<PAGE>
The Company has used the firm of Durland & Company, CPA's since 1998, when
NBMDE conducted its share exchange with the Company. Their address is 340 Royal
Palm Way, Suite 201, Palm Beach, Florida 33480. There has been no change in the
Company's independent accountant during the period commencing with the Company's
retention of Durland & Company through the date hereof.
Item 4. Recent Sales of Unregistered Securities
The Company relied upon Section 4(2) of the Act and Rule 506 for several
transactions regarding the issuance of its unregistered securities. In each
instance, such reliance was based upon the fact that (i) the issuance of the
shares did not involve a public offering, (ii) there were no more than 35
investors (excluding "accredited investors"), (iii) each investor who was not an
accredited investor either alone or with his purchaser representative(s) has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective investment, or the
issuer reasonably believes immediately prior to making any sale that such
purchaser comes within this description, (iv) the offers and sales were made in
compliance with Rules 501 and 502, (v) the securities were subject to Rule 144
limitation on resale and (vi) each of the parties is a sophisticated purchaser
and had full access to the information on the Company necessary to make an
informed investment decision by virtue of the due diligence conducted by the
purchaser or available to the purchaser prior to the transaction.
The Company relied upon Section 3(b) of the Act and Rule 504 for several
transactions regarding the issuance of its unregistered securities. In each
instance, such reliance was based on the following: (i) the aggregate offering
price of the offering of the shares of Common Stock and warrants did not exceed
$1,000,000, less the aggregate offering price for all securities sold with the
twelve months before the start of and during the offering of shares in reliance
on any exemption under Section 3(b) of, or in violation of Section 5(a) of the
Act; (ii) no general solicitation or advertising was conducted by the Company in
connection with the offering of any of the shares; (iii) the fact the Company
has not been since its inception (a) subject to the reporting requirements of
Section 13 or 15(d) of the Securities Act of 1934, as amended, (b) and
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or (c) a development stage company that either has no specific
business plan or purpose or has indicated that its business plan is to engage in
a merger or acquisition with an unidentified company or companies or other
entity or person.
The Company relied upon Florida Code Section 517.061(11) for several
transactions. In each instance, such reliance is based on the following: (i)
sales of the shares of Common Stock were not made to more than 35 persons; (ii)
neither the offer nor the sale of any of the shares was accomplished by the
publication of any advertisement; (iii) all purchasers either had a preexisting
personal or business relationship with one or more of the executive officers of
the Company or, by reason of their business or financial experience, could be
reasonably assumed to have the capacity to protect their own interests in
connection with the transaction; (iv) each purchaser represented that he was
purchasing for his own account and not with a view to or for sale in connection
with any distribution of the shares; and (v) prior to sale, each purchaser had
reasonable access to or was furnished all material books and records of the
Company, all material
<PAGE>
contracts and documents relating to the proposed transaction, and had an
opportunity to question the executive officers of the Company. Pursuant to Rule
3E-500.005, in offerings made under Section 517.061(11) of the Florida Statutes,
an offering memorandum is not required; however each purchaser (or his
representative) must be provided with or given reasonable access to full and
fair disclosure of material information. An issuer is deemed to be satisfied if
such purchaser or his representative has been given access to all material books
and records of the issuer; all material contracts and documents relating to the
proposed transaction; and an opportunity to question the appropriate executive
officer. In the regard, the Company supplied such information and was available
for such questioning (the "Florida Exemption").
The Company relied upon Massachusetts Code Section 402(b)(9) for several
transactions. In each instance, such reliance is based on the following: any
transaction pursuant to an offer directed by the offeror to not more than
twenty-five persons other than those designated in paragraph (8) in the
commonwealth during any period of twelve consecutive months, whether or not the
offeror or any of the offerees is then present in the commonwealth, if (A) the
seller reasonably believes that all the buyers in the commonwealth (other than
those designated in paragraph (8)) are purchasing for investment, and (B)
insofar as an offer involves the payment directly or indirectly of any
commission or other remuneration for soliciting any prospective buyer in the
commonwealth (other than those designated in paragraph (8)) a notice is filed
with the secretary at least five full business days before the offer, and the
secretary does not by order disallow the exemption within the next five full
business days; but, in any event, the secretary may by rule or order, as to any
security or transaction, withdraw or further condition this exemption, or
increase or decrease the number of offerees permitted, or waive the conditions
in clauses (A) and (B) with or without the substitution of a limitation on
remuneration (the "MA exemption").
The Company relied upon Nevada Code Section 90.530(11) for several
transactions. In each instance, such reliance is based on the following: the
following transactions are exempt from NRS 90.460 and 90.560, except as
otherwise provided in this subsection, a transaction pursuant to an offer to
sell securities of an issuer if: (a) the transaction is part of an issue in
which there are no more than 25 purchasers in this state, other than those
designated in subsection 10, during any 12 consecutive months; (b) no general
solicitation or general advertising is used in connection with the offer to sell
or sale of the securities; (c) no commission or other similar compensation is
paid or given, directly or indirectly, to a person, other than a broker-dealer
licensed or not required to be licensed under this chapter, for soliciting a
prospective purchaser in this state; and (d) one of the following conditions is
satisfi(1) the seller reasonably believes that all the purchasers in this state,
other than those designated in subsection 10, are purchasing for investment; or
(2) immediately before and immediately after the transaction, the issuer
reasonably believes that the securities of the issuer are held by 50 or fewer
beneficial owners, other than those designated in subsection 10, and the
transaction is part of an aggregate offering that does not exceed $500,000
during any 12 consecutive months. The administrator may by rule or order as to a
security or transaction or a type of security or transaction, may withdraw or
further condition the exemption set forth in this subsection or waive one or
more of the conditions of the exemption. (the "Nevada Exemption").
<PAGE>
In each of the following transactions, the Company relied upon one or more
state exemptions from registration. The following is a summary of all state
requirements from the various states. The paragraph which follows indicates the
Company's noncompliance (if applicable) with regard to these individual state
requirements. 1) no general advertising or solicitation; 2) no commissions or
remuneration; 3) the investor purchased for investment purposes (and not with a
view toward distribution; 4) a filing with the state securities division; 5)a
consent to service of process; 6) a fee; 7) the investment was suitable for the
investor (did not exceed 10% of his net worth); 8) the investor had knowledge
and experience in these types of transactions; 9) a legend was placed in the
offering documents; 10) bad boy provisions; 11) preserve the books and records
of the Company; 12) written agreement not to sell for 12 months received from
purchaser; 13) written notice of the right to rescind; 14) stop transfer
instructions given to the transfer agent; 15) a legend was placed on the
certificates (restricted); 16) $500,000 maximum offering; 17) sales made only to
accredited investors; 18) the investor was able to bear the risk of the
investment; 19) an offering memorandum was given the purchasers; financial
statements given to the investor; 20) escrow portion of proceeds; 21) corporate
documents either supplied to or available for inspection by investor and 22)
between 10 and 40 purchasers/investors.
In Alabama, the Company failed to file notice, consent to service of
process and pay the fee within 15 days of the first sale in Alabama. In Arizona,
the Company failed to file notice and pay the fee and also failed to place the
Arizona legend on the offering documents. In California, the Company failed to
file notice, pay the fee and consent to service of process. In Delaware, the
Company failed to file notice and consent to service of process. In Georgia, the
Company failed to place the Georgia specific legend on the certificates. In
Illinois, the Company failed to file notice and to pay a fee. In Indiana, the
Company failed to file notice, consent to service of process. In Louisiana, the
Company failed to file notice and service of process and to pay a fee. In
Maryland, the Company failed to place a Maryland specific legend on the
certificates, failed to file notice and to pay a fee. In Michigan the Company
failed to place a Michigan specific legend on the certificates and failed to
give stop transfer instructions to the Company's transfer agent. In Minnesota,
the Company failed to file notice. In New Hampshire, the Company failed to file
notice, failed to consent to service of process and failed to pay a fee. In New
York the Company failed to file notice, failed to pay a fee and failed to
consent to service of process. In North Carolina, the Company failed to place a
North Carolina specific legend in the offering documents. In Ohio, the Company
failed to file notice. In Pennsylvania, the Company failed to receive written
agreements from investors agreeing not to sell for a period of 12 months and
failed to file notice or pay a fee. In Texas, the Company failed to place a
Texas specific legend on the certificates and failed to place stop transfer
instructions with the Company's transfer agent. In Utah, the Company exceeded
the $500,000 maximum offering limitation. In Washington, the Company failed to
place a Washington specific legend on the certificates and to file notice and
consent to service of process.
In November 1997, prior to its acquisition by the Company, NBMDE entered
into a share exchange agreement with MMG. The exchange was made whereby NBMDE
issued 499,000 shares of its restricted common stock to the principals of DJH,
including an issuance of 394,375 shares to Daniel Hoyng, the Company's President
and CEO. The Company has an employment contract with Mr.Hoyng. This offering was
<PAGE>
conducted pursuant to Section 4(2) of the Act and Rule 506 and the Nevada
Exemption. No Form D was filed with the Securities and Exchange Commission.
From November to December 1997, prior to its acquisition by the Company,
NBMDE conducted a self-directed private placement offering its twelve percent
(12%) convertible preferred Series A shares and three-year warrants exercisable
at $2.50. NBMDE received proceeds of $25,000 from one (1) investor and granted
warrants to purchase 10,000 shares of NBMDE's Common Stock. NMBDE used an
Offering Memorandum in connection with this placement. This offering was
conducted pursuant to Section 4(2) of the Act and Rule 506 and Section 25102(f)
of the California Code. The facts relied upon for compliance with the California
Code are as follows: The sale was made to less than 35 purchasers, including
persons not in California; the purchaser either had a preexisting personal or
business relationship with the Company or one of its officers, directors or
controlling persons, or by reason of their business or financial experience or
the business or financial experience of their professional advisors who were
unaffiliated with and who were not compensated by the issuer or any affiliate or
selling agent of the issuer, directly or indirectly and could be reasonably
assumed to have the capacity to protect their own interests in connection with
the transaction; each purchaser represented that the purchaser was purchasing
for the purchaser's own account and not with a view to or for sale in connection
with any distribution of the security; the sale was not accomplished by the
publication of any advertisement. No filing was made with the California
Department of Corporations as required by California Rule 260.102.14, although
25102(f) provides: the failure to file the notice within the time specified by
the rule of the commissioner shall not affect the availability of this
exemption. No Form D was filed with the SEC.
From December 1997 to June 1998, prior to its acquisition by the
Company, NBMDE conducted a self-directed private placement offering shares of
the NBMDE's 12% convertible bonds and three-year warrants exercisable at $1.25
per share. NBMDE received proceeds of $2,403,500 from thirty-five (35) investors
and granted warrants to purchase 1,922,800 shares of NBMDE's Common Stock. NBMDE
used an Offering Memorandum in connection with this placement. This offering was
conducted pursuant to Section 4(2) of the Act and Rule 506 and Section 8-6-11 of
the Alabama Code, Section 44-1844 of the Arizona Code, Section 517.061(11)(a) of
the Florida Code, Section 10-5-5(e) of the Georgia Code; Section 130.293 of the
Illinois Code, Section 710 I.A.C. 1-13-6(d) of the Indiana Code, Section 51:705
of the Louisiana Code, Section 80A.15(Subd. 2)(h) of the Minnesota Code, Section
30-54.210 of the Missouri Code, Section 359(f)(2)(d) of the New York Code,
Section 18(b)(4)(D) of the North Carolina Code and Section 460-44A-506 of the
Washington Code. See Part II, Item 4. "Recent Sales of Unregistered Securities."
From December 1997 to June 1998, prior to its acquisition by the
Company, NBMDE conducted a self-directed private placement offering shares of
the NBMDE's 12% convertible bonds and three-year warrants exercisable at $2.50
per share. NBMDE received proceeds of $1,105,000 from forty-seven (47) investors
and granted warrants to purchase 392,000 shares of NBMDE's Common Stock. NDMDE
used an Offering Memorandum in connection with this placement. This offering was
conducted pursuant to Section 4(2) of the Act and Rule 506 and Section 8-6-11 of
<PAGE>
the Alabama Code, Section 25102(f) of the California Code, Section
517.061(11)(a) of the Florida Code, Section 10-5-5(e) of the Georgia Code;
Section 130.293 of the Illinois Code, Section 710 I.A.C. 1-13-6(d) of the
Indiana Code, Section 51:705 of the Louisiana Code, Section 402(b)(9) of the
Massachusetts Code, Section 359(f)(2)(d) of the New York Code, Section 203(d) of
the Pennsylvania Code, Section 35-1-320(9) of the South Carolina Code and
Section 551.23 of the Wisconsin Code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
NBMDE relied upon a South Carolina exemption from registration, although
the Company failed to file with the state securities bureau as mandated by the
state statute. Sec. 35-1- 320(9) states: any transaction pursuant to an offer
directed by the offeror to not more than twenty-five persons, other than those
designated in item (8) of this section, in this State during any period of
twelve consecutive months, whether or not the offeror or any of the offerees is
then present in this State, if (a) the seller reasonably believes that all the
buyers in this State, other than those designated in item (8) of this section,
are purchasing for investment and (b) no commission or other remuneration is
paid or given directly or indirectly for soliciting any prospective buyer in
this State, other than those designated in item (8) of this section; but the
Securities Commissioner may by rule or order, as to any security or transaction
or any type of security or transaction, withdraw or further condition this
exemption, increase or decrease the number of offerees permitted or waive the
conditions in clauses (a) and (b) with or without the substitution of a
limitation on remuneration and the Securities Commissioner, further, may require
persons claiming this exemption to notify him in writing of the claim of
exemption, the number of offers extended and to whom made at any point during
the offering process;
In late 1997, NBMDE entered into a Consulting Agreement with the DAG, for
which NBMDE paid commissions in the form of cash and stock to DAG in connection
with an offering of NBMDE's 12% bonds and warrants. The Agreement was declared
null and void ab initio by the Company in June 1999, at which time the Company
entered into agreements with DFL and ECG. No Form D was filed with the SEC.
In February 1998, prior to its acquisition by the Company, NBMDE entered
into a Consulting Agreement with Equity to provide financial public relations
consulting services in exchange for $60,000 annually and 1.5% of the issued and
outstanding stock of the company, which at that time was estimated at 75,000
shares. The term of the contract was for a period of one (1) year. In December
1998, after its acquisition of NBMDE, the Company terminated this agreement. As
part of a settlement agreement, the Company issued 175,000 shares of its
unrestricted Common Stock valued at $7,000 to Equity and Equity executed a full
and general release for all claims. NBMDE relied upon Section 3(b) of the Act
and Rule 504 and Section 49:3-50(b)(9) of the New Jersey Code.
In February 1998, the Company's predecessor, Frozen Assets, entered into a
share exchange agreement with Growth whereby Frozen Assets canceled 2,500,000
shares of its restricted common stock and exchanged 1,200,000 of its convertible
preferred stock (which stock contained 10 to 1 conversion and voting rights) for
all of the outstanding capital stock of Growth, which then became a wholly-owned
subsidiary of Frozen Assets. The Company relied upon Section 4(2) of the Act and
<PAGE>
Rule 506 and the Nevada Exemption. Growth is currently inactive and its
corporate charter has been revoked by the state of Nevada. No Form D was filed
with the SEC.
On March 1, 1998, the Company executed the TK Note. In July 1998, TK
converted $10,000 of principal plus the accrued interest on the Note into the
Company's common stock at a price of $0.1216 per share for a total of 84,779
shares. The principals of the Company failed to disclose this outstanding
liability to NBMDE at the time of their exchange agreement in October 8, 1998.
The new principals of the Company honored the debt and on October 20, 1998
allowed TK to convert an additional $100,000 of principal plus the accrued
interest on the Note into the Company's common stock at a price of at a price of
$0.24 for 443,790 shares. On or about October 28, 1998 TK converted the $390,000
of principal plus accrued into 513,647 post split shares of the Company's Common
Stock. While no offering memorandum was used in connection with this offering,
the business plan of the Company, which was disclosed to the investor, then was
for the provision of product development, sales and services for the fragrance,
hand rolled cigar and Irish chocolate industries. The Company claimed an
exemption from registration in connection with each of the issuances under
Section 3(b) of the Act and Rule 504. No state exemption was required as TK is
located in Canada. No Form D was filed with the SEC.
On March 24, 1998, the Company entered into a share exchange agreement with
Fragrance Florida, whereby the Company exchanged 1,200,000 of its convertible
preferred stock (which stock contained 10 to 1 conversion and voting rights) for
all of the outstanding capital stock of Fragrance Florida, which then became a
wholly-owned subsidiary of the Company. On June 4, 1998, the Company amended its
Articles of Incorporation changing its name to Fragrance Express, Inc. Although
the parent and its subsidiary Fragrance Florida bore the same name, they did not
share the same state of incorporation, so no consent was necessary. The Company
relied upon Section 4(2) of the Act and Rule 506 and the Florida Exemption. No
Form D was filed with the SEC.
On May 21, 1998, NBMDE, prior to its acquisition by the Company, entered
into a Consulting Agreement with Rothschild and Mayflower, whereby Rothschild
and Mayflower agreed to provide a fully trading public company to the Company in
exchange for issuance of 650,000 shares of NBMDE's Common Stock which were to be
converted into 400,000 (200,000 each) restricted shares in the new public
company and a commitment to issue an additional 225,000 (112,500 each)
unrestricted shares in the new public company after acquisition. NBMDE relied
upon Section 4(2) of the Act and Rule 506 and the Florida Exemption. No Form D
was filed with the SEC.
On July 17, 1998, prior to its acquisition by the Company, NBMDE entered
into an Exclusive Distribution Agreement with both BMC-US and BMC-CAN. In
exchange for the exclusive rights to sell Bontempi Snc. instruments in the U.S.,
Mexico and though the World Wide Web. As part of this Agreement, NBMDE was to
pay $307,999 which was convertible to shares of NBMDE's restricted common stock
and to issue 2,374,999 shares of its restricted common stock to Bontempi and its
shareholders, including 658,333 shares to Victor Bianchi, currently serving as a
Director of the Company. Bontempi and its shareholders converted the remaining
<PAGE>
$258,000 of the amount due pursuant to a notice of conversion dated October 10,
1998 to 3,225,000 shares of the Company's restricted common stock. The Company
relied upon Section 4(2) of the Act and Rule 506 and Section 402(b)(9) of the
Massachusetts Code. No Form D was filed with the SEC.
In June 1998, prior to its acquisition with the Company, NBMDE entered into
a stock exchange agreement with DermaGuard whereby NBMDE acquired ten percent
(10%) or 700 shares of the issued and outstanding shares of DermaGuard's Common
Stock in exchange for three percent (3%) or 150,000 shares of NBMDE's issued and
outstanding Common Stock. NBMDE relied upon Section 4(2) of the Act, Rule 506,
Section 402(b)(9) of the Massachusetts Code and Section 51:705 of the Louisiana
Code. No Form D was filed with the SEC.
In July 1998, prior to its acquisition by the Company, NBMDE entered into
an agreement with each of its 12% bondholders and the holder of the 12%
Preferred Series A shares by which all of such holders, except one, agreed to
convert their bonds, exercise their warrants and permit the NBMDE to entered
into a share exchange agreement and merger with a public company with
distributions to be made at the time that NBMDE executed a share exchange
agreement. The one objecting bondholder, First Pacific Master Superannuation
Fund filed suit in Massachusetts against the Company in March 1999. No Form D
was filed with the SEC.
On October 1, 1998, the Company sold 9,640,724 shares of its common stock
to NBMDE for $120,509. These shares represent 2,410,181 post split shares. NBMDE
promptly distributed these shares to its shareholders pro-rata at a price of
$0.05 per share for a property distribution valued at $120,509. This represented
approximately 18.22 percent of each person's share holdings of NBMDE as of
August 19, 1998. In each instance, the issuance of securities was to its own
security holders and either pursuant to a merger, share exchange or
reorganization or pursuant to a dividend or a property distribution which was
duly voted upon and approved by the shareholders of both corporations. The
Company claimed the exemption from registration in connection with each of the
following issuances under Section 3(b) of the Act and Rule 504. In addition, the
Company relied upon the following statutes in the states in which the
shareholders were resident: Alabama Code Section 8-6-11(12); Arizona Code
Sections 44-1844(5) and/or 44- 1844(7); California Code Section 25103(c) and
Rule 260.103; Florida Code Section 517.061(4) or (6); Georgia Code Sections
10-5-9(6) and (8); Illinois Code Section 4 [5/4](I); Indiana Code Sections
23-2-1-2(11) and (15); Louisiana Code Sections 51:709(6), (8) and (12);
Massachusetts Code Section 402(11); Minnesota Code Section 80A.15(n); Missouri
Code Section 409.402(11);New Hampshire Code Section 421-B:17(l) and (n); New
Jersey Code Section 49:3- 50(11); New York Code Section 80.5; North Carolina
Code Section 78A-17(11); Ohio Code Section 1707.03(K)(1) and (2); Pennsylvania
Code Section 203 [70 P.S. 1-203](q); Rhode Island Code Section 7-11-402(13) and
(16); South Carolina, Section 35-1-310(11); Texas Code Section 5 [581-5](E) and
(G); Vermont Code Section 4204a(4) and (5); Virginia Code Section 13.1-
514(B)(8) and (14); and Washington Code Section 21.20.320(11); Wisconsin Code
Section 551.2(13) and (14). No Form D was filed with the SEC.
The state exemptions in the transaction listed above contained one or more
of the following terms: a) the Company was issuing a stock dividend or other
distribution out of its
<PAGE>
retained earnings or surplus; b) nothing of value was given by the
stockholders for the distribution, including no commission or other remuneration
and no surrender of the right to a distribution in cash or property other than
the securities; c) the transaction was pursuant to an exchange of securities
with its existing security holders; d) the transaction was authorized by a
majority of the shareholders; or e) the transaction was pursuant to a merger. In
each instance, the Company complied with all state requirements, except that the
Company failed to file an M-11 in the state of New York.
On October 8, 1998, the Company entered into a share exchange agreement
with NBMDE, which wholly-owned two dormant subsidiaries, MMG, Inc., a
Massachusetts corporation formed in March 1997 and Virushield Inc., a
Massachusetts corporation formed in December, 1997. Prior to the closing of the
share exchange, the Company conducted a pre-share exchange 4 to 1 reverse split
of its common stock and a 20 to 1 reverse split of its preferred stock. The
Company then issued 14,988,614 shares of its restricted common stock to NBMDE's
shareholders in a 1 for 1 exchange for all of the issued and outstanding shares
of NBMDE. The predecessor of NBMDE was MMG. At the time of the share exchange,
NBMDE became a wholly-owned subsidiary of the Company. As a result of this
acquisition, warrants to purchase 1,922,800 shares of NBMDE's restricted Common
Stock exercisable at $1.25 and warrants to purchase 402,000 shares of NBMDE's
restricted Common Stock exercisable at $2.50, were converted to an equal number
of warrants to purchase restricted Common Stock of the Company, which Company
warrants are exercisable for three (3) years from the date of their issuance.
The Company relied upon Section 4(2) of the Act and Rule 506 and Section 7309A
of the Delaware Code and the Nevada Exemption. On October 15, 1998, the Company
amended its Articles of Incorporation changing its name to National Boston
Medical, Inc. No Form D was filed with the SEC.
On October 9, 1998, prior to changing its name, the Company entered into a
Consulting Agreement with Good Works, Inc. to provide corporate growth
development consulting services to the Company in exchange for issuance of
500,000 shares of the Company's Common Stock. The Company relied upon Section
3(b) of the Act and Rule 504 and the Florida Exemption. No Form D was filed with
the SEC.
On October 9, 1998, prior to changing its name, the Company entered into a
Consulting Agreement with Rothschild whereby Rothschild agreed to provide
corporate growth development consulting services as a media consultant to the
Company in exchange for issuance of 250,000 shares of the Company's Common
Stock. The Company relied upon Section 3(b) of the Act and Rule 504 and the
Florida Exemption. No Form D was filed with the SEC.
In October and November 1998, the Company issued 1,702,488 shares of its
unrestricted Common Stock to eleven (11) individuals and companies in exchange
for services rendered which were valued at $68,100. The Company relied upon
Section 3(b) of the Act and Rule 504, the Florida Exemptions, and Massachusetts
Codes Section 402(b)(9); Nevada Code Section 90.530(11); South Carolina Code
Section 35-1-320(9) and no state exemption for the one investor which was a
Bahamian corporation. The Company relied upon a South Carolina exemption from
registration, although the Company failed to file with the state securities
<PAGE>
bureau as mandated by the state statute. Sec. 35-1-320(9) states: any
transaction pursuant to an offer directed by the offeror to not more than
twenty-five persons, other than those designated in item (8) of this section, in
this State during any period of twelve consecutive months, whether or not the
offeror or any of the offerees is then present in this State, if (a) the seller
reasonably believes that all the buyers in this State, other than those
designated in item (8) of this section, are purchasing for investment and (b) no
commission or other remuneration is paid or given directly or indirectly for
soliciting any prospective buyer in this State, other than those designated in
item (8) of this section; but the Securities Commissioner may by rule or order,
as to any security or transaction or any type of security or transaction,
withdraw or further condition this exemption, increase or decrease the number of
offerees permitted or waive the conditions in clauses (a) and (b) with or
without the substitution of a limitation on remuneration and the Securities
Commissioner, further, may require persons claiming this exemption to notify him
in writing of the claim of exemption, the number of offers extended and to whom
made at any point during the offering process. No Form D was filed with the SEC.
In November 1998, the Company issued 185,055 shares of its unrestricted
Common Stock to six (6) individuals and companies who should have received the
property distribution made in October, 1998, but did not receive their shares at
that time. These shares were valued at $9,253. The Company relied upon Section
3(b) of the Act and Rule 504, the Florida Exemption, and New York Code Section
80.9 and no state exemption for the three (3) parties which were Bahamian
corporations. No Form D was filed with the SEC.
In November 1998, the Company issued a total of 100,000 shares of its
restricted Common Stock to two (2) individuals. It issued 75,000 shares to
Richard Alfieri in exchange for services and 25,000 shares to one (1) individual
who should have received the property distribution made in October, 1998, but
who did not receive his shares. These shares were valued at $4,000 ($3,000 was
attributable to Mr. Alfieri's services.) The Company relied upon Section 4(2) of
the Act and Rule 506 and the Florida Exemption. There was no need for no state
exemption for the one party who was a Mexican resident. No Form D was filed with
the SEC.
On November 21, 1998, the Company entered into a share exchange agreement
with Flex and its shareholders whereby the Company exchanged 400,000 (200,000
each) shares of its restricted common stock with Ernest Zavoral and Remon Heyek
for 100% of the issued and outstanding shares of Flex. Following the exchange,
Flex became a wholly-owned subsidiary of the Company. These shares were valued
at $248,000. The President of Flex, Ernest Zavoral, remained with the Company as
the President of Flex and received 400,000 shares of the restricted common stock
of the Company. Mr. Zavoral is entitled to receive 150,000 restricted shares of
the Common Stock annually (for which he is currently entitled to vote and
receive dividends), has the ability to purchase additional shares in the event
of any offering of the Company's stock at 75% of the offering price to maintain
his then current percentage of the Company's outstanding common stock, has an
option to purchase 750,000 shares of the restricted common stock of the Company
over the next three (3) years for the average trading price of the Company's
common stock for the last twelve (12) months or the then current market price at
the time the option is exercised and he may convert one-third of his salary to
shares of the Company's restricted common stock at the average trading price of
the Company's common stock for the
<PAGE>
last twelve (12) months or the then current market price at the time the option
is exercised. All shares carry piggy-back registration rights. The Company
relied upon Section 4(2) of the Act and Rule 506 and Section 1707.03(X) of the
Ohio Code.
On November 28, 1998, the Company executed a 10% convertible note in the
amount of $750,000 in favor of TK and issued a warrant to purchase 200,000
shares of the Company's Common Stock. The Note was convertible into restricted
shares of the Company's Common Stock and has registration rights. The warrant is
exercisable at $0.48 per share and has piggy-back registration rights. The
exercise period commences 30 days following the effective date of a registration
statement covering such warrants. The Note has since been converted into
8,000,000 shares of restricted common stock of the Company in full and final
satisfaction of the Note. The Company relied upon Section 4(2) of the Act and
Rule 506. No state exemption was required as TK is located in Canada. No Form D
was filed with the SEC.
Effective January 20, 1999, the Company entered into an agreement to
spinoff Fragrance Florida and its wholly-owned subsidiary, Fragrance Express of
Florida, Inc. Pursuant to this agreement, NBM was to return all issued and
outstanding stock of Fragrance Florida at such time as Fragrance Florida became
a wholly-owned subsidiary of Telenetworx, Inc, a Florida corporation
("Telenetworx") in exchange for (i) the issuance of 15% of the issued and
outstanding stock of Telenetworx; (ii) a demand note from Fragrance Florida
payable to the Company in the amount of $700,000 bearing interest at the rate of
10% per annum and secured by a third mortgage on property located in Athens,
Georgia and (iii) an irrevocable agreement for a period of sixty (60) days for
the Company to have the right to refinance the Athens' property, the proceeds of
which would liquidate the demand note. To date, neither the Telenetworx stock
nor the demand note have been delivered to the Company. No Form D was filed with
the SEC.
In January 1999, the Company sold 1,212,121 shares of its unrestricted
Common Stock to one (1) company for $100,000. The Company relied upon Section
3(b) of the Act and Rule 504. Since the company was a Canadian corporation, no
state exemption was required. No Form D wad filed with the SEC.
On February 1, 1999, the Company entered into another Consulting Agreement
with Equity to provide financial public relations consulting services in
exchange for $30,000 payable over six (6) months. The term of the contract was
for a period of six (6) months. The Company had previously issued 175,000 shares
of its stock in December 1998 for services rendered which were valued at $7,000.
The contract was terminated by NBM in March of 1999. As part of the settlement,
Equity was paid $7,5000 and executed a full and general release. No Form D was
filed with the SEC.
On February 11, 1999, the Company entered into a Consulting Agreement with
GFC Communications Corp. to provide public and financial communication
consulting services to the Company in exchange for $5,000 per month. The term of
the contract was for a period of one (1) year, but provided for termination on
30 days notice. NBM could elect to pay the fee with unrestricted common stock.
No shares have been issued as of this date.
<PAGE>
In February 1999, the Company issued warrants to purchase 1,000,000 shares
of the Company's restricted Common Stock exercisable at $1.00 to DermaGuard. in
connection with an amendment to a Manufacturing, Distribution and Assignment
Agreement with the Company relative to the Company's Safeshield products. These
warrants have piggy-back registration rights. The Company relied upon Section
4(2) of the Act and Rule 506 and Louisiana Code Section 51:705. No Form D was
filed with the SEC.
In February 1999, the Company sold 1,666,667 shares of its unrestricted
Common Stock to one (1) company for $100,000. The Company relied upon Section
3(b) of the Act and Rule 504. Since the company was a Canadian corporation, no
state exemption was required. No Form D was filed with the SEC.
In February 1999, the Company entered into an agreement for a term of one
(1) year with Webfoot Marketing Inc. to redesign NBM's website. The Company
committed to issue 40,000 shares of its unrestricted Common Stock and 137,500 of
its restricted Common Stock at the time of the execution of the agreement. The
shares were valued at $14,200. The Company committed to pay $10,000 each quarter
in cash or to issue an equivalent value in unrestricted Common Stock if the
Company could qualify for a registration on Form S-8. Either party can cancel
the contract with 30 days notice. The Company relied on Section 3(b) of the Act
and Rule 504 for the unrestricted Common Stock and Section 4(2) and Rule 506 for
the restricted Common Stock and the Florida Exemption.
In March 1999, the Company issued 800,000 of its restricted Common Stock to
be held in escrow for the benefit of Virasept to secure payment on a promissory
note given in settlement of Virasept's cancellation of the distribution
agreement relative to Allergy Guard(TM). Such shares have not been delivered to
Virasept and remain in escrow. The Company relied upon Section 4(2) of the Act
and Rule 506 and New York Code Section 359(f)(2)(d). No Form D was filed with
the SEC.
In March 1999, the Company entered into an agreement for a term of one (1)
year with MCM to supply airtime and to act as the Company's agent for the
Backstroke(TM) infomercials. NBM pays 100% of the airtime cost, of which MCM
retains a 10% commission. NBM also issued to MCM 75,000 shares of its common
stock upon execution, which stock carries Piggy-Back Registration rights. NBM
must also issue 50,000 shares for every three month period where the sales to
advertising ratio average exceeds 1.9 to 1. The contract can be terminated on 30
days notice. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 25102(f) of the California Code. No Form D was filed with the SEC.
In April, 1999, the Company sold 1,250,000 shares of its unrestricted
Common Stock, and cashless warrants to purchase 200,000 shares of the Company's
restricted Common Stock to one (1) individual for $100,000. The warrants are
exercisable at $.25, $.50, $.75 and $1.00 over a period of two (2) years from
issuance and contain piggy-back registration rights. The Company relied upon
Section 3(b) of the Act and Rule 504 for the unrestricted Common Stock, Section
4(2) of the Act and Rule 506 for the warrants and Oklahoma Code Sections
401(b)(22) and 660-10-11-50. The facts upon which the Company relied are the
<PAGE>
sale was made to an accredited investor, the Company is not in the development
stage, the Company reasonably believed that the investor was purchasing for
investment, is not subject to any "bad-boy" provisions and engaged in no
advertising (though permitted). No Form D was filed with the SEC.
In April 1999, the Company issued 3,888,888 shares of its unrestricted
Common Stock to three(3) companies in exchange for services rendered or release
of debt incurred, which services and debt release were valued at $349,999. The
Company relied upon Section 3(b) of the Act and Rule 504, the Florida Exemption.
No Form D was filed with the SEC.
Effective May 5, 1999 and ending on November 11, 1999, the Company entered
into a Consulting Agreement with Buying Power Network to provide financial
public relations consulting services to the Company in exchange for $50,000 for
the first month, $35,000 for the second month and $25,000 for the third month,
with subsequent months to be agreed upon, each payable in cash or by issuance of
unrestricted shares of Common Stock with equivalent value. The contract was
terminated as of June 1, 1999. In exchange for services rendered by Buying Power
Network the first month, the Company issued 500,000 shares of its restricted
Common Stock valued at $50,000 to Joyce Research Group, of which Buying Power
Network is a division. The Company relied upon Section 4(2) of the Act and Rule
506 and Florida Code Section 517.061(11). No Form D was filed with the SEC.
In June 1999, the Company entered into an agreement with DFL, wherein the
Company acknowledged indebtedness to DFL in the amount of $518,000 and agreed to
issue DFL 3,375,333 shares of its restricted common stock and to pay DFL $10,000
in full and final satisfaction of such indebtedness. The Company has the right
to repurchase the shares until such time as the shares are either registered or
the Rule 144 restriction is lifted. The shares carry registration rights and NBM
must buy back the shares at the earlier of closing on specified amounts of
equity funding or after November 1, 1999. The repurchase price is $0.15 per
share. NBM also committed to issue DFL 600,000 shares of its restricted common
stock as payment for services rendered. No stock has been issued to date.
In June 1999, the Company entered into an agreement with ECG, wherein the
Company acknowledged indebtedness to ECG in the amount of $126,700 and agreed to
issue ECG 711,334 shares of its restricted common stock and to pay ECG $20,000
in full and final satisfaction of such indebtedness. The Company has the right
to repurchase the stock at a price of $0.15 per share. No stock has been issued
to date.
In June 1999, the Company entered into an agreement with DFL, wherein the
Company acknowledged an indebtedness by Hernandez to DLF in the amount of
$100,000, which indebtedness is secured partially by shares of the Company's
common stock owned by Hernandez. The Company agreed to assume joint liability
for the indebtedness subsequent to and subject to an agreement by Hernandez to
liquidate his NBM shares. The Company also agreed to issue DFL 125,560 shares of
its restricted common stock. No shares have been issued to date.
In July 1999, the Company issued 1,465,412 shares of its restricted common
stock to two (2) companies and two (2) individuals in exchange for services
rendered or release of debt incurred, which services and debt release were
<PAGE>
valued at $366,353. The Company relied upon Section 4(2) of the Act and Rule 506
and Florida code section 517.061(11) and Section 75-71-408 of the Mississippi
code and Section 90.532 of the Nevada code. No state exemption was necessary for
one (1) company, as it is a foreign corporation. No Form D was filed with the
SEC.
In July, 1999, the Company issued 150,000 shares of its restricted common
stock to Dr. David Vitko, inventor of the Backstroke(TM) and were valued at
$37,500. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 1707.03(X) of the Ohio code. No Form D was filed with the SEC.
In July 1999, the Company issued 870,000 shares of its restricted common
stock to eight (8) persons for past services on the Company's Board of
Directors. The Company relied upon Section 4(2) of the Act and Rule 506 and
Section 8-6-11 of the Alabama code, Section 517.061(11) of the Florida code,
Section 51:705 of the Louisiana code, Section 402(b)(9) of the Massachusetts
code, Section 75-71-408 of the Mississippi code and Section 1707.03(X) of the
Ohio code. No state exemption was required for two (2) individuals who are
Canadian residents. No Form D was filed with the SEC.
The Company has an employment contract with Mr. Hoyng. Under this contract,
in July 1999, the Company issued 250,000 shares of its restricted Common Stock
to Mr. Hoyng. Mr. Hoyng is entitled to receive 250,000 restricted shares of the
Common Stock annually (for which he is currently entitled to vote and receive
dividends), has the ability to purchase additional shares in the event of any
offering of the Company's stock at 75% of the offering price to maintain his
then current percentage of the Company's outstanding common stock, has an option
to purchase 2,000,000 shares of the restricted common stock of the Company over
the next three (3) years for the average trading price of the Company's common
stock for the last twelve (12) months or the then current market price at the
time the option is exercised, he may convert one-third of his salary to shares
of the Company's restricted common stock at the average trading price of the
Company's common stock for the last twelve (12) months or the then current
market price at the time the option is exercised and is entitled to a transition
bonus of 250,000 shares of the Company's restricted common stock. All shares
carry piggy-back registration rights. The Company relied upon Section 4(2) of
the Act and Rule 506 and Section 359(f)(2)(d) of the Massachusetts Code. No Form
D was filed with the SEC.
The Company has an employment contract with Mr. Lozowicki. Mr. Lozowicki is
entitled to receive 187,500 restricted shares of the Common Stock annually (for
which he is currently entitled to vote and receive dividends), has the ability
to purchase additional shares in the event of any offering of the Company's
stock at 75% of the offering price to maintain his then current percentage of
the Company's outstanding common stock, has an option to purchase 400,000 shares
of the restricted common stock of the Company over the next three (3) years for
the average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised and
he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and is entitled to a signing bonus of 100,000 shares of the
<PAGE>
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the Massachusetts Code.
The Company has an employment contract with Mr. McFarland. Mr. McFarland is
entitled to receive 500,000 restricted shares of the Common Stock annually (for
which he is currently entitled to vote and receive dividends), has the ability
to purchase additional shares in the event of any offering of the Company's
stock at 75% of the offering price to maintain his then current percentage of
the Company's outstanding common stock, has an option to purchase 500,000 shares
of the restricted common stock of the Company over the next three (3) years for
the average trading price of the Company's common stock for the last twelve (12)
months or the then current market price at the time the option is exercised and
he may convert one-third of his salary to shares of the Company's restricted
common stock at the average trading price of the Company's common stock for the
last twelve (12) months or the then current market price at the time the option
is exercised and is entitled to a signing bonus of 500,000 shares of the
Company's restricted common stock. All shares carry piggy-back registration
rights. The Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the Massachusetts Code.
Item 5. Indemnification of Directors and Officers
The Company's Articles of Incorporation provide that: no director of this
Corporation shall have personal liability to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director or
officers involving any act or omission of any such director or officer. The
foregoing provision shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or, which involve
intentional misconduct or a knowing violation of the law, (iii) under applicable
Sections of the Nevada Revised Statutes, (iv) the payment of dividends in
violation of Section 78.300 of the Nevada Revised Statutes or, (v) for any
transactions from which the director derived an improper personal benefit. Any
repeal or modification of this Article by the stockholders of the Corporation
shall be prospective only and shall not adversely affect any limitation on the
personal liability of a director or officer of the Corporation for acts or
omissions prior to such repeal or modification.
The Company's Bylaws provide that no Officer or Director shall be
personally liable for any obligations for the Corporation or for any duties or
obligations arising out of any acts or conduct of said Officer or Director
performed for or on behalf of the Corporation. The Corporation shall and does
hereby indemnify and hold harmless each person and his heirs and administrators
who shall serve at any time hereafter as a Director or Officer of the
Corporation from and against any and all claims, judgments and liabilities to
which such persons shall become subject by reason of any action alleged to have
heretofore or hereafter taken or omitted to have been taken by him as such
Director or Officer, and shall reimburse each such person for all legal and
other expenses reasonably incurred by him in connection with any such claim or
liability, including power to defend such persons from all suits or claims as
provided for under the provisions of the Nevada Revised Statutes; provided,
however, that no such persons shall be indemnified against, or be reimbursed
for, any expense incurred in connection with any claim or liability arising out
of his own negligence or willful misconduct. The rights accruing to any
<PAGE>
person under the foregoing provisions of this section shall not exclude any
other right to which he may lawfully be entitled, nor shall anything herein
contained restrict the right of the Corporation to indemnify or reimburse such
person in any proper case, event though not specifically herein provided for.
The Corporation, it's Directors, Officers, employees and agents shall be fully
protected in taking any action or making any payment, or in refusing so to do in
reliance upon the advice of counsel.
The Nevada Revised Statutes provide that: (1) A corporation may 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, except 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 a 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 the action, suit or
proceeding if he acted in good faith and in a manner which he reasonably
believes 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, conviction or upon plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believes to
be in or not opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable cause to believe
that his conduct was unlawful and (2) A corporation may 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 a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably
believes to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitles to
indemnify for such expenses as the court deems proper.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, the corporation shall indemnify him against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
<PAGE>
The statutes also provide that any discretionary indemnification under NRS
78.7502 unless ordered by a court or advanced pursuant to subsection 2, may 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. The determination must be made: (1) by the
stockholders; (2) by the board of directors by majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding;
(3) if a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel in a
written opinion; or (4) if a quorum consisting of directors who were not parties
to the action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
The articles of incorporation, the bylaws or an arrangement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsequent do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section: (1) does not exclude any other rights to which
a person seeking indemnification or advancement of expenses may be entitled
under the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his office,
except that indemnification, unless ordered by a court pursuant to NRS 78.7502
or for the advancement of expenses made pursuant to subsection 2, may not be
made to or on behalf of any director if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action and (2) continues
for a person who has ceased to be a director, officer, employee or agent and
inures to the benefit of the heirs, executors and administrators of such a
person.
PART F/S
The Financial Statements of Surgical required by Regulation S-X commence on
page F-1 hereof in response to Part F/S of this Registration Statement on Form
10-SB and are incorporated herein by this reference.
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
<S> <C>
Consolidated Balance Sheet ...........................................F-1
Consolidated Statement of Operations ..................................F-2
Consolidated Statement of Changes in Stockholders' Deficiency .........F-3
Consolidated Statement of Cash Flows .................................F-4
Notes to Consolidated Financial Statements ............................F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
National Boston Medical, Inc.
Consolidated Balance Sheet
June 30, 1999 (Unaudited)
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 31,248
Accounts receivable (net of reserve for doubtful accounts) 547,361
Inventory 198,222
Prepaid expenses and other current assets 13,762
-----------------
Total current assets 790,594
-----------------
PROPERTY AND EQUIPMENT
Furniture and equipment 701,775
Leasehold improvements 12,938
Vehicles 43,972
-----------------
Total property and equipment before depreciation 758,685
Less: accumulated depreciation (214,540)
-----------------
Net property and equipment 544,145
-----------------
OTHER ASSETS
Investments in non-marketable equity securities 375,000
Notes receivable (net of reserve for uncollectible notes) 0
Goodwill (net of reserve for amortization) 957,592
Capitalized licenses (net of reserve for amortization) 5,593,743
-----------------
Total other assets 6,926,335
-----------------
Total Assets $ 8,261,073
================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,004,470
Customer deposits 682,067
Accrued payroll and related liabilities 113,561
Convertible debt 1,100,136
-----------------
Total current liabilities 2,900,234
-----------------
Total liabilities 2,900,234
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 10,000,000 shares;
55,375 issued and outstanding 554
Common stock, $0.01 par value; authorized 50,000,000 shares;
43,397,463 issued and outstanding 433,975
Additional paid in capital in excess of par 21,473,845
Deficit (16,547,535)
-----------------
T Total Stockholders' Equity 5,360,839
-----------------
Total Liabilities and Stockholders' Equity $ 8,261,073
================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-1
<PAGE>
<TABLE>
<CAPTION>
National Boston Medical, Inc.
Consolidated Statement of Operations
For the Year Ended June, 1999
(Unaudited)
<S> <C>
Product Revenue $ 2,373,075
Other Revenue 581,550
Less: Sales returns and allowances (180,139)
------------------
Net Sales 2,774,486
Cost of Goods Sold 897,745
------------------
1,876,741
Payroll expense 1,077,219
Professional fees 1,378,982
Selling expenses 2,696,393
Other expenses 2,159,435
Bad debt expense 736,487
Depreciation and amortization 541,083
------------------
8,589,598
Interest expenses 76,230
Other (income)/expense (20,008)
------------------
Net loss $ (6,769,079)
==================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
National Boston Medical, Inc.
Consolidated Statement of Changes in Stockholders' Equity
Period from October 8, 1998 through June 30, 1999
(Unaudited)
Preferred Stock Common Stock
-------------------- -------------------
Number Number Accumulated TTL S/H
Of Shares Amount Of Shares Amount APIC Deficit Deficiency
----------- --------- ----------- -------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE
(Post Reverse Merger) 55,375 $554 17,480,018 $174,800 $18,851,583 $ (9,778,455) $ 9,248,482
Common stock issued for:
2nd Quarter - services 3,127,488 31,275 325,825 357,100
2nd Quarter - interest expenses 500,000 5,000 45,000 50,000
2nd Quarter - debt conversion 7,500,000 75,000 675,000 750,000
2nd Quarter - acquisition of subsidiary 400,000 4,000 244,000 248,000
2nd Quarter - property distribution 185,055 1,851 7,402 9,253
3rd Quarter - cash 2,878,788 28,788 171,212 200,000
3rd Quarter - services 875,000 8,750 36,500 45,250
4th Quarter - cash 1,250,000 12,500 87,500 100,000
4th Quarter - debt conversion 4,212,226 42,122 589,712 631,834
4thQuarter - services 4,988,888 49,889 440,110 489,999
Net loss (6,769,079) (6,769,079)
----------- --------- ----------- -------- ----------- ------------ ----------
55,375 $554 43,397,463 $433,975 $21,473,845 $(16,547,534) $5,360,839
=========== ========= =========== ======== =========== ============ ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
National Boston Medical, Inc.
Consolidated Statement of Cash Flows
For the Year Ended June, 1999
(Unaudited)
CASH FLOW PROVIDED (USED) BY OPERATING ACTIVITIES
<S> <C>
Net loss $ (6,769,079)
Adjustments to reconcile net loss to net cash used by operating activities
Stock issued for services rendered 892,349
Stock issued in payment of interest 50,000
Depreciation and amortization 541,083
Changes in assets and liabilities
(Increase) decrease in inventory (47,434)
(Increase) decrease in accounts receivable (547,361)
(Increase) decrease in other 137,126
Increase (decrease) in accounts payable 645,939
Increase (decrease) in customer deposits 617,067
Net cash provided (used) by operating activities (4,480,310)
-----------
CASH FLOWS USED BY INVESTING ACTIVITIES
Investments in businesses, intangibles and affiliates 815,220
Acquisition of property and equipment 649,635
------------
Net cash flows used by investing activities 1,464,855
-----------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Common stock issued for acquisitions 248,000
Common stock sold for cash 300,000
Common stock issued for property 9,253
Issuance of debt 2,751,970
Repayments of debt 1,812,609
Net cash flows provided (used) by financing activities 5,121,832
-----------
Net increase (decrease) in cash $ (823,333)
CASH, beginning of year 854,581
CASH, end of year $ 31,248
-------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 60,000
Non-Cash Investing and Financing Activities
Stock issued to acquire businesses, affiliates and exclusive $ 248,000
Stock issued towards conversion of debt $ 1,381,834
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
National Boston Medical, Inc.
Notes to Consolidated Financial Statements
June 30, 1999
(Unaudited)
(1) Summary of Significant Accounting Policies
The Company National Boston Medical, Inc. (NBM) was incorporated on August
22, 1997 under the laws of Delaware. The Company markets a consumer product
patented under the name of the Backstroke(TM) which is a combined
back-massage and healthcare device. The Company markets an industry product
named Safeshield utilized as an anti-microbial barrier lotion. The Company
markets Bontempi Medical Instruments, Snc. to professionals practicing in
the medical, dental and veterinarian fields via an Exclusive Distribution
Agreement with both Bontempi Medical Corporation (U.S.A.) and Bontempi
Medical Corporation (Canada).
The following summarize the more significant accounting and reporting policies
and practices of the Company:
a) Use of estimates The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles. In
preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the statements of financial condition,
and revenues and expenses for the period then ended. Actual results may
differ significantly from those estimates. b) Principles of consolidation
The consolidated financial statements include the accounts of Flex
Marketing, Inc., Growth Industries, NBM (Delaware), its wholly-owned
subsidiaries and Medical Marketing Group, LLC and Virushield, Inc.,
wholly-owned subsidiaries of NBM-DE. Intercompany accounts and transactions
have been eliminated in consolidation. The consolidated financial
statements for the year ended June 30, 1999 include adjustments which in
the opinion of management are necessary for fair presentation. c)
Compensation for services rendered for stock The Company issues shares of
common stock in exchange for services rendered, in payment of interest on
loans, in payment of commissions on sale of securities and in exchange for
acquisition of businesses and licenses. The costs of the services are
valued according to generally accepted accounting principles and have been
charged to operations.
(2) Significant Acquisitions In November 1998, the Company acquired 100% of
Flex Marketing, Inc. The Company issued 400,000 shares of its common stock
valued at $248,000 and received all rights and title to the Backstroke(TM)
product. The company also acquired the assets of Flex Marketing ($285,508)
as well as assumed the debt of the company ($766,185).
(3) Accounts Receivable Due to the acquisition of Flex Marketing, Inc., the
Company acquired rights to the Backstroke(TM) product which was
subsequently developed and sold via infomercials. The increase in accounts
receivable was due to amounts received from customers for installment sales
as well as funds advanced and due from Bontempi Medical Corporation
(Canada), a firm in which NBM acquired the exclusive rights to distribute
Bontempi Snc instruments in the U.S., Mexico and internet sales
distribution.
(4) Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
Prepaid leases $ 1,582
Prepaid inventory 12,180
--------------
Total $ 13,762
==============
(5) Property and Equipment During the year the Company added fixed assets
primarily through the acquisition of Flex Marketing as well as the
acquisition and capitalization of the DermaGuard formula.
F-5
<PAGE>
(6) Notes receivable Effective January 20, 1999, the Company entered into an
agreement to spinoff Fragrance Express Florida, Inc. and its subsidiary to
Telenetworx, Inc. In exchange for the Company's issued and outstanding
stock of Fragrance Florida, NBM was to receive 15% of the issued and
outstanding stock of Telenetworx, Inc.; a demand note from Fragrance
Florida payable to the Company in the amount of $700,000 bearing interest
at the rate of 10% per annum secured by a third mortgage on property
located in Georgia. To date, neither the Telenetworx Inc. stock nor the
demand note have been delivered to the Company. While the Company is
actively pursuing collection activity in this regard, the amount has been
fully reserved.
(7) Goodwill Intangible related to the acquisition of Flex Marketing, Inc. in
November, 1998 and acquisition of Medical Marketing Group (Safeshield). The
accumulated reserve for goodwill amortization is $341,829.
(8) Capitalized licenses The Company entered into an Exclusive Distribution
Agreement with both Bontempi Medical Corporation (U.S.A.) and Bontempi
Medical Corporation (Canada) to sell Bontempi Snc. Instruments in the U.S.,
Mexico and internet distribution. The term of the license was through the
year 2025. The amortization expense related to the license for the year was
$232,485.
(9) Customer deposits Reflects prepayments from customers ordering the
Company's Backstroke(R) product as well as $175,000 related to prepayment
of an order for the Company's Dermaguard product.
(10) Notes Payable The Company acquired Flex Marketing, Inc. in November, 1998
and assumed the debt of Flex. As of June 30, 1999, the Company owed
$655,000 related to the Flex Marketing acquisition, $189,000 related to
short-term financing to market and distribute Flex Marketing products and
$244,000 in miscellaneous notes to vendors and individuals for professional
services.
(11) Stockholders' Equity In October 1998, the Company entered into a reverse
merger with Fragrance Express, Inc. (FEI), a Nevada corporation. Under the
terms of the agreement, FEI issued one share for each share of NBM then
issued and outstanding, or 14,368,614 shares. This reverse merger is being
accounted for as a reorganization of NBM.
The Company has authorized 10,000,000 shares of $0.01 par value preferred
stock and 50,000,000 shares of $0.01 par value common stock.
In the second quarter, the Company issued 400,000 shares of common stock
for the acquisition of Flex Marketing, Inc.; 3,127,488 shares for services
valued at $357,100; 500,000 shares to pay $50,000 of interest, 7,500,000
shares to convert debt valued at $750,000; and 185,055 shares related to
property distribution valued at $9,253.
In the third quarter, the Company issued 875,000 shares for services valued
at $45,250; and 2,878,788 shares for $200,000 in cash.
In the fourth quarter, the Company issued 4,988,888 shares for services
valued at $489,999; 4,212,226 shares to covert debt valued at $631,834; and
1,250,000 shares for $100,000 in cash.
(12) Income taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax and
financial reporting purposes. The Company had net operating loss
carryforwards for income tax purposes of approximately $9,778,455 for the
year ended June 30, 1998 and $6,769,079 for the year ended June 30, 1999
which expire beginning June 30, 2117.
The amount recorded as deferred tax assets, cumulative as of June 30, 1999
is $6,619,000 which represents the amount of tax benefits of loss
carryforwards. The Company has established a valuation allowance for this
deferred tax asset of $6,619,000, as the Company has no history of
profitable operations.
F-6
<PAGE>
(13) Commitments and Contingencies The Company operates from facilities leased
through November 30, 2000. The Company is obligated under a financing lease
through May 28, 2000 and another through April 27, 2001. The Company is
obligated to lease payments amounting to $44,288 in fiscal year 2000 and
$18,980 in fiscal year 2001, and $0 thereafter.
(14) Subsequent Events
a) In July 1999, the Company issued 1,465,412 shares of its restricted
common stock to two companies and two individuals in exchange for services
rendered or release of debt incurred, which services and debt release were
valued at $366,353.
b) In July 1999, the Company issued 150,000 shares of its restricted common
stock to the inventor of the Backstroke(TM) and were valued at $37,500.
c) In July 1999, the Company issued 870,000 shares of its restricted common
stock to eight (8) persons for past services on the Company's Board of
Directors and were valued at approximately $130,500.
F-7
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
<S> <C>
Independent Auditors' Report .........................................F-2
Consolidated Balance Sheet ...........................................F-3
Consolidated Statement of Operations ..................................F-4
Consolidated Statement of Changes in Stockholders' Deficiency .........F-5
Consolidated Statement of Cash Flows .................................F-6
Notes to Consolidated Financial Statements ............................F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO: The Board of Directors and Stockholders
National Boston Medical, Inc.
(A Development Stage Enterprise)
Taunton, Massachusetts
We have audited the accompanying consolidated balance sheet of National Boston
Medical, Inc., (the "Company") (A Development Stage Enterprise) as of June 30,
1998 and the related consolidated statements of operations, changes in
stockholders' deficiency and cash flows for the period from August 22, 1997
(Inception) through June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
National Boston Medical, Inc. as of June 30, 1998 and the consolidated results
of their operations and their cash flows for the period from August 22, 1997
(Inception) through June 30, 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company's significant operating losses, working
capital deficiency and stockholders' deficiency raise substantial doubt about
its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Durland & Company
Durland & Company, CPAs, P.A.
Palm Beach, Florida
November , 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
National Boston Medical, Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheet
June 30, 1998
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 854,581
Prepaid inventory 135,550
Prepaid inventory - related party 25,000
Prepaid expenses and other current assets 150,888
------------------
Total current assets 1,166,019
------------------
PROPERTY AND EQUIPMENT
Furniture and equipment 77,466
Leasehold improvements 12,938
Vehicles 13,641
------------------
Total property and equipment before depreciation 104,045
Less: accumulated depreciation (14,063)
------------------
Net property and equipment 89,982
------------------
OTHER ASSETS
Investment in non-marketable equity securities 375,000
------------------
Total other assets 375,000
------------------
Total Assets $ 1,631,001
==================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 33,449
Accounts payable - related party 384,610
Customer deposits 65,000
Accrued payroll and related liabilities 54,033
Convertible debt 3,710,614
------------------
Total current liabilities 4,247,706
------------------
Total Liabilities 4,247,706
------------------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.01 par value; authorized 590 shares;
1 share issued 0
Common stock, $0.01 par value; authorized 15,000,000
shares; 6,415,550 issued and outstanding 64,156
Additional paid in capital in excess of par 7,097,594
Deficit (9,778,455)
------------------
Total Stockholders' Deficiency (2,616,705)
------------------
Total Liabilities and Stockholders' Deficiency $ 1,631,001
==================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
National Boston Medical, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Operations Period from
August 22, 1997 (Inception) through June 30, 1998
<S> <C>
REVENUE $ 2,845
COST OF GOODS SOLD
Cost of goods sold 577
-----------------
Gross margin 2,268
-----------------
EXPENSES
Compensation :
Officers 153,461
Others 2,651,876
Capital development commissions - related party 4,308,550
Product purchases 221,441
General and administrative expense 2,140,423
Depreciation 14,063
-----------------
Total expenses 9,489,814
-----------------
Loss from operations (9,487,546)
-----------------
Other income (expense)
Interest income 2,620
Interest expense (293,529)
-----------------
Total other income (expense) (290,909)
-----------------
Net loss $ (9,778,455)
=================
Net loss per share, basic $ (2.63)
=================
Weighted average number of shares outstanding 3,719,091
=================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
National Boston Medical, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Changes in Stockholders' Deficiency
Period from August 22, 1997 (Inception) through June 30, 1998
Preferred Stock Common Stock
-------------------------------------
Number Number Accumulated TTL S/H
of Shares Amount of Shares Amount APIC Deficit Deficiency
--------- --------- --------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE, August 22, 1997
(Inception) 0 $ 0 0 $ 0 $ 0 $ 0 $ 0
Common stock issued for :
11/97 - acquisition of subsidiary 0 0 500,000 5,000 0 0 5,000
2nd quarter - services 0 0 3,050,000 30,500 0 0 30,500
2nd quarter - cash 0 0 40,000 400 49,600 0 50,000
3rd quarter - services 0 0 105,000 1,050 261,450 0 262,500
3rd quarter - cash 1 0 100 1 25,124 0 25,125
4th quarter - services 0 0 2,510,450 25,105 6,251,020 0 6,276,125
4th quarter - cash 0 0 10,000 100 12,400 0 12,500
4th quarter - interest expense 0 0 50,000 500 124,500 0 125,000
4th quarter - investment in
non-marketable equity securities 0 0 150,000 1,500 373,500 0 375,000
Net loss 0 0 0 0 0 (9,778,455) (9,778,455)
--------- --------- --------- --------- ---------- ----------- -----------
BALANCE, June 30, 1998 1 $ 0 6,415,550 $ 64,156 $ 7,097,594 $(9,778,455) $(2,616,705)
========= ========= ========= ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
National Boston Medical, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
Period from August 22, 1997 (Inception) through June 30, 1998
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
<S> <C>
Net loss $ (9,778,455)
Adjustments to reconcile net loss to net cash used for
development activities:
Stock issued for services rendered 6,569,125
Stock issued in payment of interest 125,000
Depreciation 14,063
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses (150,888)
(Increase) decrease in prepaid inventory (160,550)
Increase (decrease) in accounts payable 33,449
Increase (decrease) in accounts payable - related parties 384,610
Increase (decrease) in accrued interest expense 74,614
Increase (decrease) in customer deposits 65,000
Increase (decrease) in accrued salaries 54,033
-------------------
Net cash provided by (used by) development activities (2,769,999)
-------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (104,045)
-------------------
Net cash provided by (used by) investing activities (104,045)
-------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock sold for cash 67,625
Preferred stock sold for cash 25,000
Proceeds from sale of convertible debt 3,636,000
-------------------
Net cash provided by (used by) financing activities 3,728,625
-------------------
Net increase (decrease) in cash 854,581
-------------------
CASH, beginning of period 0
-------------------
CASH, end of period $ 854,581
===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 91,295
===================
Non-cash financing and investing activities:
Stock issued to acquire investment in non-marketable equity secu$ities 375,000
===================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
National Boston Medical, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 1998
(1) Summary of Significant Accounting Policies
The Company National Boston Medical, Inc., (NBM) was incorporated on August
22, 1997 under the laws of the state of Delaware. Through the acquisition
of Medical Marketing Group, LLC in November 1997, NBM acquired all rights
and interest in an anti-viral hand wash. The Company is located in Taunton,
Massachusetts.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles. In
preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the statements of financial condition,
and revenues and expenses for the period then ended. Actual results may
differ significantly from those estimates.
b) Principles of consolidation The consolidated financial statements
include the accounts of Medical Marketing Group, LLC, its wholly owned
subsidiary. Inter-company accounts and transactions have been eliminated in
the consolidation.
c) Start-up costs Costs of start-up activities, including organization
costs, are expensed as incurred following Statement of Position (SOP) 98-5.
This SOP sets forth the generally accepted accounting principles for costs
of start-up activities of development stage entities.
d) Net loss per share Basic is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
e) Compensation for services rendered for stock The Company issues shares
of common stock in exchange for services rendered, in payment of interest
on loans and in payment of commissions on sale of securities. The costs of
the services are valued according to generally accepted accounting
principles and have been charged to operations.
f) Property and equipment All property and equipment are recorded at cost
and depreciated over their estimated useful lives, using the straight-line
method. Upon sale or retirement, the costs and related accumulated
depreciation are eliminated from their respective accounts, and the
resulting gain or loss is included in the results of operations. Repairs
and maintenance charges which do not increase the useful lives of the
assets are charged to operations as incurred.
(2) Significant Acquisitions In November 1997, the Company acquired 100% of the
outstanding membership interests of Medical Marketing Group, LLC. The
Company issued 500,000 shares of its common stock to effect this
acquisition. As part and parcel to this transaction, the Company received
all rights and title to an anti-viral hand wash. The transaction was
accounted for as a purchase at historical cost, due to common control.
(3) Convertible Debt At June 30, 1998, the Company had $3,636,000 of
convertible debt outstanding. This debt has a stated interest rate of 12%
with a three year maturity. It was convertible into common stock at a rate
of either one share for each $1.25 or $2.50 of debt face amount, depending
on the date it was offered to the investor.
F-7
<PAGE>
National Boston Medical, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 1998
At June 30, 1998, the Company had recorded $74,614 in interest expense
related to this debt. The Company paid $540,190 in commissions, accrued
$384,610 in commissions, and issued 1,350,000 shares of common stock valued
at $3,375,000 as commissions to the Company, which assisted NBM in the sale
of the debt.
(4) Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
<TABLE>
<S> <C>
Prepaid rent $ 3,600
Prepaid vehicle leases 26,809
Escrow deposit 120,000
Other 1,004
----------------------
Total $ 151,413
======================
</TABLE>
(5) Stockholders' Equity The Company has authorized 590 shares of $0.01 par
value preferred stock and 15,000,000 shares of $0.01 par value common
stock.
In November 1997, NBM issued 500,000 shares of common stock in exchange for
100% of the outstanding membership interests of Medical Marketing Group,
LLC. In November 1997, NBM issued 3,050,000 founders shares for services
valued at par, or $30,500. In December 1997, NBM issued shares for $50,000
in cash.
In the third quarter, NBM issued 105,000 shares for services valued at
$262,500, and 100 shares for $125 in cash.
In the fourth quarter, the Company issued 2,510,450 shares for services
valued at $6,276,125; 10,000 shares for $12,500 in cash; 50,000 shares to
pay $125,000 of interest and 150,000 shares as an investment in non-
marketable common stock valued at $375,000 of a medical products
distribution company, which is the primary distributor of NBM's anti-viral
hand wash.
(6) Income taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax and
financial reporting purposes. The Company had net operating loss
carryforwards for income tax purposes of approximately $9,778,455, which
expire beginning June 30, 2117.
The amount recorded as deferred tax assets, cumulative as of June 30, 1998,
is $3,900,000, which represents the amount of tax benefits of loss
carryforwards. The Company has established a valuation allowance for this
deferred tax asset of $3,900,000, as the Company has no history of
profitable operations.
(7) Commitments and Contingencies NBM operates from facilities leased through
November 30, 2000. NBM is obligated under a financing lease through May 28,
2000 and another through April 27, 2001. The Company is obligated to lease
payments amounting to $44,553 in fiscal 1999, $44,288 in fiscal 2000 and
$18,980 in fiscal 2001, and $0 thereafter.
(8) Going Concern The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company's
financial position and operating results raise substantial doubt about the
Company's ability to continue as a going concern, as reflected by the net
loss of $9,778,455
F-8
<PAGE>
National Boston Medical, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 1998
(8) Going Concern (Cont.)
accumulated from August 22, 1997 (Inception) through June 30, 1998. The
ability of the Company to continue as a going concern is dependent upon
commencing operations, developing sales and obtaining additional capital
and financing. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
The Company raised approximately $2,000,000 in the first quarter of fiscal
1999.
(9) Subsequent Events
a) Convertible debt In July 1998, the Company offered the convertible debt
holders a 12% discount of the price per share for conversion, if the debt
holder converted the debt into equity within thirty days of the offer. This
offer changed the conversion prices from $1.25 and $2.50 to $1.10 and
$2.20, respectively. All of the convertible debt holders, save one, elected
to convert. Accrued interest was paid in shares at the original conversion
rate. This offer did not modify the warrant exercise rate. Under the terms
of this offer, the Company issued 2,778,345 shares in exchange for the
outstanding convertible debt, and 77,871shares for $112,209 of accrued
interest. Warrants were exercised for 1,455,800 shares, for which
$1,916,625 in cash was received. The one remaining convertible debt holder
requested repayment of his debt in the amount of $525,000. Over the
following year, the Company repaid this amount.
In November 1998, NBM received $750,000, less a $100,000 commission,
through a Canadian registered broker/dealer, in exchange for a convertible
note. This note was due December 31, 2001, and carried a 10% interest rate.
The conversion price was the lower of $0.625 per share or 75% of the
average closing bid price for the three days preceding the loan closing.
Pursuant to this, the Company will record a beneficial conversion feature
discount in the amount of $250,000. In June 1999, this convertible note was
converted to 7,500,000 shares of common stock, and 500,000 shares for the
accrued interest amounting to $50,000.
b) Stockholders' equity At the same time as the convertible debt and
accrued interest were being converted to common stock, the preferred
stockholder converted the one share of preferred stock into 20,000 common
shares. At the same time, common stock subscriptions were received for
78,000 shares in exchange for $150,000 in cash.
In August 1998, one of the founders agreed to leave the Company. Under the
terms of his leaving, he received $105,000, which was designated as
$50,000, in exchange for 200,000 shares of the common stock he held of the
Company, and $55,000 as a severance payment.
c) Significant acquisitions In July 1998, the Company acquired the
exclusive worldwide marketing rights, except for Western Europe and Canada,
to the complete line of medical instruments produced by Bontempi, SA of
Italy. The Company issued 2,374,999 shares of restricted common stock in
exchange for those rights, valued at $5,794,246. The seller of the rights
was a group of Canadian citizens who held the rights and had been
commercializing the rights in Canada and the US for several years. This
valuation is derived from the value of the stock, as there was no market
value of the rights. The Company had most recently sold shares for $2.50
per share, and believes that a 50% discount on this price is warranted due
to the size of the block of shares (approximately 17% of total issued and
outstanding), and the lack of marketability of the shares. The recipients
of the shares entered into long-term employment agreements with NBM, along
with the transfer of those rights.
In October 1998, the Company entered into a reverse merger with Fragrance
Express, Inc. (FEI), a Nevada corporation. Under the terms of the
agreement, FEI issued one share for each share of NBM then issued and
F-9
<PAGE>
outstanding, or 14,988,614 shares. This reverse merger is being accounted
for as a reorganization of NBM.
F-10
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Independent Auditors' Report...................................F-2
Balance Sheets.................................................F-3
Statements of Operations.......................................F-4
Statements of Changes in Stockholders' Deficiency..............F-5
Statements of Cash Flows.......................................F-6
Notes to the Financial Statements .............................F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Flex Marketing, Incorporated
Canfield, Ohio
We have audited the accompanying balance sheets of Flex Marketing, Incorporated,
a wholly-owned subsidiary of National Boston Medical, Inc. as of December 31,
1998 and 1997, and the related statements of operations, changes in
stockholders' deficiency and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of financial
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respect, the financial position of Flex Marketing, Incorporated as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company's significant operating losses, working
capital deficiency and stockholders' deficiency raise substantial doubt about
its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Durland & Company
Durland & Company, CPAs, P.A.
Palm Beach, Florida
June 3, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
Flex Marketing, Incorporated
Balance Sheets
December 31, 1998 and 1997
1998 1997
------------------ --------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 4,938 $ 14,637
Inventory 72,158 50,051
Capitalized advertising costs 66,419 37,472
------------------ --------------------
Total current assets 143,515 102,160
------------------ --------------------
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 201,725 201,725
Office furniture and equipment 12,748 12,748
Less: accumulated depreciation (72,480) (15,683)
------------------ --------------------
Total property and equipment - at cost 141,993 198,790
------------------ --------------------
Total Assets $ 285,508 $ 300,950
================== ====================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Note payable $ 147,848 $ 150,000
Current portion of long-term debt 115,224 5,931
Accounts payable 122,184 31,698
Accounts payable - parent company 84,543 0
Due to related party 127,084 43,652
------------------ --------------------
Total current liabilities 596,883 231,281
------------------ --------------------
LONG-TERM DEBT 253,845 369,069
------------------ --------------------
STOCKHOLDERS' DEFICIENCY
Common stock, no par value, 100 shares issued and outstanding 500 500
Additional paid-in capital (557,222) 0
Accumulated deficit (8,498) (299,900)
------------------ --------------------
Total stockholders' deficiency (565,220) (299,400)
------------------ --------------------
Total Liabilities and Stockholders' Deficiency $ 285,508 $ 300,950
================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
Flex Marketing, Incorporated
Statements of Operations
Years Ended December 31, 1998 and 1997
1998 1997
------------------ --------------------
<S> <C> <C>
Net sales $ 70,517 $ 40,578
Cost of goods sold 87,819 152,546
------------------ --------------------
Gross margin (17,302) (111,968)
------------------ --------------------
OPERATING EXPENSES
Selling expenses 121,161 81,629
General and administrative expenses 103,155 99,006
------------------ --------------------
Total operating expenses 224,316 180,635
------------------ --------------------
Net operating loss (241,618) (292,603)
OTHER EXPENSES
Interest expense (24,202) (7,297)
------------------ --------------------
Total other expenses (24,202) (7,297)
------------------ --------------------
Net loss $ (265,820) $ (299,900)
================== ====================
Net loss per weighted average share, basic $ (2,658) $ (2,999)
================== ====================
Weighted average number of shares, basic 100 100
================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Flex Marketing, Incorporated
Statement of Changes in Stockholders' Deficiency
Years Ended December 31, 1998 and 1997
Common stock
----------------------------
Additional Total
Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Deficiency
-------------- ------------- ------------ -------------- -----------------
<S> <C> <C> <C> <C> <C>
BEGINNING BALANCE, January 1, 1997
Issuance of common stock 100 $ 500 $ 0 $ 0 $ 500
Net Loss 0 0 0 (299,900) (299,900)
-------------- ------------- ------------ -------------- -----------------
BALANCE, December 31, 1997 100 500 0 (299,900) (299,400)
Undistributed loss at conversion of S to C corporation 0 0 (557,222) 557,222 0
Net Loss 0 0 0 (265,820) (265,820)
-------------- ------------- ------------ -------------- -----------------
BALANCE, December 31, 1998 100 $ 500 $ (557,222)$ (8,498)$ (565,220)
============== ============= ============ ============== =================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
Flex Marketing, Incorporated
Statements of Cash Flows
Years Ended December 31, 1998 and 1997
1998 1997
------------------- -------------------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (265,820) $ (299,900)
Adjustments to reconcile net loss to net cash used by operating activities
Depreciation and amortization 57,468 23,178
Write off of capitalized advertising costs 37,472 0
Changes in assets and liabilities
(Increase) decrease in inventory (22,107) 23,224
Increase (decrease) in accounts payable 90,486 31,698
Increase (decrease) in accounts payable - Parent 84,543 0
------------------- -------------------
Net cash provided (used) by operating activities (17,958) (221,800)
------------------- -------------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
Capitalized advertising costs (67,090) (44,967)
Acquisition of property and equipment 0 (12,748)
------------------- -------------------
Net cash flows provided (used) by investing activities (67,090) (57,715)
------------------- -------------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Advances from related parties 98,332 52,589
Repayments to related parties (14,900) (8,937)
Additional financing 0 250,000
Issuance of stock 0 500
Repayments of debt (8,083) 0
------------------- -------------------
Net cash flows provided (used) by financing activities 75,349 294,152
------------------- -------------------
Net increase (decrease) in cash (9,699) 14,637
CASH, beginning of year 14,637 0
------------------- -------------------
CASH, end of year $ 4,938 $ 14,637
=================== ===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 24,202 $ 7,297
=================== ===================
Non-cash investing and financing activities
Acquisition of property and equipment and inventory by assumption of debt$ 0 $ 275,000
=================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
Flex Marketing, Incorporated
(A Wholly-Owned Subsidiary of National Boston Medical, Inc.)
Notes to Financial Statements
(1) Summary of Significant Accounting Principles
The Company Flex Marketing, Incorporated (the Company) is an Ohio
corporation specializing in the development, marketing, advertising and
direct sales of innovative new products throughout the world. Currently,
the Company has one product, the Backstroke back massager.
The Company began operations on approximately January 1, 1997, with an
effective date of incorporation of September 11, 1997. On November 21,
1998, the Company was acquired by National Boston Medical, Inc. (the
Parent).
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as
of the date of the statements of financial condition, and revenues and
expenses for the period then ended. Actual results may differ significantly
from those estimates.
b) Start-up costs Costs of start-up activities, including organization
costs, are expensed as incurred following Statement of Position (SOP)
988-5.
c) Net loss per share Basic is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
d) Inventory Inventory, consisting primarily of component parts and
finished goods, is stated at the lower of cost (first-in, first-out method)
or market.
e) Property and equipment All property and equipment are recorded at cost
and depreciated over their estimated useful lives, using the straight-line
method. Upon sale or retirement, the costs and related accumulated
depreciation are eliminated from their respective accounts, and the
resulting gain or loss is included in the results of operations. Repairs
and maintenance charges which do not increase the useful lives of the
assets are charged to operations as incurred.
f) Advertising costs The company expenses the production costs of
advertising the first time the advertising takes place, except for
direct-response advertising, which is capitalized and amortized over its
expected period of future benefits. Direct-response advertising consists
primarily of costs associated with the production of infomercials that air
on television. The capitalized costs of the advertising are amortized over
the period during which future benefits are expected, approximately
eighteen months.
(2) Inventories Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
---------------------------- --------------------------
<S> <C> <C>
Component parts $ 32,707 $ 17,286
Finished goods 39,451 32,765
---------------------------- --------------------------
Total inventories $ 72,158 $ 50,051
============================ ==========================
</TABLE>
(3) Notes Payable At December 31, 1997, the Company had an outstanding line of
credit with a local bank totaling $150,000, at 10% interest, renewable
annually. The Company converted the line of credit into a term loan during
1998. The term loan requires five monthly installments of $2,463, including
interest at the rate of 2% above the bank's prime rate (7.75% at December
31, 1998) from January 1999 through June 1999, at which time approximately
$143,000 will be due. The line of credit and term loan are collateralized
by substantially all assets of the Company, and certain assets of
shareholders of the Parent and are guaranteed by certain shareholders of
the Parent.
F-7
<PAGE>
Flex Marketing, Incorporated
(A Wholly-Owned Subsidiary of National Boston Medical, Inc.)
Notes to Financial Statements
(4) Long-Term Debt At December 31, 1998 and 1997, long-term debt consisted of
the following:
<TABLE>
<CAPTION>
1998 1997
--------------------- -------------------
<S> <C> <C>
8.75% note, payable to a bank in monthly installments
of $3,218, including interest, through September 2009;
this loan was assumed in exchange for certain assets in 1997
and the Company is presently negotiating collateral and guarantee
requirements with the bank $ 269,500 $ 275,000
9.5% unsecured note, payable to an individual; expected to
be repaid in 1999 99,569 100,000
--------------------- -------------------
369,069 375,000
Less: Current portion 115,224 5,931
--------------------- -------------------
$ 253,845 $ 369,069
===================== ===================
Future maturities of long-term debt are as follows:
1999 $ 115,224
2000 17,082
2001 18,638
2002 20,336
2003 22,188
Thereafter 175,601
---------------------
$ 369,069
=====================
</TABLE>
(5) Advertising Costs At December 31, 1998 and 1997, $66,419 and $37,472,
respectively, of advertising was reported as assets. Advertising expense
was $79,866 and $73,519 in 1998 and 1997, respectively, including $37,472
in 1998 for amounts written down to net realizable value. Amortization
expense was $671 and $7,495 in 1998 and 1997, respectively.
(6) Related Party Transactions at December 31, 1998 and 1997, unsecured demand
notes due to related parties amounted to $127,084 and $43,652,
respectively, and were due to former shareholders of the Company who are
now shareholders of the Parent. These notes bear interest at the rate of 6%
and 9%, respectively.
The Company leases its facilities and equipment from one of the Parent's
shareholders on a month-to-month basis. Total rent expenses for 1998 and
1997 amount to $14,650 and $18,035, respectively.
(7) Income Taxes The previous shareholders consented to the Company's election
to be an S corporation within the provisions of Section 1362(a) of the
internal Revenue Code, which provide that income of the Company will be
taxed directly to the shareholders and not to the Company. Accordingly,
there is no provision for income taxes in the accompanying financial
statements for the period from January 1, 1997 through November 21, 1998.
On November 21, 1998, the Company was acquired by the Parent, which
automatically rescinded its election under Section 1362 of the Internal
Revenue Code. Henceforth, beginning November 21, 1998, the Company will be
liable for Federal and state corporation income taxes under Subchapter C of
the Internal Revenue Code and related state
F-8
<PAGE>
Flex Marketing, Incorporated
(A Wholly-Owned Subsidiary of National Boston Medical, Inc.)
Notes to Financial Statements
(7) Income Taxes (Continued) statutes. The tax benefit and deferred taxes for
the period November 21, 1998 through December 31, 1998 are immaterial. As a
result of the automatic revocation of Subchapter S status, the Company
recorded the conversion of its accumulated deficit at November 21, 1998,
amounting to $557,222, as an undistributed loss charged to additional
paid-in capital in excess of par.
Beginning November 21, 1998, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
(8) Commitments and Contingencies
Royalty Agreements: The Company has entered into several agreements which
require the payment of royalties on sales of product. Two of these
agreements are with shareholders of the Parent. Total royalties paid in
1998 were $4,129.
Litigation: At December 31, 1998, the Company is a defendant in a lawsuit
by one of its suppliers for alleged breach of contract. The suit asks for
compensatory and punitive damages totaling $636,000. The Company believes
the suit is without merit and intends to vigorously defend its position.
(9) Going Concern The Company incurred an operating loss of $265,820 for the
year ended December 31, 1998 and, as of that date, had a working capital
deficiency of $453,368 and shareholder's deficiency of $565,220. The
Company's ability to continue to operate is dependent upon its ability to
successfully market its present product, develop and market new products
and to raise additional capital. Although there have been sales of
approximately $220,000 of its product through March 1999, there is no
assurance that the Company can continue to operate.
F-9
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Independent Auditors' Report........................................F-2
Balance Sheet.......................................................F-3
Statement of Loss...................................................F-4
Statement of Changes in Stockholders' Deficiency....................F-5
Statement of Cash Flows.............................................F-6
Notes to the Financial Statements ..................................F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Medical Marketing Group, LLC
(A Development Stage Enterprise)
Taunton, Massachusetts
We have audited the accompanying balance sheet of Medical Marketing Group, LLC,
a development stage enterprise, as of June 30, 1997, and the related statements
of operations, changes in stockholders' deficiency and cash flows for the period
from March 13, 1997 (Inception) through June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of financial
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimated made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medical Marketing Group, LLC as
of June 30, 1997, and the results of its operations and its cash flows for the
period from March 13, 1997 (Inception) through June 30, 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company's significant operating losses, working
capital deficiency and stockholders' deficiency raise substantial doubt about
its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Durland & Company
Durland & Company, CPAs, P.A.
Palm Beach, Florida
July 29, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
Medical Marketing Group, LLC
(A Development Stage Enterprise)
Balance Sheet
June 30, 1997
ASSETS
CURRENT ASSETS
<S> <C>
Loan receivable - related party $ 20,000
-----------------------
Total current assets 20,000
-----------------------
Total Assets $ 20,000
=======================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank overdraft $ 9,868
Advances - related parties 50,000
-----------------------
Total current liabilities 59,868
-----------------------
STOCKHOLDERS' DEFICIENCY
Common stock, no par value, authorized 5,000,000 shares,
2,760,000 shares issued and outstanding 276
Deficit accumulated during the development stage (40,119)
Stock subscription receivable (25)
-----------------------
Total stockholders' deficiency (39,868)
-----------------------
Total Liabilities and Stockholders' Deficiency $ 20,000
=======================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
Medical Marketing Group, LLC
(A Development Stage Enterprise)
Statement of Operations Period from March 13,
1997 (Inception) through June 30, 1997
<S> <C>
REVENUES $ 0
----------------
OPERATING EXPENSES
Consulting fees 15,000
General and administrative expenses 119
Product development 25,000
----------------
Total operating expenses 40,119
----------------
Net loss $ (40,119)
================
Net loss per weighted average share, basic $ (0.015)
================
Weighted average number of shares 2,760,000
================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Medical Marketing Group, LLC
(A Development Stage Enterprise)
Statement of Stockholders' Deficiency Period
from March 13, 1997 (Inception) through June 30, 1997
Common Stock
-----------------------
Stock Deficit Accumulated Total
Subscription During the Stockholders'
Shares Amount Receivable Development Stage Deficiency
------------ ---------- ----------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
BEGINNING BALANCE, January 1, 1997 0 $ 0 $ 0 $ 0 $ 0
Issuance of founders' stock 2,760,000 276 (25) 0 251
Net Loss 0 0 0 (40,119) (40,119)
------------ ---------- ----------- ------------------ -------------
BALANCE, June 30, 1997 2,760,000 $ 276 $ (25) $ (40,119) $ 39,868
============ ========== =========== ================== =============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
Medical Marketing Group, LLC
(A Development Stage Enterprise)
Statement of Cash Flows Period from March 13,
1997 (Inception) through June 30, 1997
CASH FLOWS USED BY DEVELOPMENT ACTIVITIES
<S> <C>
Net loss $ (40,119)
Changes in assets and liabilities
Increase in loan receivable - related party (20,000)
---------------
Net cash used by development activities (60,119)
---------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
None
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Advances from related parties 50,000
Issuance of founders stock 251
Increase in cash overdraft 9,868
---------------
Net cash flows provided by financing activities 60,119
---------------
Net increase (decrease) in cash 0
CASH, beginning of year 0
---------------
CASH, end of year $ 0
===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: None
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
Medical Marketing Group, LLC
(A Development Stage Enterprise)
Notes to Financial Statements
(1) Summary of Significant Accounting Principles
The Company Medical Marketing Group, LLC (the Company) is a Nevada
chartered development stage limited liability company which conducts its
business from its headquarters in Taunton, Massachusetts. The Company was
incorporated on March 13, 1997.
The Company has not yet engaged in its expected operations. The Company's
future operations will be to develop, market and sell innovative medical
products to various consumer groups. Current activities include raising
additional equity and negotiating with potential key personnel and
facilities. There is no assurance that any benefit will result from such
activities. The Company will not receive any operating revenues until the
commencement of operations but will, nevertheless, continue to incur
expenses until then.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, as
of the date of the statements of financial condition, and revenues and
expenses for the period then ended. Actual results may differ significantly
from those estimates.
b) Start-up costs Costs of start-up activities, including organization
costs, are expensed as incurred following Statement of Position (SOP) 98-5.
c) Net loss per share Basic is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
(2) Loan Receivable - Related Party During the period ended June 30, 1997, the
Company loaned funds to Boston Medical Marketing, LLC (BMM), a company
under common control, to be used for daily operations. The loan bears no
interest, is due on demand and is secured by all assets of BMM. Unpaid
amounts at June 30, 1997 were $20,000. In November 1997, the Company took
possession of BMM's assets in payment of loans totaling $146,555.
(3) Advances - Shareholders During the period ended June 30, 1997, certain
minority shareholders advanced funds to the Company. These advances bear no
interest and were repaid in full during the year ended June 30, 1998.
Unpaid amounts at June 30, 1997 totaled $50,000.
(4) Stockholders' Equity The Company has authorized 5,000,000 shares of no par
value common stock. The Company had 2,760,000 shares issued and outstanding
at June 30, 1997. In June 1997, the Company issued 2,760,000 shares of
founders' stock for cash of $251 and a stock subscription receivable of
$25.
(5) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax and
financial reporting purposes. The Company had a net operating loss for
income tax purposes of approximately $40,119.
As the LLC had failed to timely elect to be taxed as a corporation, it
reverts automatically to the partnership taxation rules. As such, the
entire $40,119 flowed through to the stockholders' personal income tax
returns.
F-7
<PAGE>
Medical Marketing Group, LLC
(A Development Stage Enterprise)
Notes to Financial Statements
(6) Going Concern As shown in the accompanying financial statements, the
Company incurred a net loss of $40,119 for the period from March 13, 1997
(Inception) through June 30, 1997. The ability of the Company to continue
as a going concern is dependent upon commencing operations and obtaining
additional capital and financing. The financial statements do not include
any adjustments that might be necessary if the Company is unable to
continue as a going concern. The Company is currently seeking capital to
allow it to begin its planned operations.
(7) Subsequent Events In November 1997, 100% of the issued and outstanding
stock of the Company was exchanged for 500,000 shares of common stock of
National Boston Medical, Inc. (NBM), a Delaware corporation headquartered
in Taunton, Massachusetts. NBM is now the sole shareholder of the Company.
F-8
<PAGE>
PART III
Item 1. Index to Exhibits
3.(i).1 Articles of Incorporation of Frozen Assets, Inc.,
filed June 21, 1995
<PAGE>
3.(i).2 Certificate of Reinstatement, Frozen Assets, Inc.,
dated June 30, 1997
3.(i).3 Restated Articles of Incorporation of Frozen Assets, Inc.,
filed July 30, 1997.
3.(i).4 Certificate of Amendment of Articles of Incorporation of Frozen
Assets, Inc., changing the Name of Corporation to Growth Indus.,
Inc., filed March 16, 1998.
3.(i).5 Certificate of Amendment of Articles of Incorporation of Growth
Industries, Inc., changing the Name of Corporation to Fragrance
Express, Inc., filed June 4, 1998.
3.(i).6 Certificate of Amendment of Articles of Incorporation of Fragrance
Express, Inc., changing the Name of Corporation to National Boston
Medical, Inc., filed October 15, 1998.
3.(ii).1 Bylaws of Frozen Assets, Inc.
4.1 Form of Private Placement of Offering of 12% common shares and
Warrants at $1.25 per share.
4.2 Form of Private Placement of Offering of 12% common shares and
Warrants at $2.50 per share.
4.3 Certificate of Designation Establishing 12% Convertible Cumulative
Redeemable Stock, Series A.
4.4 Securities Subscription Agreement in connection with the Private
Placement of 12% Series A Senior Subordinated Convertible
Redeemable Promissory Notes of Growth Industries, Inc.
4.5 Conversion of Securities and Share Exchange Agreement
regarding the 12% , 3 year convertible bond convertible at
$1.25 per share.
4.6 Settlement Agreement between National Boston Medical, Inc., and
James McInerney and Auckland Trust Co., Limited as Trustee for
First Pacific Master Superannuation Fund, dated February, 1999.
4.7 Extension of February Settlement Agreement between National Boston
Medical, Inc., and James McInerney and Auckland Trust Co., Ltd as
Trustee for First Pacific Master Superannuation Fund, dated
May 21, 1999.
4.8 Conversion of Securities and Share Exchange Agreement
regarding the 12% , 3 year convertible bond convertible at
$2.50 per share.
4.9 Conversion of Securities and Share Exchange Agreement regarding
the 12% Convertible Redeemable Preferred Stock, Series A.
4.10 Convertible Debenture Term Sheet for November 25, 1998 Convertible
Note in favor of Thomson Kernaghan & Co., Ltd.
4.11 $750,000 Convertible Note dated November 25, 1998 by NBM in favor
of Thomson Kernaghan & Co., Ltd.
<PAGE>
10.1 Acquisition Agreement between Frozen Assets, Inc., and Growth
Industries, Inc., dated 2/14/98.
10.2 Acquisition Agreement between Growth Industries, Inc. and
Fragrance Express, Inc., dated 3/24/98.
10.3 Agreement for the Exchange of Stock between Fragrance Express,
Inc., and shareholders who own shares of National Boston Medical,
Inc., a Delaware corporation, dated October 8, 1998.
10.4 Agreement to Purchase Medical Marketing Group, LLC by National
Boston Medical, Inc. dated November 3, 1997.
10.5 Exclusive Distribution Agreement Between Bontempi Medical Corp.
Canada and Bontempi Medical Corp. USA and National Boston Medical,
Inc., a Delaware corporation.
10.6 Agreement for the Exchange of Stock between National Boston
Medical, Inc. and Flex Marketing Inc., dated November 21, 1998.
10.7 Spin Off Agreement between National Boston Medical and Fragrance
Express, Inc., dated January, 1999.
10.8 Letter of Confirmation of Agreement between National Boston
Medical, Inc. and Ira Weingarten d/b/a Equity Communications re
Financial Public Relations Counsel commencing February 16, 1998
and terminating February 15, 1999.
10.9 General Release of National Boston Medical, Inc., dated November
23, 1998, of all Claims arising out of or from the Agreement with
Ira Weingarten d.b.a. Equity Communications dated May 21, 1998.
10.10 Agreement between National Boston Medical, a Delaware
corporation, and Rothschild Reserve International, Inc., a
Florida corporation, and Mayflower Industries, Inc. dated
May 21, 1998.
10.11 Consulting Agreement with Good Works, Inc., dated October 9, 1998.
10.12 Consulting Agreement with Rothschild Reserve International, Inc.,
dated October 9, 1998.
10.13 Letter of Confirmation of Agreement between National Boston
Medical, Inc. and Ira Weingarten d/b/a Equity Communications re
Financial Public Relations Counsel commencing February 1, 1999
and terminating August 1, 1999.
10.14 General Release of National Boston Medical, Inc., dated April
13, 1999, of all Claims arising out of or from the Agreement with
Ira Weingarten d/b/a Equity Communications dated February 1, 1999.
10.15 Consulting Agreement with GFC Communications Corp. dated February
11, 1999.
10.16 Consulting Agreement with Buying Power Network dated May 5, 1999.
10.17 Operating Agreement for Boston Medical Marketing dated April, 1997
10.18 Exclusivity Agreement with South Atlantic Industries, Inc. dated
November 7, 1997.
<PAGE>
10.19 Contract with Webfoot Marketing, Inc. dated February 25, 1999.
10.20 Stock Exchange Agreement with DermaGuard, Inc. dated June 23, 1998
10.21 Manufacturing, Distribution and Assignment Agreement with
DermaGuard, Inc., dated June 23, 1998.
10.22 First Amendment to Manufacturing, Distribution and
Assignment Agreement with DermaGuard effective June 19,
1998.
10.23 Second Amended & Restated Manufacturing, Distribution and
Assignment Agreement with DermaGuard reconfirmed February
3, 1999.
10.24 Bontempi Medical Corporation/National Boston Medical, Inc. and
Germiphene Corporation Distribution Agreement dated June 29, 1998
10.25 Allergy Guard/Distribution Agreement revised agreement
dated August 5, 1998.
10.26 Agreement with D.V. Back Products , Inc. and Dr. David Vitko,
individually and Flex Marketing dated March 10, 1997.
10.27 Release and Settlement Agreement by and between David V. Vitko,
D.V. Back Products, Inc. and THG Construction Management, Inc.,
Flex Marketing, Inc.,Ernest Zavoral and Remon Hayek dated January
13, 1999.
10.28 Modification of Variable Commercial Revolving or Draw Note, dated
June 1, 1999
10.29 Production Agreement between Flex Marketing and Banyan Productions
dated September 22, 1998.
10.30 Aftermarket - Flex Marketing Inbound Telemarketing
Agreement with Aftermarket Company and Flex Marketing
dated December 23, 1998.
10.31 Media Funding and Service Fee Agreement dated January 18, 1999.
10.32 Letter regarding Media Funding and Servicing Fee Agreement dated
January 18, 1999.
10.33 Accommodation Agreement with Cardservice International for
processing bankcard transactions dated February 15, 1999.
10.34 Contract with ASW Logistics, Inc.
10.35 Blitz Marketing Agreement with Blitz Marketing, Inc. and Flex
Marketing, Inc., a National Boston Medical Company dated November
19, 1998.
10.36 Maximum Coverage Media, Inc. Agreement dated March 1, 1999.
10.37 International Campaign Management Agreement with Frederiksen
Television, Inc. dated May 26, 1999.
10.38 Confidentiality & Manufacturing Agreement with Kongent Company
Limited executed August 11, 1998.
10.39 Price Quotation from Kongent Company Ltd., dated March 23, 1998.
10.40 Price Quotation from Sare Plastics dated December 10, 1998.
<PAGE>
10.41 Executive Employment Agreement-Daniel J. Hoyng dated May 11, 1999.
10.42 Executive Employment Agreement-Ernest Zavoral dated July 23, 1999
10.43 Executive Employment Agreement-Barry McFarland dated August 2,
1999.
10.44 Executive Employment Agreement-Marek Lozowicki dated July 23, 1999
10.45 Commercial Property Lease of Corporate Offices, 43 Taunton
Green, Taunton, MA 02780, entire third floor, dated
January 28, 1998.
10.46 Commercial Property Lease of Corporate Offices, 43 Taunton
Green, Taunton, MA 02780, Second Floor, Suite Four(4), 400
sq. feet, dated January 28, 1998.
10.47 Rental Agreement of Summit Property with addendums signed
April 8, 1999.
10.48 Campaign Management Agreement with M2 Marketing and Management
Services, Inc. dated May 1, 1999.
10.49 Marketing and Distribution Agreement with Tristar Products, Inc.,
dated July 19, 1999.
10.50 Agreement dated June 30, 1999 between the Company and the David
Arden Group.
10.51 Agreement dated June 30, 1999 between the Company and Dragons
Forever, Ltd.
10.52 Agreement dated Jun 30, 1999 between the Company and
Evergreen Consulting Group, Ltd.
10.53 Agreement dated June 30, 1999 between the Company and Dragons
Forever, Ltd.
27.1 Financial Data Schedule.
----------------
(* Filed herewith)
Item 2. Description of Exhibits
The documents required to be filed as Exhibits Number 2 and 6 and in Part
III of Form 1-A filed as part of this Registration Statement on Form 10-SB are
listed in Item 1 of this Part III above. No documents are required to be filed
as Exhibit Numbers 3 , 5 or 7 in Part III of Form 1-A and the reference to such
Exhibit Numbers is therefore omitted. The following
<PAGE>
additional exhibits are filed hereto:
23.1 * Accountants' Consent from Durland & Company, CPA's
-----------
(* Filed herewith)
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
National Boston Medical Inc.
(Registrant)
Date: ___________, 1999 By:/s/ Daniel J. Hoyng
Daniel J. Hoyng, President and CEO
By:/s/ Marek Lozowicki
Marek Lozowicki, Secretary
By:/s/ Barry McFarland
Barry McFarland, Chief Financial Officer
EXHIBIT 3.(i).1
FILED Articles of Incorporation Filing fee: C73097
IN THE OFFICE OF THE (PURSUANT TO NRS 78) Receipt #:
SECRETARY OF STATE STATE OF NEVADA
OF THE
STATE OF NEVADA
10819-95 [State Seal]
JUN 29 1995
STATE OF NEVADA
Secretary of State
IMPORTANT: Read instruction on reverse side before completing this form.
TYPE OR PRINT (BLACK INK ONLY)
1. NAME OF CORPORATION: Frozen Assets, Inc.
2. RESIDENT AGENT: (designated resident agent and his STREET ADDRESS in Nevada
(where process may be served)
Name of Resident Agent: Earl P. Gripentrog, Jr
- --------------------------------------------------------------------------------
Street Address: 9321 Jumpin Juniper Las Vegas NV 89129
-----------------------------------------------------------------------------
Street No. Street Name City Zip
3. SHARES: (number of shares the corporation is authorized to issue)
Number of shares with par value: 100,000 Par value: $.01/share Number of
shared without par value: 0
4. GOVERNING BOARD: shall be styled as (check one): X Directors Trustees The
FIRST BOARD OF DIRECTORS shall consist of 2 member and the names and
addresses are as follows (attach additional pages if necessary):
Earl P. Gripentrog, Jr. 9321 Jumpin Juniper Las Vegas NV 89129
------------------------ ---------------------------------------
Name Address City/State/Zip
Gregory M. Shulman 2008 Cedarcrest Court Las Vegas NV 89134
------------------------- ----------------------------------------
Name Address City/State/Zip
5. PURPOSE (optional - see reverse side): The purpose of the corporation shall
be:
6. OTHER MATTERS: This form includes the minimal statutory requirements to
incorporate under NRS 78. You may attach additional information pursuant to
NRS 78.037 or any other information you deem appropriate. If any of the
additional information is contradictory to this form it cannot be filed and
will be returned to you for correction. Number of pages attached
7. SIGNATURES OF INCORPORATORS: The names and addresses of each of the
incorporators signing the articles: (signatures must be obtained) (Attach
additional pages if
<PAGE>
there are more than two incorporators).
Earl P. Gripentrog, Jr. Gregory M. Shulman
- --------------------------- -------------------------
Name (print) Name (print)
9321 Jumpin Juniper Las Vegas NV 89129 2008 Cedarcrest Court, LV, NV 89134
- ---------------------------------------- -----------------------------------
Address City/State/Zip Address City/State/Zip
/s/Earl P Gripentrog, Jr. /s/Gregory M. Shulman
- ------------------------- -----------------------
Signature Signature
State of NV County of Clark State of NV County of Clark
This instrument was acknowledged before This instrument was acknowledged before
me on me on
June 19 , 1995 June 19 , 1995
------------------ ------------------
Earl P. Gripentrog, Jr. Gregory M. Shulman
- ----------------------- -------------------
as Chairman as President
- ----------------------- -------------------
(Type of authority, e.g. president) (Type of authority, e.g. president)
of Frozen Assets, Inc. of Frozen Assets, Inc.
(Name of party on behalf of whom (Name of party on behalf of whom
instrument was executed) instrument was executed)
/s/ Judith A. Koehn /s/ Judith A. Koehn
- ----------------------- ----------------------
Notary Public Notary Public
(Affix seal)
8. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
I, Earl P. Gripentrog, Jr. hereby accept appointment as Resident Agent for the
above named corporation.
/s/ Earl P. Gripentrog, Jr. 6/19/95
- --------------------------------- ---------
Signature of Resident Agent Date
EXHIBIT 3.(i).2
C 10819-1995 STATE OF NEVADA
SECRETARY OF STATE
--------------------
CERTIFICATE OF REINSTATEMENT
I, DEAN HELLER, the duly elected Secretary of State of the State of Nevada,
do hereby certify that FROZEN ASSETS INC. a corporation formed under the laws of
the State of NEVADA having paid all filing fees, licenses, penalties and costs,
in accordance with the provisions of Title 7 of the Nevada Revised Statutes, as
amended, for the years and in the amounts as follows:
1996-97 List of Officers and Late Fee..............$100.00
1997-98 List of Officers............................ 85.00
Reinstatement Fee................................... 50.00
and otherwise complied with the provisions of said section, the said corporation
has been reinstated, and that by virtue of such reinstatement it is authorized
to transact its business in the same manner as if the aforesaid filing fees,
licenses, penalties and costs had been paid when due.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal of
State, at my office in Carson City, Nevada, this 30th day of June , A.D., 1997
/s/ Dan Heller
-------------------
Secretary of State
EXHIBIT 3.(i).3
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 30, 1997
No. 10819-95
Restated Articles of Incorporation
Of
Frozen Assets, Inc.
On the 26th day of June, 1997, pursuant to the Nevada Revised Statues 78.320 and
other applicable Nevada Revised Statutes, the annual meeting of shareholders
representing a majority of the holders was held. Whereas, there being shares
validity issued and outstanding entitled to vote, with a total voting power of
100,000 shares, shareholders holding more than 50% of the issued and outstanding
stock of the corporation voted either by proxy or in person to restate the
articles of incorporation of Frozen Assets, Inc.
Therefore, the corporation does by these presents restate its Articles of
Incorporation as follows:
First: Name
The name of the corporation is Frozen Assets, Inc. (The
"Corporation).
Second: Registered Office and Agent
The address of the registered office of the corporation in the State of Nevada
is 9321 Jumpin Juniper Ave., in the city of Las Vegas, County of Clark. The name
and address of the corporation's registered agent in the State of Nevada is Earl
P. Gripentrog, Jr., at said address, until such time as another agent is duly
authorized and appointed by the corporation.
Third: Purpose and Business
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
Nevada Revised Statutes of the State of Nevada, including but not limited to the
following:
(A) The Corporation may at any time exercise such rights, privileges, and
powers, when not inconsistent with the purposes and object for which
this corporation is organized.
(B) The Corporation shall have power to have succession by its corporate
name in perpetuity, or until dissolved and its affairs wound up
according to law;
<PAGE>
(C) The Corporation shall have power to sue and be sued in any court of
law or equity;
(D) The Corporation shall have power to make contracts;
(E) The Corporation shall have power to hold, purchase and convey real and
personal estate and to mortgage or lease any such real and personal
estate with its franchises. The power to hold real and personal estate
shall include the power to take the same by devise or bequest in the
State of Nevada, or in any other state, territory or country;
(F) The corporation shall have power to appoint such officers and agents
as the affairs of the Corporation shall require and allow them
suitable compensation;
(G) The Corporation shall have power to make bylaws not inconsistent with
the constitution or laws of the United States, or of the State of
Nevada, for the management, regulation and government of its affairs
and property, the transfer of its stock, the transaction of its
business and the calling and holding of meetings of stockholders.
(H) The Corporation shall have the power to wind up and dissolve itself,
or be wound up or dissolved;
(I) The Corporation shall have the power to adopt and use a common seal or
stamp, or to not use such seal or stamp and if one is used, to alter
the same. The use of a seal or stamp by the corporation on any
corporate documents is not necessary. The Corporation may use a seal
or stamp, if it desires, but such use or non-use shall not in any way
affect the legality of the document;
(J) The Corporation Shall have the power to borrow money and contract
debts when necessary for the transaction of its business, or for the
exercise of its corporate rights, privileges or franchises, or for any
other lawful purpose of its incorporation; to issue bonds, promissory
notes, bills of exchange, debentures and other obligations and
evidence of indebtedness, payable at a specified time or times, or
payable upon the happening of a specified event or event, whether
secured by mortgage, pledge or otherwise, or unsecured, for money
borrowed, or in payment for property purchase, or acquired, or for
another lawful object;
(K) The Corporation shall have the power to guarantee, purchase, hold,
sell, assign, transfer, mortgage, pledge or otherwise dispose of the
shares of the capital stock of, or any bonds, securities or evidence
in indebtedness created by any other corporation or corporation in the
<PAGE>
State of Nevada, or any other state or government and, while the owner
of such stock, bonds, securities or evidence of indebtedness, to
exercise all the rights, powers and privileges of ownership, including
the right to vote, if any;
(L) The Corporation shall have the power to purchase, hold, sell and
transfer shares of its own capital stock and use therefor its capital,
capital surplus, surplus or other property or fund;
(M) The Corporation shall have to conduct business, have one or more
offices and hold, purchase, mortgage and convey real and personal
property in the State of Nevada and in any of the several states,
territories, possessions and dependencies of the United States, the
District of Columbia and in any foreign country;
(N) The Corporation shall have the power to do all and everything
necessary and proper for the accomplishment of the objects enumerated
in its articles of incorporation, or any amendments thereof, or
necessary or incidental to the protection and benefit of the
Corporation and, in general, to carry on any lawful business necessary
or incidental to the attainment of the purposes of the Corporation,
whether or not such business is similar in nature to the purposes set
forth in the articles of incorporation of the Corporation, or any
amendment thereof;
(O) The Corporation shall have the power to make donations for the public
welfare or for charitable, scientific or educational purposes;
(P) The Corporation shall have the power to enter partnerships, general or
limited, or joint ventures, in connection with any lawful activities.
Forth: Capital Stock
1. Classes and Number of Shares. The total number of shares of all classes of
stock which the corporation shall have authority to issue is Sixty Million
(60,000,000), consisting of Fifty Million (50,000,000) shares of Common
Stock, par value of $0.01 per share (The "Common Stock:) and Ten Million
(10,000,000) shares of Preferred Stock, which have a par value of $0.01 per
share (the "Preferred Stock").
2. Powers and Rights of Common Stock
(A) Preemptive Right. No shareholders of the Corporation holding common
stock shall have any preemptive or other right to subscribe for any
additional un-issued or treasury shares of stock or for other
securities of any class, or for rights, warrants or options to
purchase stock, or for scrip, or for securities of any kind
convertible into stock or carrying stock purchas warrants or
privileges unless so authorized by the Corporation;
<PAGE>
(B) Voting Rights and Powers. With respect to all matters upon which
stockholders are entitled to vote or to which stockholders are
entitled to give consent, the holders of the outstanding shares of the
Common Stock shall be entitled to case thereon one (1) vote in person
or by proxy for each shares of the Common Stock standing in his/her
name:
(C) Dividends and Distributions
(I) Cash Dividends. Subject to the rights of holders of Preferred
Stock, holders of Common Stock shall be entitled to receive such
cash dividends as may be declared thereon by the Board of
Directors from time to time out of assets of funds of the
Corporation legally available therefor.
(II) Other Dividends and Distributions. The Board of Directors may
issue shares of the Common Stock in the form of a distribution or
distributions pursuant to a stock dividend or split-up of the
shares of the Common Stock;
(III)Other Rights. Except as otherwise required by the Nevada Revised
Statues and as may otherwise be provided in these Articles of
Incorporation, each share of the Common Stock shall have
identical powers, preferences and rights, including rights in
liquidation;
3. Preferred Stock. The powers, preferences, rights, qualifications,
limitations and restrictions pertaining to the Preferred Stock, or any
series thereof, shall be such as may be fixed, from time to time, by the
board of Directors in its sole discretion, authority to do so being hereby
expressly vested in such board..
4. Issuance of the Common Stock and the Preferred Stock. The Board of
Directors of the ----------------------------------------------------
Corporation may from time to time authorize by revolution the issuance of
any or all shares of the Common Stock and the Preferred Stock herein
authorized in accordance with the terms and conditions set forth in these
Articles of Incorporation for such purposes, in such amounts, to such
persons, corporations, or entities, for such consideration and in the case
of the Preferred Stock, in one or more series, all as the Board of
Directors in its discretion may determine and without any vote or other
action by the stockholders, except as otherwise required by law. The Board
of Directors, from time to time, also may authorize, by resolution,
options, warrants and other rights convertible into Common or Preferred
stock (collectively "securities.") The securities must be issued for such
consideration, including cash, property, or services, as the Board of
Directors may deem appropriate, subject to the requirement that the value
of such consideration be no less than the par value if the shares issued.
Any shares issued for which the consideration so fixed has been paid or
delivered shall be fully paid stock and
<PAGE>
the holder of such shares shall not be liable for any further call or
assessment or any other payment thereon, provided that the actual value of
such consideration is not less that the par value of the shares so issued.
The Board of Directors may issue shares of the Common Stock in the form of
a distribution or distributions pursuant to a stock divided or split-up of
the shares of the Common Stock only to the then holders of the outstanding
shares of the Common Stock.
5. Cumulative Voting. Except as otherwise required by applicable law, there
shall be no cumulative voting on any matter brought to a vote of
stockholders of the Corporation.
Fifth: Adoption of Bylaws.
In the furtherance and not in limitation of the powers conferred by statute
and subject to Article Sixth hereof, the Board of Directors is expressly
authorized to adopt, repeal, rescind, alter or amend in any respect the Bylaws
of the Corporation (the "Bylaws").
Sixth: Shareholder Amendment of Bylaws.
Notwithstanding Article Fifth hereof, the bylaws may also be adopted,
repealed, rescinded, altered or amended in any respect by the stockholders of
the Corporation, but only the affirmative vote of the holders of not less than
seventy-five percent (75%) of the voting power of all outstanding shares of
voting stock, regardless of class and voting together as a single voting class.
Seventh: Board of Directors
The business and affairs of the Corporation shall be managed by and under
the direction of the Board of Directors. Except as may otherwise be provided
pursuant to Section 4 or Article Forth hereof in connection with righted to
elect additional directors under specified circumstances, which may be granted
to the holders of any class or series of Preferred Stock, the exact number of
directors of the Corporation shall be determined form time to time by bylaw or
amendment thereto, providing that the number of directors shall not be reduced
to less that two (2). The directors holding office at the time of the filing of
these Articles of Incorporation shall continue as directors until the next
annual meeting and/or until their successors are duly chosen.
Eighth: Term of Board of Directors.
Except as otherwise required by applicable law, each director shall serve
for a term ending on the date of the third Annual Meeting of Stockholders of the
Corporation (the "Annual Meeting") following the Annual Meeting at which such
director was elected. All directors, shall have equal standing.
Not withstanding the foregoing provisions of this Article Eighth each
director shall serve until his successor is elected and qualified or until his
death resignation or removal; no decrease in the authorized number of directors
shall shorten the term of any incumbent director; and additional directors,
<PAGE>
elected pursuant to Section 4 or Article Forth hereof in connection with rights
to elect such additional directors under specified circumstances, which may be
granted to the holders of any class or sense of Preferred Stock, shall not be
included in any class, but shall serve for such term or terms and pursuant to
such other provisions as are specified in the resolution of the Board of
Directors establishing such class or senes.
Ninth: Vacancies on Board of Directors
Except as may otherwise be provided pursuant to Section 4 of Article Forth
hereof in connection with rights to elect additional directors under specified
circumstances, which may be granted to the holders of any class or series of
Preferred Stock, newly created directorships resulting rom any increase in the
number of directors, or any vacancies on the board of Directors resulting from
death, resignation, removal, or other causes, shall be filled solely by the
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified or until
such director's death, resignation or removal, whichever first occurs.
Tenth: Removal of Directors
Except as may otherwise be provided pursuant to Section 4 or Article Fourth
hereof in connection with rights to elect additional directors under specified
circumstances, which may be granted to the holders of any class or series of
Preferred Stock, any director may be removed from office only for cause and only
for the affirmative vote of the holders of not less than seventy-five percent
(75%) of the voting power of all outstanding shares of voting stock entitled to
vote in connection with the election of such director, provided, however, that
where such removal is approved by a majority of the Directors, the affirmative
vote of a majority of the voting power of all outstanding shares of voting stock
entitled to vote in connection with the election of such director shall be
required for approval of such removal. Failure of an incumbent director to be
nominated to serve an additional term of office shall not be deemed a removal
from office requiring any stockholder vote.
Eleventh: Stockholder Action
Any action required or permitted to be taken by the stockholders of the
Corporation must be effective at a duly called Annual Meeting or at a special
meeting of stockholders of the Corporation, unless such action may be authorized
or taken by the written consent of the holders of outstanding shares of Voting
Stock having not less than the minimum voting power that would be necessary to
authorize or take such action at a meeting of stockholders at which all shares
entitled to vote thereon were present and voted, provided all other requirements
of applicable law these Articles have been satisfied.
Twelfth: Special Stockholder Meeting
Special meetings of the stockholders of the Corporation for any purpose or
purposes may be called at any time by a majority of the Board of Directors or by
<PAGE>
the Chairman of the Board or the President. Special meeting may not be called by
any other person or persons. Each special meeting shall be held at such date and
time as is requested by the person or persons calling the meeting, within the
limits fixed by law.
Thirteenth: Location of Stockholder Meeting
Meetings of stockholders of the Corporation may be held within or without
the State of Nevada, as the Bylaws may provide. The books of the Corporation may
be kelp (subject to any provision of the Nevada Revised Statutes) outside the
State of Nevada at such place or places as may be designated from time to time
by the Board of Directors or in the Bylaws.
Fourteenth: Private Property of Stockholders.
The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever and the stockholders shall not
be personally liable for the payment of the corporation's debts.
Fifteenth: Stockholder Appraisal Rights in Business Combinations
to the maximum extend permissible under the Nevada Revised Statutes of the
State of Nevada, the stockholders of the Corporation shall be entitled to the
statutory appraisal rights provided therein, with respect to any business
Combination involving the Corporation and any stockholder (or in affiliate or
associate of any stockholder), which required the affirmative vote of the
Corporation's stockholders.
Sixteenth: Other Amendments
The Corporation reserves the right to adopt, repeal, rescind, alter or
amend in any respect any provision rights conferred on stockholders herein
granted subject to this reservation.
Seventeenth: Term of Existence.
The Corporation is to have perpetual existence.
Eighteenth: Liability of Directors.
No director of this Corporation shall have personal liability to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director or officers involving any act or omission of any
such director or officer. The foregoing provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty or loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or, which involve intentional misconduct or a knowing violation of law,
(iii) under applicable Sections of the Nevada Revised Statues, (iv) the payment
of dividends in violation of Section 78.300 on the Nevada Revised Statutes or,
(v) for any transaction form which the director derived an improper personal
<PAGE>
benefit. Any repeal or modification of this Article by the stockholders of the
Corporation shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director or officer of the Corporation
for acts or omissions prior to such repeal or modification.
I, Douglas Ansell, President and Director of Frozen Assets, Inc., do hereby
swear and affirm that the Restated Articles of Incorporation as contained herein
are true and correct as adopted by a majority of shareholders on June 26th,
1997. Dated this 25th day of July, 1997.
By: /s/Douglas Ansel
-----------------
Douglas Ansell
President/Director
Verification
State of Nevada )
) ss.
County of Clark )
On this 25th day of July 1997, before me, the undersigned, a Notary Public
in and for said State, personally appeared Douglas Ansell personally known to me
(or provided to me on the basis of satisfactory evidence) to be the person who
subscribed his name to the Articles of Incorporation and acknowledge to me that
he executed the same freely and voluntarily and for the use and purposes therein
mentioned.
/S/ Bridget E. Richards
-------------------------
A Notary Public in and for said
County and State
EXHIBIT 3.(i).4
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR 16 1998
No. 10819-95
CERTIFICATE OF AMENDMENT OF ARTICLES OF
INCORPORATION
of
FROZEN ASSETS, INC.
Douglas Ansell certifies that:
1. The original articles were filed with the Office of the Secretary of State
on June 29, 1995.
2. As of the date of this certificate, 5,000,000 shares of stock of the
corporation have been issued.
3. Pursuant to a shareholders meeting at which in excess of 51% voted in favor
of the following amendment, the company hereby adopts the following
amendments to the amendment of the Articles of Incorporation of this
Corporation:
First: Name of Corporation.
The name of the corporation is Growth Industries, Inc., (The
"Corporation").
/s/ Douglas Ansell /s/ Bobby Combs
---------------------- -----------------
Douglas Ansell, Bobby Combs,
Secretary/Director Vice President/Director
State of Nevada )
) ss.
County of Clark )
On March 9th, 1998 personally appeared before me, a Notary public, Douglas
Ansell and Bobby Combs, who acknowledge that they executed the above instrument.
/s/ Bridget E. Richards
---------------------------
A Notary Public in and for said County and State
EXHIBIT 3.(i).5
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUN 04 1998
No. 10819-95
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
GROWTH INDUSTRIES, INC.
(the Corporation)
We the undersigned, Douglas Ansell (President/Director) and Bobby Combs (Vice
President/Director) of the Corporation do hereby certify:
That the board of Directors of the Corporation at a meeting duly convened and
held on the 1st day of June, 1998, adopted a resolution to amend the original
articles as follows:
Article I is hereby amended to read as follows:
First: The name of the corporation is "Fragrance Express, Inc."
The number of shares of the Corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation are 5,000,000; that the said change
and amendment has been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon."
/s/ Douglas Ansell /s/ Bobby Combs
- -------------------- ----------------
Douglas Ansell, President Bobby Combs, Vice President
State of Nevada )
) ss.
County of Clark )
The undersigned Notary Public certified, deposes and states that
Bobby Comb and Douglas Ansell, personally appeared before me and executed the
foregoing on behalf of the Corporation as its President and Secretary
respectively, this 4h day of June, 1998.
/s/ Bridget E. Richards
-------------------------
Notary Public in and for said County and State
EXHIBIT 3.(i).6
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Filed By: (After Issuance of Stock)
FRAGRANCE EXPRESS, INC.
Name of Corporation
We the undersigned, Dan Hoyng, President and Randy Perez, the Secretary of
FRAGRANCE EXPRESS, INC.
do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held on October 12th, adopted a resolution to amend the original articles as
follows:
Article 1. is hereby amended to read as follows:
The name of this Corporation is: National Boston Medical, Inc.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 3,429,046, that the said
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/Dan Hoyng
---------------
President or Vice President
/s/ Randall Perez
-------------------
Secretary or Assistant Secretary
State of Florida )
) SS.
County of Palm Beach )
On October 12, 1998, personally appeared before me, a Notary Public, Dan
Hoyng and Randall Perez, who acknowledged that they executed the above
instrument.
/s/Bradley P. Rothenberg
--------------------------
Signature of Notary
(Notary Stamp or Seal)
EXHIBIT 3.(ii).1
Bylaws
of
FROZEN ASSETS, INC.
(The "Corporation")
Article I
Office
The Board of Directors shall designate and the Corporation shall maintain a
principal office. The location of the principal office may be changed by the
Board of Directors. The Corporation also may have offices in such other places
as the board may from time to time designate. The location of the initial
principal office of the Corporation shall be designated by resolution.
Article II
Shareholders Meetings
1. Annual Meetings.
The annual meeting of the shareholders of this corporation shall be held at
such place within or without the State of Nevada as shall be set forth in
compliance with these Bylaws. The meeting shall be held on the last Thursday of
June of each year. If such day is a legal holiday, the meeting shall be on the
next business day. The meeting shall be for the election of Directors and for
the transaction of such other business as may properly come before it.
2. Special Meetings
Special meetings of shareholders, other than those regulated by statute,
may be called by the President upon written request of the holders of 50% or
more of the outstanding shares entitled to vote at such special meeting. Written
notice of such meeting stating the place, the date and hour of the meeting, the
purpose or purposes for which it is called, and the name of the person by whom
or at whose direction the meeting is called shall be given.
3. Notice of Shareholders Meeting
The Secretary shall give written notice stating the place, day, and hour of
the meeting, and in the case of a special meeting, the purpose or purposes for
which the meeting is called, which shall be delivered not less than ten ore more
than fifty days before the date of the meeting, either personally or by mail to
each shareholder or record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail, addressed to the shareholder at his address as it
appears on the books of the Corporation, with postage thereon prepaid.
Attendance at the meeting shall constitute a wavier of notice thereof.
<PAGE>
4. Place of Meeting
The Board of Directors may designate any place, either within or without
the State of Nevada, as the place of meeting for any annual meeting or for any
special meeting called by the Board of Directors. A waiver of notice signed by
all shareholder entitled to vote at a meeting may designate any place, either
within or without the State of Nevada, as the place for the holding of such
meeting. If no designation is made, or if a special meeting is otherwise called,
the place of meeting shall be the principal office of the Corporation.
5. Record Date
The Board of Directors may fix a date not less than ten nor more than fifty
days prior to any meeting as the record date for the purpose of determining
shareholders entitled to notice of and to vote at such meetings of the
shareholders. The transfer books may be closed by the Board of Directors for a
stated period not to exceed fifty days for the purpose of determining
shareholders entitled to receive payment of and dividend, or in order to make a
determination of shareholders for any other purposes.
6. Quorum.
A majority of the outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At a meeting resumed after any such
adjournment at which a quorum shall be present or represented, any business may
be transacted, which might have been transacted at the meeting as originally
noticed.
7. Voting
A holder of an outstanding shares, entitled to vote at a meeting, may vote
at such meeting in person or by proxy. Except as may otherwise be provided in
the currently filed Articles of Incorporation, every shareholder shall be
entitled to one vote for each share standing in his name on the record of
shareholders. Except as herein or in the currently filed Articles of
Incorporation otherwise provided, all corporate action shall be determined by a
majority of the votes cast at a meeting of shareholders by the holders of shares
entitled to vote thereon.
8. Proxies
At all meeting of shareholders, a shareholder may vote in person or by
proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
six months from the date of it's execution.
<PAGE>
9. Informal Action by Shareholders
Any action required to be taken at a meeting of the shareholders, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by a majority of the shareholders entitled to vote with
respect to the subject matter thereof.
Article III
Board of Directors
1. General Powers
The business and affairs of the Corporation shall be managed by it's Board
of Directors. The Board of Directors may adopt such rules and regulations for
the conduct of their meetings and the management of the Corporation as they
appropriate under the circumstances. The Board shall have authority to authorize
changes in the Corporation's capital structure.
2. Number, Tenure and Qualification
The number of Directors of the Corporation shall be a number between one
and five, as the Directors may by resolution determine form time to time. Each
of the Directors shall hold office until the next annual meeting of shareholders
and until his successor shall have been elected and qualified.
3. Regular Meetings
A regular meeting of the Board of Directors shall be held without other
notice than by this Bylaw, immediately after and, at the same place as the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than this resolution.
4. Special Meetings
Special meetings of the Board of Directors may be called by order of the
Chairman of the board or the President. The Secretary shall give notice of the
time, place and purpose or purposes of each special meeting by mailing the same
at least two days before the meeting or by telephone, telegraphing or
telecopying the same at least one day before the meeting to each Director.
Meeting of the Board of Directors may be held by telephone conference call.
5. Quorum
A majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business, but less than a quorum may adjourn any
meeting from time to time until a quorum shall be present, whereupon the meeting
may be held, as adjourned, without further notice. At any meeting at which every
Director shall be present, even though without any formal notice any business
may be transacted.
<PAGE>
6. Manner of Acting
At all meetings of the Board of Directors, each Director shall have one
vote. The action of a majority of Directors present at a meeting shall be the
act of the full Board of Directors, provided that a quorum is present.
7. Vacancies
A vacancy in the Board of Directors shall be deemed to exist in the case of
death, resignation, or removal or any Director, or if the authorized number of
Directors is increased, or if the shareholders fail, at any meeting of the
shareholders, at which any Director is to be elected, to elect the full
authorized number of Directors to be elected at that meeting.
8. Removals
Directors may be removed, at any time, by a vote of the shareholders
holding a majority of the shares outstanding and entitled to vote. Such vacancy
shall be filled by the Directors entitled to vote. Such vacancy shall be filled
by the Directors then in office, though less than a quorum, to hold office until
the next annual meeting or until his successor is duly elected and qualified,
except that any directorship to be filled by election by the shareholders at the
meting at which the Director is removed. No reduction of the authorized number
of Directors shall have the effect of removing any Director prior to the
expiration of his term of office.
9. Resignation
A director may resign at any time by delivering written notification
thereof to the President or Secretary of the Corporation. A resignation shall
become effective upon it's acceptance by the Board of Directors' provided,
however, that if the Board of Directors has not acted thereon within ten days
from the date of it's delivery, the resignation shall be deemed accepted.
10. Presumption of Assent
A Director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action(s) taken unless his dissent shall be placed in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a Director who voted in favor of such
action.
11. Compensation
By resolution of the Board of Directors, the Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors 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.
<PAGE>
12. Emergency Power
When, due to a national disaster or death, a majority of the Directors are
incapacitated or otherwise unable to attend the meetings and function as
Directors, the remaining members of the Board of Directors shall have all the
powers necessary to function as a complete Board, and for the purpose of doing
business and filling vacancies shall constitute a quorum, until such time as all
Directors can attend or vacancies can be filled pursuant to these Bylaws.
13. Chairman
The Board of Directors may elect from it's own number a Chairman of the
Board, who shall preside at all meetings of the Board of Directors, and shall
perform such other duties as may be prescribed from time to time by the Board of
Directors. The Chairman may by appointment fill any vacancies on the Board of
Directors.
Article IV
Officers
1. Number
the officers of the Corporation shall be a President, one or more Vice
President, and a Secretary Treasurer, each of whom shall be elected by a
majority of the Board of Directors. Such other Officers and assistant Officers
as may be deemed necessary may be elected or appointed by the Board of
Directors. In it's discretion, the Board of Directors may leave unfilled for any
such period as it may determine any office except those of President and
Secretary. Any two or more offices may be held by the same person. Officers may
or may not be Directors or shareholders of the Corporation.
2. Election and Term of Office
The Officers of the Corporation to be elected by the Board of Directors
shall be elected annually by the board of Directors at the fi4rst meeting of the
Board of Directors held after each annual meeting of the shareholders. If the
election of Officers shall not be held at such meeting, such election shall be
held as soon thereafter as convenient. Each Officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
3. Resignation
Any Officer may resign at any time by delivering a written resignation
either to the President or to the Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
<PAGE>
4. Removal
Any Officer or agent may be removed by the Board of Directors whenever in
it's judgment the best interest Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an Officer or agent shall not of itself
create contract rights. Any such removal shall require a majority vote of the
Board of Directors, exclusive of the Officer in question if he is also a
Director.
5. Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, or is a new office shall be created, may be
filled by the Board of Directors for the un-expired portion of the term.
6. President
The president shall be the chief executive and administrative Officer of
the Corporation. He shall preside at all meetings of the stockholders and, in
the absence of the Chairman of the Board, at meetings of the Board of Directors.
He shall exercise such duties as customarily pertain to the office of President
and shall have general and active supervision over the property, business, and
affairs of the Corporation and over it's several Officers, agents, or employees
other than those appointed by the Board of Directors. He may sign, execute and
deliver in the name of the Corporation powers of attorney, contracts, bonds and
other obligations, and shall perform such other duties as may be prescribed from
time to time by the Board of Directors or by the Bylaws.
7. Vice President
The Vice President shall have such powers and perform such duties as may be
assigned to him by the Board of Directors or the President. In the absence or
disability of the President, the Vice President designated by the Board or the
President shall perform the duties and exercise the powers of the President. A
Vice President may sign and execute contracts any other obligations pertaining
to the regular course of his duties.
8. Secretary
The Secretary shall keep the minutes of all meetings of the stockholders
and of the Board of Directors and, to the extent ordered by the Board of
Directors or the President, the minutes of meeting of all committees. He shall
cause notice to be given of meetings of stockholders, of the Board of Directors,
and of any committee appointed by the Board. He shall have custody of the
corporate seal and general charge of the records, documents and papers of the
Corporation not pertaining to the performance of the duties vested in other
Officers, which shall at all reasonable times be open to the examination of any
Directors. He may sign or execute contracts with the President or a Vice
President thereunto authorized in the name of the Corporation and affix the seal
of the Corporation thereto. He shall perform such other duties as may be
prescribed from time to time by the Board of Directors or by the Bylaws.
<PAGE>
9. Treasurer
The Treasurer shall have general custody of the collection and
disburdenment of funds of the Corporation. He shall endorse on behalf of the
Corporation for collection check, notes and other obligations, and shall deposit
the same to the credit of the Corporation in such bank or banks or depositories
as the Board of Directors may designate. He may sign, with the President or such
other persons as may be designated for the purpose of the Board of Directors,
all bills of exchange or promissory notes of the Corporation. He shall enter or
cause to be entered regularly in the books of the Corporation full and accurate
account of all monies received and paid by him on account of the Corporation;
shall at all reasonable times exhibit his books and accounts to any Director of
the Corporation upon application at the office of the Corporation during
business hours; and, whenever required by the Board of Directors or the
President, shall render a statement of his accounts. He shall perform such other
duties as may be prescribed from time to time by the board of Directors or by
the Bylaws.
10. Other Officers
Other Officers shall perform such duties and shall have such powers as may
be assigned to them by the Board of Directors.
11. Salaries
Salaries or other compensation of the Officers of the Corporation shall be
fixed from time to time by the Board of Directors, except that the Board of
Directors may delegate to any person or group of persons the power to fix the
salaries or other compensation of any subordinate Officers or agents. No Officer
shall be prevented from receiving any such salary or compensation by reason of
the fact the he is also a Director of the Corporation.
12. Surety Bonds
In case the Board of Directors shall so require, any Officer or agent of
the Corporation shall execute to the Corporation a bond in such sums and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, monies or
securities of the Corporation, which may come into his hands.
Article V
Contracts, Loans, Checks and Deposits
1. Contracts
The Board of Directors may authorize any Officer or Officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the Corporation and such authority may be general or
confined to specific instances.
<PAGE>
2. Loans
No loan or advance shall be contracted on behalf of the Corporation, no
negotiable paper or other evidence of it's obligation under any loan or advance
shall be issued in it's name, and no property of the Corporation shall be
mortgaged, pledged, hypothecated or transferred as security for the payment of
any loan, advance, indebtedness or liability of the Corporation unless and
except as authorized by the Board of Directors. Any such authorization may be
general or confined to specific instances.
3. Deposits
All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies or
other depositories as the Board of Directors may select, or as may be selected
by an Officer or agent of the Corporation authorized to do so by the Board of
Directors.
4. Checks and Drafts
All notes, drafts, acceptances, checks, endorsements and evidence of
indebtedness of the Corporation shall be signed by such Officer or Officers or
such agent or agents of the Corporation and in such manner as the Board of
Directors from time to time may determine. Endorsements for deposits to the
credit of the Corporation in any of it's duly authorized depositories shall be
made in such manner as the Board of Directors may from time to time determine.
5. Bonds and Debentures
Every bond or debenture issued by the Corporation shall be in the form of
an appropriate legal writing, which shall be signed by the President or vice
President and by the treasurer or by the Secretary, and sealed with the seal of
the Corporation. The seal may be facsimile, engraved or printed. Where such bond
or debenture is authenticated with the manual signature of an authorized Officer
of the Corporation or other trustee designated by the indenture of trust or
other agreement under which such security is issued, the signature of any of the
Corporation's Officers named thereon may be facsimile. In case any Officer who
signed, or whose facsimile signature has been used on any such bond or
debenture, shall cease to be an Officer of the Corporation for any reason before
the same has been delivered by the Corporation, such bond or debenture may
nevertheless by adopted by the Corporation and issued and delivered as though
the person who signed it or whose facsimile signature has been used thereon had
not ceased to be such Officer.
Article VI
Capital Stock
1. Certificate of Share
The shares of the Corporation shall be represented by certificates prepared
by the Board of Directors and signed by the President. The signatures of such
Officers upon a certificate may be facsimiles if the certificate is
<PAGE>
countersigned by a transfer agent or registered by a registrar other than the
Corporation itself or one of it's employees. All certificates for shares shall
be consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for transfer shall
be canceled except that in case of a lost, destroyed or mutilated certificate, a
new one may be issued therefor upon such terms and indemnity to the Corporation
as the Board of Directors may prescribe.
2. Transfer of Shares
Transfer of shares of the Corporation shall be made only on the stock
transfer books of the Corporation by the holder of record thereof or by his
legal representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed by the Corporation to be
the owner thereof for all purposes.
3. Transfer Agent and Registrar
The Board of Directors of the Corporation shall have the power to appoint
one or more transfer agents and registrars for the transfer and registration of
certificates of stock on any class, and may require that stock certificates
shall be countersigned and registered by one or more of such transfer agents and
registrars.
4. Lost or Destroyed Certificates
The Corporation may issue a new certificate to replace any certificate
theretofore issued by it alleged to have been lost or destroyed. The Board of
Directors may require the owner of such a certificate or his legal
representative to give the Corporation a bond in such sum and with such sureties
as the Board of Directors may direct to indemnify the Corporation as transfer
agents and registrars, if any, against claims that may be made on account of the
issuance of such new certificates. A new certificate may be issued without
requiring any bond.
5. Registered Shareholders
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder thereof, in fact, and shall not be bound
to recognize any equitable or other claim to or on behalf of this Corporation to
any and all of the rights and powers incident to the ownership of such stock at
any such meeting, and shall have power and authority to execute and deliver
proxies and consents on behalf of this Corporation in connection with the
exercise by this Corporation of the rights and powers incident to the ownership
of such stock. The Board of Directors, from time to time, may confer like powers
upon any other person or persons.
<PAGE>
Article VII
Indemnification
No Officer or Director shall be personally liable for any obligations of
the Corporation or for any duties or obligations arising out of any acts or
conduct of said Officer or Director performed for or on behalf of the
Corporation. The Corporation shall and does hereby indemnify and hold harmless
each person and his heirs and administrators who shall serve at any time
hereafter as Director or Officer of the Corporation from and against any and all
claims, judgments and liabilities to which such persons shall become subject by
reason of his having heretofore or hereafter been a Director or Officer of the
Corporation, or by reason of any action alleged to have heretofore or hereafter
taken or omitted to have been taken by him as such Director or Officer, and
shall reimburse each such person for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability, including power
to defend such persons from all suits or claims as provided for under the
provisions of the Nevada Revised Statutes; provided, however, that no such
persons shall be indemnified against, or be reimbursed for, any expense incurred
in connection with any claim or liability arising out of his own negligence or
willful misconduct. The rights accruing to any person under the foregoing
provisions of this section shall not exclude any other right to which he may
lawfully be entitled, nor shall anything herein contained restrict the right to
the Corporation to indemnify or reimburse such person in any proper case, even
though not specifically herein provided for. The Corporation, it's Directors,
Officers, employees and agents shall be fully protected in taking any action or
making any payment, or in refusing so to do in reliance upon the advice of
counsel.
Article VIII
Notice
Whenever any notice is required to be given to any shareholder or Director
of the Corporation under the provisions of the Articles of Incorporation, or
under the provisions of the Nevada Statutes, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
Attendance at any meeting shall constitute a waiver of notice of such meetings,
except where attendance is for the express purpose of objecting to the holding
of that meeting.
Article IX
Amendments
These Bylaws may be altered, amended, repealed, or new Bylaws adopted by a
majority of the entire Board of Directors at any regular or special meeting. Any
Bylaw adopted by the Board may be repealed or changed by the action of
shareholders.
Article X
Fiscal Year
The fiscal year of the Corporation shall be fixed and may be varied by
resolution of the Board of Directors.
<PAGE>
Article XI
Dividends
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the surplus of the Corporation.
Article XII
Corporate Seal
The seal of the Corporation shall be in the form of a circle and shall bear
the name of the Corporation and the year of incorporation per sample affixed
hereto.
Thursday, July 6th, 1995 Frozen Assets, Inc.
By: /s/ Earl P. Gripentrog, Jr.
---------------------------------
Earl P. Gripentrog, Jr., Secretary
EXHIBIT 4.1
NATIONAL BOSTON MEDICAL, INC.
(the "Company")
$2,500,000.00
$1.25 each Common Stock
This Confidential Private Placement Term Sheet ("Term Sheet") relates to the
private placement of up to 1,000,0001 shares at $1.25 per share Common Stock
The Common Shares offered hereby are being offered by the Company only to
persons who meet the definition of "Accredited Investor" set forth in Rule
501(a) of Regulation D promulgated under the Securities Act of 1933, as amended
(the "Act). The company reserves the right to sell as many Common Shares as
required to fund the growth of the Company. For more information concerning the
offering procedures see "TERMS OF THE OFFERING."
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AS AMENDED OR UNDER APPLICABLE STATE SECURITIES LAWS, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS TERM SHEET OR ENDORSED THE MERITS OF THIS
OFFERING. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS."
------------------------
Price to Investor Selling Commission Proceeds to Company(1)
Per Common Share $ 1.25 $ .19 $ 1.06
Total Maximum(1) $ 2,500,000 $ 30,000(2) $ 2,125,000
----------------------
(1) The Company reserves the right to sell in excess of the maximum. (2) Assumes
a selling commission on each sale of the Common Shares offered hereby.
- --------
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
SUBSCRIPTION INSTRUCTIONS
TO
SUBSCRIPTION AGREEMENT
FOR
PRIVATE PLACEMENT TERM SHEET, DATED DECEMBER 12, 1997
1. Subscription Agreement
READ THE SUBSCRIPTION AGREEMENT IN ITS ENTIRETY. It contains certain
statements and certain representations required to be made by each subscriber.
Complete, date, and sign the signature page (page 8 of the Subscription
Agreement) and return the executed Subscription Agreement, together with payment
in full for the number of Common Shares subscribed for, to the Company at the
address set forth in item 3 below.
2. Certificate for Corporate, Partnership, Trust and Joint Purchasers
If the purchaser is a corporation, partnership, trust or two or more
individuals purchasing jointly, not the specific instructions that appear in the
Certificate of corporate, Partnership, trust and Joint Purchasers. Please date
and sign the Certificate.
3. Payment
You will be required to submit the executed Signature Page and tender the
correct purchase price in cash, check (made payable to "National Boston Medical,
Inc."), wire transfer or similar payment (or surrender of Notes) in order to
complete your subscription. The minimum investment is one Common Share at
$25,000 per Common Shares. See Paragraph 5 to the Subscription Agreement.
Deliver or mail items 1, 2 and 3 to: National Boston Medical, Inc., 43
Taunton Green, Suite 3, Taunton, MA, 02780, Attention Daniel J. Hoyng,
President. (funds can be wire transferred) See attached document.
ALL INFORMATION SHOULD BE TYPED OR PRINTED IN INK.
ANY CORRECTIONS MUST BE INITIALED.
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
SUBSCRIPTION AGREEMENT
To: National Boston Medical, Inc.
43 Taunton Green, Suite 3
Taunton, MA 02780
Attention: Daniel J. Hoyng, President
1. Agreed Subscription; Purchase Price. The undersigned hereby subscribes
for Common Shares issued by National Boston Medical, Inc., a Delaware
corporation (the "Company") at price of $1.25 per Share. The undersigned agrees
to promptly tender to the Company payment of the full subscription price in
cash.
The undersigned agrees that this subscription is and shall be irrevocable,
but that it may be rejected, in whole or in part, by the Company, and that the
obligations of the undersigned hereunder will terminate if this subscription is
not accepted by the Company. The undersigned understands that the Company will
notify him if this subscription has been rejected for any reason. If this
subscription is rejected, the payment tendered by him will be returned to him
forthwith, without interest on deduction. If this subscription is accepted by
the Company, the amount of the payment tendered by him will be applied in
accordance with the description set forth in the Term Sheet and Section 5
hereof.
2. Acknowledgments of Subscriber; Economic Risk; No Liquidity. The
undersigned understands and agrees that an investment in the Common Shares is
not a liquid investment. In particular and in addition to the representations in
Section 3 hereof, the undersigned recognizes, acknowledges and agrees that:
2.1 The undersigned must bear the economic risk of investment in the
Common Shares (and the component securities) for an indefinite period of time,
since the Common Shares (and the component securities) have not been registered
under the Securities Act of 1933, as amended (the "Act") or applicable state
securities laws ("State Acts"), and, therefore, cannot be transferred or sold
unless either they are subsequently registered under the Act and applicable
State Act, or an exemption from registration is available and a favorable
opinion of counsel to that effect is obtained.
2.2 The undersigned will have only those limited rights to register
under the Act and applicable State Acts the Common Stock.
3. Subscriber's Representations. The undersigned represents to and agrees
with the Company that:
3.1 The undersigned and his purchaser representative(s), if any, have
carefully reviewed and understand the risks of and other considerations relating
to a purchase of the Common Shares.
3.2 The undersigned and his purchaser representative(s), if any, have
been afforded the opportunity to obtain any information necessary to verify the
accuracy of any representations or information set forth in the Term Sheet and
<PAGE>
have had all of their inquiries to the Company answered in full, and have been
furnished all requested material relating to the Company, the offering and sale
of the Common Shares and any other matter described in the Term Sheet.
3.3 Neither the undersigned nor his purchaser representative(s), if
any, have been furnished any offering literature by the Company or any of their
affiliates, associates or agents, other than the Term Sheet and the exhibits and
attachments thereto.
3.4 The undersigned is acquiring the Common Shares for which he
hereby subscribes as principal for his own investment account, and not (1) with
a view to the resale or distribution of all or any part thereof, (2) on behalf
of another person who has not made the foregoing representation, or (3) in order
for any person to acquire less than the minimum subscription required hereunder,
unless a lesser subscription specifically has been accepted by the Company.
3.5 The undersigned is an accredited investor, as defined in Rule
501(a) of Regulation D promulagated pursuant of the Act, by virtue of the fact
that (INITAL APPLICABLE CHOICES):
___(i) The undersigned had individual income (exclusive of any income
attributable to spouse) of more than $200,00 in each of the most recent two
years or joint income with the undersigned's spouse in excess of $300,00 in each
of such years and reasonably expects to have income of at least the same level
for the current year.
___(ii) The undersigned has an individual net worth, or a combined
net worth with the undersigned's spouse, in excess of $1,000,000. For purposes
of this Subscrition Agreement, "individual net worth" means the excess of total
assets at fair market value, including home and personal property, over total
liabilities.
___(iii) The undersigned is a director or executive officer of the
Company.
Accredited partnership, corporation, trust or other investors must
initial at least one of the following statements.
___(iv) the undersigned is a bank as defined in section 3(a)(2) of
the Act, or a savings and loan association or other institution as defined in
secant 33(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to section 15 of the Securities
Exchange Act of 1934; an insurance company as defined in section 2(13) of the
Act; an investment company registered under the Investment Company Act of 1940
or a business development company as defined in section 2(a)(48) of that Act; a
Small Business Investment Company licensed by the U.S. Small business
Adminstration under section 301(c) or (d) of the Small Business Investment Act
of 1958; a plan established and maintained by a state, its political
subdivisions, or any agency or instumentally of a state or its political
subdivision, for the benefit of its employees if such plan has total assets in
excess of $5,000,000; an employee benefit plan within the meaning o the Employee
Retirement Income Security Act of 1974, if the investment decision is made by a
plan fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess
<PAGE>
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that ae accredited investors.
___(v) The undersigned is a private business development company as
defined in section 202(a)(22) of the Investment Advisors Act of 1940.
___(vi) The undersigned is an organization described in section
501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, formed of the specific purpose for acquiring the
securities offered, with total assets in excess of $5,000,000.
___(vii) The undersigned is a trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquireing the securities
offered, whose purchase is directed by a sophisticated person as described in
Rule 506(b)(2)(ii) of Regulation D.
___(viii) All of the equity owners of the undersigned qualify as
accredited investors under one of the statements set forth above.
3.6 The undersigned has evaluated the risks of investing in the
Company and has substantial experience in making investment decisions of this
type or is relying on his investment decision.
3.7 The undersigned understands the fundamental aspects of and risks
involoved in an investment in the Company's Common Shares, including (1)the
speculative nature of the investment, (2) the financial hazards involved,
including the risk of losing the entire investment, (3) the lack of liquidity
and the restrictions on transferability of the Common Shares, (4) the inherent
risks relating to the business of the Company, and (5) the fact that the Company
has a limited operating history, limited capital resources, may require
additional financing and has accumulated deficits.
3.8 The address set forth on the Subscription Agreement Signature
Page hereof is the undersigned's true and correct principal address, and the
undersigned has no present intention of becoming a resident of any other stateor
jurisdiction.
3.9 The undersigned, if a corporation, partnership, trust or other
form of business entity, (1) is authorized and otherwise duly qualified to
purchase and hold the Common Shares, (2) has its pricipal place of business at
its residence address set forth on the Subscription Agreement Signature Page
hereof, (3) has not been formed for the specific purpose of acquiring the Common
Shares, and (4) has submitted and executed all documents required pursuant to
the Certificate for Corporate, Partnership, Trust, and Joint Purchasers and
Special Subscription Instructions. The person executing this Subscription
Agreement and all other documents related to the offering hereby represents that
he is duly authorized to execute and deliver all such documents on behalf of the
entity. IF THE UNDERSIGNED IS ONE OF THE AFOREMENTIONED ENTITIES, IT HEREBY
AGREES TO SUPPLY ANY ADDITIONAL WRITTEN INFORMATIN THAT MAY BE REQUIRED BY THE
COMPANY
3.10 All of the information that the undersigned has heretofore
furnished to the Company, or that is set forth herein with respect to himself,
his financial position, and his business and
<PAGE>
investment experience, is correct and complete as of the date hereof, and, if
there should be any material change in such information prior to the closing of
the sale of the common Shares, the undersigned will immediately furnish the
revised or corrected information to the Company.
3.11 The undersigned agrees to be bound by all of the terms and
conditions of the offering made by the Term Sheet including the Exhibits
thereto.
3.12 No persons other than the undersigned will have a direct or
indirect interest in the Common Shares subscribed for hereby.
3.13 The undersigned consents to the placement of a legend on any
certificate(s) or other document evidencing the Common Shares (if separately
certified) stating that such securities have not been registered under the Act
and setting forth or referring to the restrictions on transferability and sales
thereof. The undersigned is aware that the Company will make a notation in its
appropriate records with respect to the restriction on the transferability of
such securities.
3.14 The undersigned understands that the Company will review this
Subscription Agreement and is hereby given authority by the undersigned to call
his bank or place of employment or otherwise review the financial standing of
the undersigned; and it is further agreed that the Company reserves the
unrestricted right to reject or limit in whole or in part any subscription and
to close the offer at any time.
3.15 To the extent thepurchaser of the Common Shares is represented
by an investment advisor, the investment advisor makes the following additional
representations:
(i) it has full power and authority to execute and deliver this
Subscription Agreement on behalf of each of the purchasers for whom it is
executing this Subscription Agreement ("Represented Purchaser") such Represented
Purchaser's investments in the Common Shares are not prohibited are not
prohibited by applicable laws and such investment advisor's acting on behalf of
such Represented Purchasers with respect to such investments is also not
prohibited by applicable laws. Upon investment advisor's execution and delivery
of this Subscription Agreement on behalf of a Represented Purchaser, and upon
execution and delivery of this Subscription Agreement by the Company, this
Subscription Agreement will constitute the valid, binding and enforceable
obligation of such Represented Purchaser.
(ii)it is an investment advisor registered as such under the
Investment Advisors Act of 1940. It is acting as investment advisor to each of
the Represented Purchaser's funds be utilized to acquire the Common Shares.
(iii)it has knowledge and experience in finacial and business
matters in general and in similar investments in particular so as to be capable
of evaluating the merits and risk of an investment in the Common Shares.
Attached to the signature page of this Subscription Agreement is the written
evidence of discretionary authority of the investment advisor with respect to
each of the represented purchasers.
<PAGE>
4. State Law Legends
4.1 Colorado Residents. The undersigned acknowledges that the Common
Shares, the Dividend Stock and the Conversion Stock have not been registered
under the Colorado Securities Act (the "Colorado Act"), and therefore cannot be
sold or transferred by the investor except in a transaction which is exempt
under the Colorado Act or pursuant to an effective registration thereunder.
4.2 Connecticut Residents. The undersigned acknowledges that the
Common Shares, the Dividend Stock and the Conversion Stock have not been
registered under the Connecticut Uniform Securities Act (the "Connecticut Act"),
and are subject to restrictions on the transferability and sale of securities as
set forth herein. The undersigned hereby agrees that such securities will not be
transferred or sold without registration under the Connecticut Act or exemption
therefrom.
4.3 Florida Residents. As described in the introductory pages of the
Term Sheet, Florida investors have, under certain circumstances, a right of
recision pursuant to Section 517.061(11)(a)(5) of the Florida Securities and
Investor Protection Act.
4.4 Kansas The undersigned acknowledges that the Common Shares, the
Dividend Stock and the Conversion Stock have not been registered under the
Kansas Securities Act (the "Kansas Act"), and therefore cannot be sold or
transferred by the investor except in a transaction which is exempt under the
Kansas Act or pursuant to an effective registration thereunder.
4.5 Minnesota. The undersigned acknowledges that the Common Shares,
the Dividend Stock and the Conversion Stock have not been registered under the
Minnesota Blue Sky Law (the "Minnesota Act"), and therefore cannot be sold or
transferred by the investor except in a transaction which is exempt under the
Minnesota Act or pursuant to an effective registration thereunder.
4.6 New Jersey Residents. The undersigned acknowledges that the
Common Shares, the Dividend Stock and the Conversion Stock have not been
approved or disapproved by the Bureau of Securities of the State of New Jersey
nor has the Bureau passed on or endorsed the merits of this offering. Any
representation to the contrary is unlawful.
4.7 New York Residents. Each New York purchaser of the Common Shares
understands that this offering of Common Shares of the Company has not been
reviewed by the attorney general of the State of New York. The undersigned
understands that nay offering literature used in connection with this offering
has not been prefiled with the attorney general and has not been reviewed by the
attorney general prior to its use. The attorney general of the state of New York
has not passed on or endorsed the merits of this offering. Any representation to
the contrary is unlawful. The Common Shares are being purchased for the
undersigned's own account for investment, and not for distribution or resale to
others. The undersigned agrees that he will not sell or otherwise transfer the
Common Shares or the component securities unless they are registered under the
federal Securities Act of 1933 or unless and exemption from such are
registration is available. The undersigned represents that he has adequate means
of providing for this current needs and possible personal contingencies, and
<PAGE>
that he has no need for liquidity of this investment.
4.8 Ohio. The undersigned acknowledges that the Common Shares, the
Dividend Stock and the Conversion Stock have not been registered under the Ohio
Securities Act (the "Ohio Act"), and therefore cannot be sold or transferred by
the investor except in a transaction which is exempt under the Ohio Act or
pursuant to an effective registration thereunder.
4.9 Oregon. The undersigned acknowledges that the Common Shares, the
Dividend Stock and the Conversion Stock have not been registered under the
Oregon Securities Act (the "Oregon Act"), and therefore cannot be sold or
transferred by the investor except in a transaction which is exempt under the
Oregon Act or pursuant to an effective registration thereunder.
4.10 Texas Residents. The undersigned hereby acknowledges that the
Common Shares, the Dividend Stock and the Conversion Stock cannot be sold unless
they are subsequently registered under the Securities Act of 1933, as amended,
and the Texas Securities Act, or an exemption from registration is available.
The undersigned further acknowledges that because such securities are not
readily transferable, he must bear the economic risk of his investment for an
indefinite period of time.
5. Terms of Subscription and Closing
5.1 The subscription will begin as of the date of the Term Sheet and
will terminate upon completion (the "Termination Date"). The minimum
subscription per subscriber shall be 10,000 shares at $2.50 per share.
5.2 The Company reserves the right in its discretion, to (i) offer
and sell up to as many Common Shares as required to fund the companies strength.
The Company is not required to notify any Common Share subscriber or purchaser
of the offer and sale of any additional Common Shares.
5.3 Upon receipt and acceptance by the Company of subscription
documents and payment (collected funds or surrendered Notes) for Common Shares,
the Company shall, with reasonable dispatch, issue and mail the Common Shares so
purchased to investors (the "Closing"). Since there is no minimum offering, upon
receipt of payment (clearance of funds) and executed Subscription Agreement in
form and substance satisfactory to the Company, the company will issue Common
Shares as collected funds or surrendered Notes are received.
5.4 Subscriptions will not be deemed accepted by the Company until
the latest to occur of (I) receipt from an investor of a duly executed and
completed Subscription Agreement; (ii) satisfaction, in the Company's sole
discretion that the subscriber is an accredited investor; and (iii) collected
funds or surrendered Notes with respect to such subscription. Subscriptions may
not be withdrawn by a subscriber after delivery of the executed Subscription
Agreement. The Company may, in its sole discretion, accept or reject the
subscription of any person in whole or in part.
6. The foregoing representations are true and accurate as of the date
hereof, shall be true and accurate as of the date of the execution of this
Subscription Agreement, and shall survive such date. If, in any respect, such
<PAGE>
representations shall not be true and accurate prior to or upon the execution of
this Subscription Agreement, the undersigned shall give written notice of such
fact to the Company, specifying which representations are not true and accurate
and the reasons therefor, with a copy to his purchaser representative(s), if
any.
7. This subscription is not transferable or assignable by the undersigned.
8. This subscription, upon acceptance by the Company, shall be binding upon
the heirs, executors, administrators, successors and assigns of the undersigned.
9. This Subscription Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Massachusetts without giving effect
to conflict of laws principles.
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned hereby subscribes for the number of Common Shares set forth
below as described in the Confidential Private Placement term Sheet, dated March
17, 1997 issued by National Boston Medical, Inc., a corporation organized under
the laws of Delaware. The entire Subscription Agreement, of which this is the
signature page, is provided as additional documentation to the Term Sheet.
1. Dated: ______________
2. Number of Common Shares:
3. Subscription Price ($1.25 per share)
-----------------------------------
Signature of Subscriber (and Taxpayer Identification or
title, if applicable) Social Security Number
Signature of Joint Purchaser Taxpayer Identification or
(if any) Social Security Number
Name and Residence Address Mailing Address, if Different
(Not Post Office Address) From Residence Address:
Name (please print) Name (please print)
Number and Street Number and Street
City State Zip Code City State Zip Code
Subscription for Common Shares accepted as of
NATIONAL BOSTON MEDICAL, INC.
By:
---------------------------
<PAGE>
Face Value $_____________ U.S.
NATIONAL BOSTON MEDICAL INC.
Know all men that National Boston Medical Inc., a Delaware Corporation having
it's principal place of business at 43 Taunton Green, Taunton, Massachusetts is
held and firmly bound unto:
Name:
Address:
to the payment of which sum National Boston Medical, Inc. binds itself, their
successors, and assigns, firmly by these presents.
Signed, sealed and dated this day of 1998.
Now therefore, the condition of the foregoing obligation is that:
1. The term is for three years.
2. The interest is at 12% (twelve percent) payable semi-annually on the amount
outstanding during said term.
3. Interest payments are payable either:
a) in cash (U.S.)
b) in stock (value to be set by National Boston Medical Inc. Board of
Directors or if stock becomes publicly traded that price will take
precedence.
c) option to accept interest payments in cash or stock belongs to the
bond holder.
4. Warrant: National Boston Medical Inc. as principal obligor warrants to the
bondholder that it will exchange said $12,500.00 Bond (Indenture), at any
time during said three (3) year term or (3) years from the date of
surrender, upon presentations to National Boston Medical Inc. at it's
principal place of business, for common stock of the corporation, National
Boston Medical, Inc.
Exercise of this warrant and presentation shall cause 10,000 common shares
(at $2.50 per share) of the National Boston Medical, Inc. to be issued to
the bondholder, in exchange for said bond, and cause such issuance to be
recorded on the books and records of the corporation
5. National Boston Medical, Inc. agrees, as part of the conditions, for the
issuance of said bond, that: a) it will create a sinking fund called the
"Bond Retirement Fund" b) said "Bond Retirement Fund" shall be funded by
National Boston Medical, Inc.
<PAGE>
reserving 5% (five percent) of it's gross sales from it's general business
account and placing said 5% into a separate National Boston Medical, Inc.
"Bond Retirement Fund bank account' for the three year period following the
issuance of said bonds.
a) National Boston Medical, Inc. shall have the sole right to retire said
bond within 30 (thirty) days of issue upon payment of $12,750.00
(twelve thousand seven hundred and fifty) to the bondholder.
b) National Boston Medical, Inc. shall have the sole right to retire said
bond at anytime after 30 days for the sum of $12,625.00 (twelve
thousand six hundred and twenty five) of said bond.
c) Notice by the National Boston Medical, Inc. to the shareholder, at the
last recorded address, on the books and records of the corporation, by
certified mail, postmarked within the time frame, shall be deemed
sufficient notice to trigger the repurchase of the bonds under items
5c and 5d by National Boston Medical, Inc.
d) Upon retirement, or for the retirement and payment of the
aforementioned bonds, National Boston Medical, Inc. may terminate it's
"Bond Retirement Fund account".
6. In the event the Company needs to raise additional capital, beyond its
initial offering, all Bond holders will be given right of the first refusal
to purchase additional stock or bonds.
Witness the seal of the National Boston Medical, Inc. corporation this ____ day
of________, 19__
National Boston Medical, Inc.
by:
-------------------------------
President
Corporate Seal
<PAGE>
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned hereby subscribes for the purchase of Corporate Bonds in
the increments of $_______________ set forth below as described in the
Confidential Private Placement Bond, dated ________________, 1998 issued by
National Boston Medical, Inc., a corporation organized under the laws of
Delaware. The entire Subscription Agreement, of which this is the signature
page, is provided as additional documentation to the Bond (Indenture).
1. Dated: __________, 1998
2. Number of Bonds Purchased:
3. Subscription Price ($12,500 per unit)
-----------------------------------------------------
Signature of Subscriber (and Taxpayer Identification or
title, if applicable) Social Security Number
- ------------------------------- --------------------------------
Signature of Joint Purchaser Taxpayer Identification or
(if any) Social Security Number
Name and Residence Address Mailing Address, if Different
(Not Post Office Address) from Residence Address:
________________________ ________________________
Name (please print) Name (please print)
________________________
Number and Street Number and Street
________________________ ________________________________
City State Zip Code City State Zip Code
Subscription for Bonds accepted as of _____________ , 1998
NATIONAL BOSTON MEDICAL, INC.
By:
-----------------------------
<PAGE>
AFFIDAVIT
STATUS OF LOST STOCK CERTIFICATE
I, _______________, of _________________, under the pains and perjury herewith
declare:
1. That after making an investment in National Boston Medical, Inc., I
received shares of common stock to evidence such investment.
a) amount of investment $___________
b) amount of shares issued ___________
c) stock certificate number ___________
2. That I did receive the shares per the terms of the investment agreement.
3. I am herewith certifying that I have received said shares of common stock,
that I have not pledged such stock, nor have I given, sold or assigned such
stock.
4. That I have lost the stock certificate that I did receive from National
Boston Medical, Inc.
5. That should I locate my stock certificate aforementioned, I will so inform
National Boston Medical, Inc. and return this stock certificate to National
Boston Medical, Inc. registered mail even though such shares of stock may
carry my name upon them.
6. That I have agreed to such an exchange of bonds for common stock that
remain missing and hereby relinquish any rights I have or may have in the
aforementioned common stock certificate amount.
Sworn to this _____ day if ____________, 1998 under the pains and penalties of
perjury.
Witness:
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
IN WHOLE OR PART IN THE ABSENCE COUNSEL REASONABLE SATISFACTORY TO THE COMPANY
IN FORM AND SUBSTANCE REASONABLE SATISFACTORY TO THE COMPANY THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT EXISTS WITH RESPECT TO THE PROPOSED SALE,
TRANSFER, PLEDGE, HYPOTHECATION OF OTHER DISPOSITION.
NATIONAL BOSTON MEDICAL, INC.
COMMON STOCK PURCHASE WARRANT
CERTIFICATE TO PURCHASE
SHARES OF COMMON STOCK
VOID AFTER 5:OO P.M. NEW YORK LOCAL TIME ON
3 YEARS FROM DATE OF ISSUANCE
This Warrant Certificate certifies that , or registered assigns, is the
registered Holder ("Holder") of ____________ Common Stock Purchase Warrants
("Warrants") to purchase shares of common stock $.01 par value per share
("Common Stock"), of National Boston Medical, Inc., a Delaware corporation (the
"Company"). Each Warrant enables the Holder to purchase form the Company at any
time until 5:00 p.m. New York, New York local time on [3 years from date
issuance] one fully paid and non-assessable share of Common Stock (individually,
a "Share" and collectively the "Shares") upon presentation and surrender of this
Warrant Certificate and upon payment of the purchase price of $1.25 per share
(the "Exercise Price"); provided, however, that if the current market price per
Share of Common Stock exceeds $3.00 for sixty (60) consecutive trading days
during which the Shares underlying the Warrants to be redeemed were the subject
of an effective and current registration statement under the Securities Act of
1933, as amended (the "Act"), then the Company may, in its sole option, redeem
some or all of the Warrants at a redemption price of $.05 for Shares underlying
the Warrants to be redeemed. For purposes of computing the exercise price the
term "current marked price per share of Common Stock" shall mean the "Market
Price" as defined in Section 11(a) hereof. Payment shall be made in lawful money
of the United States of America by certified check payable to the Company. Such
payment shall be made at the principal office of the Company at 43 Taunton
Green, Suite 3, Taunton, MA 02780. As hereinafter provided, the Exercise Price
and number of Shares purchasable upon the exercise of the Warrants are subject
to modification or adjustment upon the happening of certain events.
The Warrants represented by this Warrant Certificate are issuable upon the
conversion of the Convertible Securities in a private placement as described in
a certain Confidential Private Placement Term Sheet dated December 10, 1997 (the
"Private Placement") for a six (6) year period, commencing on the date of
issuance.
<PAGE>
1. Upon surrender to the Company, this Warrant Certificate may be exchanged
for Another Warrant Certificate or Warrant Certificates evidencing a like
aggregate number of Warrants. If this Warrant Certificate shall be exercised in
part, the Holder shall be entitled to receive upon surrender hereof another
Warrant Certificate or Warrant Certificates evidencing the number of Warrants
not exercised.
2. No Holder shall be deemed to be the Holder of Common Stock or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose nor shall anything contained herein be construed to
confer upon the Holder any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof or to give or withhold consent to any
corporate action (whether upon any reorganization, issuance of stock,
reclassification or conversion of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meeting or to receive
dividends or subscription rights or otherwise until a Warrant shall have been
exercised and the Common Stock purchasable upon the exercise thereof shall have
become issuable.
3. Each Holder consents and agrees with the Company and any other Holder
that:
(a) this Warrant Certificate is exercisable by the Holder in person or by
attorney duly authorized in writing at the principal office of the Company in
whole or in part;
(b) anything herein to the contrary notwithstanding, in no event shall the
Company be obligated to issue Warrant Certificates evidencing other than a whole
number of Warrants or issue Certificates evidencing other than a whole number of
Shares upon the exercise of this Warrant Certificate; provided, however, that
the Company shall pay with respect to any such fraction of a share an amount of
cash based upon the current market value (or book value, if there shall be no
public market value for shares purchasable upon exercise hereof); and
(c) the Company may deem and treat the person in whose name this Warrant
Certificate is registered as the absolute true and lawful owner hereof for all
purposes whatsoever.
4. The Company shall maintain books for the transfer and registration of
Warrants. Upon the transfer of any Warrants, the Company shall issue and
register the Warrants in the names of the new Holders. The Warrants shall be
signed manually by the Chairman, Chief Executive Officer, President or any Vice
President and the Secretary (or Assistant Secretary) of the Company. Subject to
Paragraph 10, the Company shall transfer, from time to time, any outstanding
Warrants upon the books to be maintained by the company for such purpose upon
transfer. Upon any transfer, a new Warrant Certificate shall be issued to the
transferee and the surrendered Warrants shall be canceled by the company.
Warrants may be exchanged at the option of the Holder, when surrendered at the
office of the Company, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Shares. Subject to the terms of this Warrant
Certificate, upon such surrender and payment written order of the Holder of such
Warrants and in such name or names as such Holder may designate, a certificate
or certificates for the number of full Shares so purchased upon the exercise of
<PAGE>
such Warrants. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become the Holder of record of such Shares as of the date of the surrender of
such Warrants and payment of the Exercise Price; provided, however, that if, at
the date of surrender and payment, te transfer books of the Shares shall be
closed, the certificates for the Shares shall be issuable as of the date on
which such books shall be opened and until such date the Company shall be under
no duty to deliver any certificate for such Shares; provided, further, however,
that such transfer books, unless otherwise required by law or by applicable rule
of any national securities exchange, shall not be closed at any one time for a
period longer than 20 days. The rights of purchase represented by the Warrants
shall be exercisable, at the election of the Holders, either in whole or from
time to time in part (but in no event with respect to less than 100 Shares).
5. The Company will pay any documentary stamp taxes attributable to the
initial issuance of the Shares issuable upon the exercise of the Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for Shares in a name other than that of the
Holder in respect of which such Shares are issued, and in such case the Company
shall not be required to issue or deliver any certificate for Shares or any
Warrant until the person requesting the same has paid to the Company the amount
of such tax or has established to the Company's satisfaction that such tax has
been paid.
6. In case the Warrant Certificate shall be mutilated, lost stolen or
destroyed, the Company may, in its discretion, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate, lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction and an indemnity, if requested,
also satisfactory to it.
7. There have been reserved, and the company shall at all times keep
reserved, out of the authorized and unissued Common Stock, a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
this Warrant Certificate. The Company agrees that all Shares issuable upon
exercise of the warrants shall be, at the time of delivery of the certificates
for such Shares, validly issued and outstanding, fully paid and nonassessable.
8. Subject and pursuant to the provisions of this paragraph, the purchase
price and number of Shares subject to this Warrant Certificate shall be adjusted
from time to time as set forth hereinafter:
(a) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in common Stock, then the
Exercise Price shall be proportionately decreased as of the close of business on
the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding Common Stock
by recapitalization, reclassification or split-up there-of, the Exercise Price
immediately prior to such subdivision shall be proportionately decreased, and ,
if the company shall at any time combine the outstanding Common Stock by
<PAGE>
recapitalization, reclassification or combination thereof, the Exercise Price
immediately prior to such combination shall be proportionately increased. Any
such adjustment to the Exercise Price shall become effective at the close of the
business on the record date for such subdivision or combination.
(c) In case the Company after the date hereof shall distribute to all of
the Holders of outstanding share of Common Stock any securities or other assets
(other than a cash distribution made as a dividend payable out of earnings or
out of any earned surplus legally available for dividends under the laws of the
State of Florida), the Board of Directors shall be required to make such
equitable adjustment in the Exercise Price, as in effect immediately prior to
the record date for such distribution, as may be necessary to preserve for the
Holder rights substantially proportionate to those enjoyed hereunder by the
Holder immediately prior to the happening of such distribution. Any such
adjustment to the Exercise Price shall become effective at the close of business
on the record date for such distribution.
(d) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the company with another
corporation, of the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that Holders of common stock shall
be entitled to receive stock, securities, cash, or assets with respect to or in
exchange for Common Stock, then as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Company or such successor
or purchasing corporation, as the case may be, shall execute a supplemental
Warrant Certificate providing that each Holder shall have the right thereafter
and until the expiration date to exercise a Warrant for the kind and amount of
stock securities, cash or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale by a Holder of the number of
shares of Common Stock for the purchase of which such Warrant might have been
exercised immediately prior to such reorganization, reclassification,
consolidation, merger or sale, subject to further adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Paragraph 8.
(e) If at any time after the date of issuance hereof the Company shall
grant or issue any shares of Common Stock, or grant or issue any rights or
options for the purchase of, or stock or other securities convertible into,
Common Stock (such convertible stock or securities being herein collectively
referred to as "Convertible Securities" other than:
(i) shares issued in a transaction described in subparagraph (f) of
this paragraph 8; or
(ii) shares issued, subdivided or combined in transactions described
in subparagraphs (a) or (b) of this Paragraph 8;
for a consideration per share which is less than the then current market price
per share of Common Stock. Then the Exercise Price in effect immediately prior
to such issuance or sale (the "Applicable Exercise Price") shall, and thereafter
upon each issuance or sale, the Applicable Exercise Price shall, simultaneously
with such issuance or sale, be adjusted, so that such
<PAGE>
Applicable Exercise Price shall equal a price determined by multiplying the
Applicable Exercise Price by a fraction, the numerator of which shall be:
(A) the sum of (x) the total number of shares of Common Stock outstanding
immediately prior to such issuance plus (y) the number of shares of Common Stock
which the aggregate consideration received, as determined in accordance with
subparagraph (g) below for the issuance or sale of such additional Common Stock
or Convertible Securities deemed to be an issuance of Common Stock as provided
in subparagraph (h) below, would purchase (including and consideration received
by the Company upon the issuance of any shares of Common Stock or Convertible
Securities since the date the Applicable Exercise Price became effective not
previously included in any computation resulting in an adjustment pursuant to
this subparagraph (e)) at the then current market price per share of Common
Stock; and the denominator of which shall be
(B) the total number of shares of Common Stock outstanding (or deemed to be
outstanding as provided in subparagraph (g)) immediately after the issuance or
sale of such additional shares.
For purposes of this Paragraph 8 the current market "current market price
per share' of Common Stock at any date shall be deemed to be the average daily
closing prices for thirty (30) consecutive business days before such date. The
closing price for each day shall be the last sale price regular way or, in case
no such reported sale takes place on such day the average of the last reported
bid and ask prices regular way, in either case on the principal national
securities exchange, on which the Common Stock is admitted to trading or listed,
or if not listed or admitted to trading on such exchange the average of the
highest reported bid and lowest reported ask prices as reported by NASDAQ, or
other similar organization if NASDAQ is no longer reporting such information, or
if not so available, the fair market price as determined by the Board of
Directors of the Company. The current market price per share of common stock
shall be reduce appropriately to take into account the restricted nature of any
securities issued by the Company and the issuance or sale of larger blocks of
its securities.
If, however, the Applicable Exercise Price thus obtained would result in
the issuance of a lesser number of shares upon conversion than would be issued
at the initial Exercise Price specified in the first paragraph hereof, the
Applicable Exercise Price shall be such initial Exercise Price.
(f) Anything in this Paragraph 8 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be made in connection with:
(i) the grant, issuance of exercise of any Convertible Securities
pursuant to the Company's qualified or non-qualified Employee Stock Option
Plans or any other bona fide employee benefit plan or incentive
arrangement, previously adopted, or as may hereafter be adopted, by the
Company's Board of Directors, for the benefit of the Company's employees,
consultants or directors, as any such plans or arrangements may hereafter
be amended from time to time;
<PAGE>
(ii) the issuance of any shares of Common Stock pursuant to the grant
or exercise of Convertible Securities outstanding as of the date hereof;
(iii) to shareholders of any corporation or other entity the stock or
assets of which is acquired by, or which merges into the company (the
"Target Company") in proportion to their stock holdings of the Target
Company immediately prior to such acquisition or of such merger
beneficially own in excess of fifteen (15%) of the issued and outstanding
Capital Stock of the Company ("Affiliate") or, if the Target Company is an
Affiliate, that the Company has obtained a fairness opinion from a
recognized investment banking firm as to the consideration receive by the
Company in connection with such acquisition or merger; or
(iv) in a bona fide public offering pursuant to a firm commitment
underwriting.
(g) For the purpose of subparagraph (a) above, the following provisions
shall also be appealed:
(i) In the case of the issuance or sale of additional shares of Common
Stock for cash, the consideration received by the Company therefor shall be
deemed to be the amount of cash received by the Company for such shares,
before deducting therefrom any commissions, compensations or other expenses
paid or incurred by the Company for any underwriting of, or otherwise in
connection with, the issuance of sale of such shares.
(ii) In the case of the issuance of Convertible Securities, the
consideration received by the Company therefore shall be deemed to be the
amount of cash, if any, received by the Company for the issuance of such
rights or Convertible Securities, plus the minimum amounts of cash and fair
value of other consideration, if any, payable to the Company upon the
exercise of such rights or options or payable to the Company on conversion
of such Convertible Securities.
(iii) In the case of the issuance of Common Stock or Convertible
Securities for a consideration in whole or in part, other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as reasonably determined in good faith by the Board of Directors of
the Company (irrespective of accounting treatment thereof); provided,
however, that if such consideration consists of the cancellation of debt
issued by the Company, the consideration shall be deemed to be the amount
the Company received upon issuance of such debt (gross proceeds) plus
accrued interest and, in the case of original issue discount or zero coupon
indebtedness, accredited value to the date of such cancellation, but not
including any premium or discount at which the debt may then be trading or
which might otherwise be appropriate for such class of debt.
(iv) In case of the issuance of additional shares of Common Stock upon
the conversion or exchange of any obligations (other than Convertible
Securities), the amount of the consideration received by the Company, for
such obligations ro shares or converted or exchanged, before deducting form
such consideration so received by the company any expenses
<PAGE>
or commissions or compensations incurred or paid by the company for any
underwriting of, or otherwise in connection with, the issuance or sale of
such obligations or shares, plus any consideration received by the Company
in adjustment of interest and dividends. If obligations or shares of the
same class or series of a class as the obligations or shares so converted
or exchanged shall be deemed to be the average amount of each of the
consideration received by the Company upon the original issuance of all
such obligations or shares. The amount of consideration received by the
Company upon the original issuance of the obligations or shares so
converted or exchanged and the amount of the consideration, if any, other
than such obligations or shares received by the Company upon such
conversion or exchange shall be determined in the same manner as provided
in subparagraphs (i) through (iii) above with respect to the consideration
received by the Company in case of the issuance of additional shares of
Common Stock or Convertible Securities.
(h) For the purposes of the adjustments provided for in subparagraph (e)
above, if at any time, the Company shall issue any Convertible Securities the
Company shall be deemed to have issued at the same time of the issuance of such
Convertible Securities the maximum number of shares of Common Stock issuable
upon conversion of the total amount of such Convertible Securities.
(i) On the expiration, cancellation or redemption of any Convertible
Securities, the Exercise Price then in effect hereunder shall forthwith be
readjusted to such Exercise Price as would have been obtained (a) had the
adjustments made upon the issuance or sale or such expired, canceled or redeemed
Convertible Securities been made upon the basis of the issuance of only the
number of shares of Common Stock, therefore actually delivered upon the exercise
or conversion of such Convertible Securities ( and the total consideration
received therefore) and (b) had all subsequent adjustments been made only on the
basis of the Exercise Price as readjusted under this subparagraph (i) for all
transactions (with would have affected such adjusted Exercise Price) made after
the issuance or sale of such Convertible Securities.
(j) Anything in this Paragraph 8 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 5% in such Exercise Price; provided,
however, that any adjustment which by reason of this subparagraph (j) are not
required to be made shall be carried forward and taken into account in making
subsequent adjustments. All calculations under this Paragraph shall be made to
the nearest cent or to the nearest tenth of a share, as the case may be.
(k) Upon any adjustments of any Exercise Price, then and in each such case
the Company shall promptly deliver a notice to the registered Holder of this
Holder of this Warrant, which notice shall state the Exercise Price resulting
from such adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise hereof, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(l) Upon any adjustment of the Exercise Price pursuant to any provisions
contained in this Paragraph 8, the number of Shares issuable upon exercise of
this Warrant shall be changed to the number of Shares determined by dividing (i)
<PAGE>
the aggregate Exercise Price payable for the purchase of all Shares issuable
upon exercise of the Warrant immediately prior to such adjustment by (ii) the
Exercise Price per Share in effect immediately after such adjustment.
9. In case at any time:
(i) The Company shall pay any dividend payable in stock upon the
Common Stock or make any distribution (other than regular cash dividends)
to the Holders of the Common Stock;
(ii) The Company shall offer for subscription pro-rata to the
Holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) There shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any or more of such cases, the Company shall give written notice to the
holder of the date on which (x) the books of the Company shall close or a record
shall be taken for such dividend, distribution, or subscription rights, or (v)
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the Holders of Common Stock of record
shall participate in such dividend, distribution, or subscription rights or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
notice shall be given at least 20 days prior to the record date or the date on
which the Company's transfer books are closed in respect thereof. Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of any of the matters set forth in this Paragraph.
10.(a) The Holder of this Warrant Certificate, each transferee hereof and
any Holder and transferees of any Shares, by his or its acceptance thereof,
agrees that (a) no public distribution of Warrants or Shares will be made in
violation of the Securities Act of 1933 as amended (the "Act"), and (b) during
such period as the delivery of a prospectus with respect to Warrants or Shares
may be required by the Act, no public distribution of Warrants or Shares will be
made in a manner or on terms different from those set forth in, or without
delivery of, a prospectus then meeting the requirements of Section 10 of the Act
and in compliance with all applicable state securities laws. The Holder of this
Warrant Certificate and each transferee hereof further agrees that if any
distribution of any of the Warrants or Shares is proposed to be made by them
otherwise than by delivery of a prospectus meeting the requirements of Section
10 of the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed distribution will not be in
violation of the Act or of applicable state law. Furthermore, it shall be a
condition to the transfer of the Warrants that any transferee thereof deliver to
the Company his or its written agreement to accept and be bound by all of the
terms and conditions contained in this Warrant certificate.
<PAGE>
(b) This Warrant or the Shares or any other security issued or issuable
upon exercise of this Warrant may not be sold or otherwise disposed of except as
follows:
(1) To a person who in the opinion of counsel for the Holder,
reasonably acceptable to the Company, is a person to whom this Warrant or
Shares may legally be transferred without registration and without the
delivery of a current prospectus under the Act with respect thereto and
then only against receipt of an agreement of such person to comply with the
provisions of this Section (1) with respect to any resale or other
disposition of such securities which agreement shall be satisfactory in
form and substance to the Company and its counsel; provided that the
foregoing shall not only apply to any such Warrant, Shares or other
security as to which such Holder shall have received an opinion letter form
counsel to the Company as to the exemption thereof from the registration
under the Act pursuant to Rule 144(k) under the Act; or
(2) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering
thereof for such sale or disposition.
(c) Each certificate for Shares issued upon exercise of this Warrant shall
bear a legend relating to the non-registered status of such Shares under the
Act, unless at the time of exercise of this Warrant such Shares are subject to a
currently effective registration statement under the Act.
11.(a) The Warrants are redeemable by the Company, at its sole option, in
whole or in part from time to time, at a redemption price equal to $.05 per
Share underlying the Warrant to be redeemed at any time commencing from the date
o issuance, upon not less than thirty (30) days' prior written notice, if the
current marker price per Share of Common Stock exceeds $3.00 for any sixty (60)
consecutive trading day period during which the Shares underlying the Warrants
to be redeemed were the subject of an effective and current registration
statement under the Act. The sixty (60) consecutive trading day period ending on
the third business day prior to the date the notice of redemption is given is
hereinafter referred to as the "Measurement Period". Notwithstanding the
foregoing, the Company shall not be entitled to redeem any of the Warrants
represented by this Certificate, unless the issuance of the Shares into which
the Warrants are exercisable has been registered under the Act at all times
during the applicable Measurement Period and shall continue to be so registered
at all times between the date on which the notice of redemption is given and the
"Redemption Date" (as hereinafter defined). For purposes hereof, "Market Price"
shall mean the average of the daily closing prices for five (5) consecutive
business days prior to such dividend payment date. The closing price for each
day shall be the last sale price regular way, or, in case no such report of sale
takes place on such day, the average of the last reported bid and asked prices
regular way in either case on a principal national securities exchange on which
the Common Stock is admitted to trading or listed, or if not listed or admitted
to listing on such exchange, the average of the highest reported bid and lowest
reported ask price as reported by NASDAQ, or similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.
(b) In the event the Company shall elect to redeem all or any port of the
Warrants, the Company shall fix a date for redemption (the "Redemption Date").
Notice of redemption shall be mailed by first class mail, postage prepaid, by
<PAGE>
the Company not less than 30 days from the date fixed for redemption to the
registered Holder of this Warrant Certificate at its last address as it shall
appear on the Company's Warrant Certificate registry books. Any notice mailed in
the manner herein provided shall be conclusively presumed to have been duly
given whether or not the Holder receives such notice. Any right to exercise a
Warrant being redeemed shall terminate at 5:00 PM (New York time) on the
business day immediately preceding the Redemption Date.
(c) From and after the date specified for redemption, the Company shall, at
the place specified in the notice of redemption, upon presentation and surrender
of this Certificate to the Company by or on behalf of the Holder thereof,
deliver or cause to be delivered to or upon the written order of the Holder a
sum in cash equal to the redemption price of each Warrant being redeemed. Form
and after the date fixed for redemption and upon the deposit or setting aside by
the Company of a sum sufficient to redeem all the Warrants called for
redemption, such Warrants shall expire and become void and all rights hereunder
with respect thereto, except the right to receive payment of the redemption
price, shall cease,
(d) If less than all of the Common Stock purchase warrants sold in the
Private Placement are called for redemption by the Company, the particular
Common Stock purchase Warrants to be redeemed shall be selected at random by the
Company in such manner as the Company in its discretion may deem fair and
appropriate. If there shall be drawn for redemption less than all of the
Warrants represented by this Warrant Certificate, the Company shall execute and
deliver, upon surrender of this Warrant Certificate, without charge to the
Holder, a new Warrant Certificate representing the unredeemed balance of the
Warrants represented by this Warrant Certificate.
12. In connection with the Private Placement, the Company has obligated
itself to use its best efforts to (i) prepare and file under the Act a
registration statement relating to the Shares (the term "registration statement"
as used herein being deemed to include any form which may be used to register a
distribution of Convertible Securities to the public for cash); (ii) prepare and
file with the appropriate state blue sky authorities the necessary documents to
register or qualify the Shares, provided that the Company shall only be required
to register or qualify the Shares in the states where the Convertible Securities
have been registere3d or qualified; and (iii) use its best efforts to cause such
registration statement to become effective and to keep such registration
statement state blue sky filings current and effective for six (6) years;
provided however, the Company will have no such obligation to keep effective a
registration statement with regard to the Shares which is then outstanding if it
agrees to purchase the Shares at the then current market price of the Shares.
All expenses in connection with preparing and filing any registration
statement (and any registration or qualification under the blue sky laws of the
states in which the offering will be made under such registration statement)
shall be borne in full by the Company except that the underwriting commissions
and expenses attributable to the Shares so registered and the fees and
disbursements of counsel, if any to the holders of the Shares shall be borne by
such holders. The Company may include other securities in any such registration
statement.
<PAGE>
As a precaution to such registration and qualification each holder of the
Shares will provide the Company with sufficient information to permit and
qualification and will indemnify the Company, and each person who controls the
Company within the meaning of Section 15 of the Act, from and against any and
all losses, claims, damages, expenses and liabilities caused by any untrue
statement of a material fact contained in any registration statement or
contained in a prospectus furnished under the Act or cause by any omission to
state of a material fact therein necessary to make the statement therein not
misleading, insofar as such losses, claims, damages, expenses and liabilities
are caused by such untrue statement or omission based upon information furnished
in writing to the Company by any such holder expressly for use in any
registration statement or prospectus. In addition, each holder will execute and
deliver all such documents and undertakings as the Company may deem necessary or
desirable for purposes of compliance with applicable federal and state
securities laws. The Company's obligations as set forth above with respect to
each holder are contingent on such holder's satisfaction of his or its
obligations set forth above.
13.(a) This Warrant shall be governed by and construed in accordance with
the substantive laws of the State of Massachusetts, without giving effect to
conflict of laws principles.
(b) This Warrant Certificate constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous Agreements and
understandings, inducements or conditions whether express or implied, oral or
written. Neither this Warrant Certificate nor any portion or provision hereof
may be changed, waived or amended orally or any manner other than by an
agreement in writing signed by the Holder and the Company.
(c) Except as otherwise provided in this warrant Certificate, all notices,
requests, demands and other communications required or permitted under this
Warrant Certificate or by law shall be in writing and shall be deemed to have
been duly given, made and received only when delivered against receipt or when
deposited in the United States mails, certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Company: National Boston Medical, Inc.
43 Taunton Green, Suite 3
Taunton, MA 02780
Attention: Daniel J. Hong, President
Holder: At the address shown for the
Holder in the registration
book maintained by the Company.
(d) If any provision of this Warrant Certificate is prohibited by or is
unlawful or unenforceable under any applicable law or any jurisdiction, such
provision shall, as to such jurisdiction be in effect to the extent of such
prohibition in any jurisdiction shall not invalidate such provision in any other
jurisdiction; and provided, further that where the provisions of any such
<PAGE>
applicable law may be waived, that they hereby are waived by the Company and the
Holder to the full extent permitted by law and to the and that this Warrant
instrument shall be deemed to be a valid and binding agreement in accordance
with its terms.
IN WITNESS WHEREOF, has caused this Warrant Certificate to be signed by its
duly authorized officers as of the Day of , .
NATIONAL BOSTON MEDICAL, INC.
By:
Name:
Title: President/CEO
EXHIBIT 4.2
Private Placement Memorandum Confidential Copy No._____
NATIONAL BOSTON
MEDICAL, INC.
12% Note due , 2001
and Redeemable Warrants
--------------------
This Price Placement Memorandum (the "Memorandum") relates to the sales
(the "Offering") by The Company, a Delaware Corporation (the "Company"), of
unsecured 12% Bonds, due three years from the date of issuance, together with
redeemable warrants (the "Redeemable Warrants").
Each Redeemable Warrant entitles the holder to acquire such number of
shares of common stock of the Company, zero par value (the "Common Stock"),
equal to the principal amount of the Bonds purchased (the "Warrant Shares")
together with the Redeemable Warrants and the Bonds, the "Securities"), at an
exercise price of $2.50 per share, subject to adjustment, at any time for six
years form the date of issuance. -------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND AN INVESTMENT
IN THE SHARES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
INVESTORS MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF THE
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME AND BE ABLE TO
WITHSTAND A TOTAL LOSS OF THEIR INVESTMENT.
------------------
Maximum Offering: $1,500,000 in principal amount
------------------
The date of this Private Placement Memorandum is February, 27 1998
<PAGE>
THE SECURITIES OFFERED HEREBY ("THIS OFFERING") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION THEREUNDER OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ---------------------
THE INFORMATION PRESENTED HEREIN WAS PREPARED BY THE COMPANY AND IS BEING
FURNISHED BY THE PLACEMENT AGENT SOLELY FOR USE BY PROSPECTIVE INVESTORS IN
CONNECTION WITH THIS OFFERING. THE PLACEMENT AGENT MAKES NO REPRESENTATIONS AS
TO THE FUTURE PERFORMANCE OF THE COMPANY. THE PLACEMENT AGENT EXPRESSLY
DISCLAIMS ANY REPRESENTATION RESPECTING ANY PROJECTIONS CONCERNING THE COMPANY'S
FUTURE OPERATING RESULTS OR MARKET ACCEPTANCE OF ITS PRODUCTS THAT ARE INCLUDED
IN THE MEMORANDUM.
THIS MEMORANDUM (TOGETHER WITH ANY AMENDMENTS OR SUPPLEMENTS AND ANY OTHER
INFORMATION THAT MAY BE FURNISHED TO PROSPECTIVE INVESTORS BY THE COMPANY)
INCLUDES OR MAY INCLUDE CERTAIN STATEMENTS, ESTIMATES AND FORWARD-LOOKING
PROJECTIONS OF THE COMPANY WITH RESPECT TO THE ANTICIPATED FUTURE PERFORMANCE OF
THE COMPANY. SUCH STATEMENTS, ESTIMATES AND FORWARD-LOOKING PROJECTIONS REFLECT
VARIOUS ASSUMPTIONS OF MANAGEMENT THAT MAY OR MAY NOT PROVE TO BE CORRECT AND
INVOLVE VARIOUS RISKS AND UNCERTAINTIES. THE PLACEMENT AGENT HAS NOT
PARTICIPATED IN THE PREPARATION OF, AND TAKES
<PAGE>
NO RESPONSIBILITY FOR, THESE STATEMENTS, ESTIMATES OR PROJECTIONS.
THIS MEMORANDUM DOES NOT PURPORT TO BE ALL-INCLUSIVE OR CONTAIN ALL
INFORMATION THAT A PROSPECTIVE INVESTOR MAY DESIRE IN INVESTIGATING THE COMPANY.
EACH INVESTOR MUST RELY ON HIS OR HER OWN EXAMINATION OF THE COMPANY AND THE
TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED IN MAKING AN
INVESTMENT DECISION REGARDING THE SECURITIES, A PROSPECTIVE INVESTOR SHOULD
CONSULT HIS OR HER OWN COUNSEL, ACCOUNTANTS AND OTHER ADVISORS AND CAREFULLY
REVIEW AND CONSIDER THE ENTIRE MEMORANDUM.
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL TO, OR A SOLICITATION
OF AN OFFER TO BUY FROM, ANYONE IN ANY STATE OR IN ANY OTHER JURISDICTION IN
WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED. EXCEPT AS OTHERWISE
INDICATED, THIS MEMORANDUM SPEAKS AS OF THE DATE HEREOF. NEITHER THE DELIVERY OF
THIS MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY AFTER THE DATE HEREOF.
EACH PURCHASER, PRIOR TO HIS OR HER PURCHASE OF THE SECURITIES OFFERED
HEREBY, SHALL HAVE THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE ANSWERS
FROM, A REPRESENTATIVE OF THE COMPANY AT ITS PRINCIPAL OFFICE DURING BUSINESS
HOURS, CONCERNING THE TERMS AND CONDITIONS OF THIS OFFERING AND TO OBTAIN ANY
ADDITIONAL INFORMATION WHICH THE COMPANY POSSESSES OR CAN ACQUIRE WITHOUT
UNREASONABLE EFFORT OR EXPENSE THAT IS NECESSARY TO VERIFY THE ACCURACY OR
INFORMATION FURNISHED IN THE MEMORANDUM. PROSPECTIVE INVESTORS WHO WISH TO
OBTAIN ANY SUCH INFORMATION SHOULD CONTACT DANIEL HOYNG, PRESIDENT, THE COMPANY,
43 TAUNTON GREEN SUITE 5, PO BOX 1161, TAUNTON, MA 02780, TELEPHONE (800)
807-2259.
ANY ADDITIONAL INFORMATION OR REPRESENTATIONS GIVEN OR MADE BY THE COMPANY
IN CONNECTION WITH THIS OFFERING, WHETHER ORAL OR WRITTEN, ARE QUALIFIED IN
THEIR ENTIRETY BY THE INFORMATION SET FORTH IN THIS MEMORANDUM, INCLUDING, BUT
NOT LIMITED TO, THE RISK FACTORS SET FORTH HEREIN.
THE INFORMATION CONTAINED IN THIS MEMORANDUM IS CONFIDENTIAL AND
PROPRIETARY TO THE COMPANY AND IS BEING SUBMITTED TO PROSPECTIVE INVESTORS SOLEY
FOR SUCH INVESTORS' CONFIDENTIAL USE WITH THE EXPRESS UNDERSTANDING THAT,
WITHOUT THE PRIOR EXPRESS WRITTEN PERMISSION OF THE COMPANY, SUCH PERSONS WILL
NOT RELEASE THIS MEMORANDUM OR DISCUSS THE INFORMATION CONTAINED HEREIN OR MAKE
REPRODUCTIONS FOR OR USE THIS MEMORANDUM FOR ANY PURPOSE OTHER THAN EVALUATING A
<PAGE>
POTENTIAL INVESTMENT IN THE SHARES.
A PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS MEMORANDUM, AGREES TO
PROMPTLY RETURN TO THE PLACEMENT AGENT OF THE COMPANY THIS MEMORANDUM AND ANY
OTHER DOCUMENTS OR INFORMATION FURNISHED BY OR ON BEHALF OF THE PLACEMENT AGENT
OR THE COMPANY IF THE PROSPECTIVE INVESTOR ELECTS NOT TO PURCHASE AN Y OF THE
SECURITIES OFFERED HEREBY.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C>
Summary................................................................... 1
The Offering.............................................................. 4
Summary of Financial Data................................................. 6
Investment Consideration.................................................. 7
Use of Proceeds........................................................... 9
Dividend Policy........................................................... 9
Business.................................................................. 10
Products.................................................................. 11
Market Research & Strategy................................................ 13
Operations................................................................ 16
Organization & Management................................................. 17
Financial Plan............................................................ 19
Description of Securities................................................. 19
Plan of Distribution...................................................... 20
Principal Stockholders.................................................... 21
Accounting Matters........................................................ 22
Additional Information.................................................... 22
Exhibit A - Developmental Time Line..........................................A-1
Exhibit B - Consolidated Financial Statements of the Company.................B-1
Exhibit C - Consolidated Financial Projections of the Company and
Related Assumptions for Fiscal years 1998 through 2002.....C-1
Exhibit D - Investor suitability Requirements................................D-1
Exhibit E - Note with Warrant Term Sheet.....................................E-1
Exhibit F - VIRUSHIELD Test Results..........................................F-1
</TABLE>
**************************************
VIRUSHIELD (R) is a registered trademark of the Company.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the financial statements and bonds
thereto, appearing elsewhere in this Memorandum. References herein to The
Company or the Company refer to The Company and its consolidated subsidiaries,
unless the context otherwise indicates. This Summary contains certain
forward-looking statement, including statements relating to the timing of
commercial introduction of certain of the Company's products under development.
The Company's actual results could differ materially from the results
anticipated in these forward-looking statements, as a result of certain of the
factors set forth under "Risk Factors" and elsewhere in this Memorandum.
The Problem
Several factors, including the increased resistance of infectious agents to
existing medications, have caused the nonsocomial infection rate to increase in
hospitals throughout the United States. The physician's offices are the subject
of increasing attention and litigation instigated by patients and insurance
providers. The public is increasingly aware of the problem regarding
transference of disease and bacteria through contact. Restaurants, banks, and
other businesses lose billions of dollars each year due to employee illness
contracted through public contact.
The Product
VIRUSHIELD is a unique, new, long-lasting anti-microbial lotion that:
a Removes dead cells and prepares the skin for steps 2 and 3;
b Distributes healing and anti-microbial agents over the entire skin surface,
killing many germs and viruses on contact; and
c Binds the essential protective elements to the skin and forms a waterproof
barrier.
The most significant benefit is that tests of VIRUSHIELD by FDA approved labs
verify that this protection lasts up to four (4) hours, even with repeated hand
washings. (Exhibit F)
The Company
The Company, whose primary asset is the exclusive and sole right to sell
and market VIRUSHIELD in the worldwide market. Manufactured by an FDA certified
product manufacturer, VIRUSHIELD will serve as the prevention flagship product
of the company. The Company is a medical distribution company, which holds the
patent pending for VIRUSHIELD. It seeks to add new innovative medical products
either through acquisitions or development.
The company is run by a team of seasoned professional with over 75 years
combined experience in sales and marketing, with a concentration on the health
care filed. The company plans to utilize this team to realize strategic growth
at an accelerated pace focusing on the markets with the highest probability of
success during the first two years of its existence. (See exhibit A)
VIRUSHIELD will be shipped and packaged in case quantities and will be targeted
to distribution channel, which address the following market segments:
<PAGE>
a Medical and health care, including physicians, dentists, home health
care attendants, long-term care facilities, day care centers and
hospitals.
b Commercial applications which will include, but not be limited to,
restaurants and fast food outlets, the airline industry, banks,
grocery stores, and convenience stores.
c Government institutions, national, state and local, including
hospitals, schools, military and other public oriented offices.
d International distribution channels are being established for the
delivery of the product on a global basis.
e Direct delivery to consumers who wish to benefit from the product.
Exciting New Developments
The company has the following contracts or ongoing negotiations with:
a Maui Dreams Corporation, Inc. (DBA Med-West Distribution, Inc.)- The
Company has entered into an agreement with this distribution company
to begin to move our product into the pacific rim. They also have
created an interest with several large retail marketing companies
(Amway, Mary Kay and Avon to name a few) to potentially private label
and license or product of their distribution. This contract calls for
just over $2,000,000.00 in projected revenue during 1998.
b Leosons of Albany, New York - the Company has entered into an
agreement which calls for over $1,000,000 in sales in 1998. The first
portion of the order is being finalized, it appears over $270,000 will
be shipped to Saudi Arabia. Leosons have retained exclusive rights to
Saudi Arabi. Leosons have retained exclusive rights to Saudi Arabia,
Lebanon, Jordan, Syria Yeoman, Oman Qutar, Bahrain Yoe, USA in
exchange for their order. In order to maintain exclusive rights their
contract requires $1,000,000.00 in sales in 1998.
c Investment International is a large Florida based company who exports
Internationally. On February 5, 1998 the Company entered into a
contract to export $500,000 worth of product in 1998. They plan to
export to Italy and several South American countries. (For additional
prospects see Exhibit G)
The Opportunity
Due to current and skyrocketing product demand and a virtually unlimited
number of potential users of VIRUSHIELD, the demand for the product could exceed
the physical limitation of product availability and the company's capacity to
fulfill orders.
Thus, The Company seeks to raise $1,500,000 through the sale of bonds. The
returns to a qualified investor at this time should be excellent. (See attached
Pro Forma)
<PAGE>
Summary
The funds raised will allow the company to meet current demand and increase
the sales volume of the product which should precipitate the launch of a public
stock offering within the first 24 months, providing that market conditions are
favorable. This offering will enable the company to expand into new markets,
increase its number of products, and provide initial stage investors an
opportunity to maximize the return of their investment.
<PAGE>
THE OFFERING
Securities Offered
By
the Company: A maximum of $1,500,000 in principal amount (the "Maximum
Amount") of unsecured 12% Bonds due 2001 together with Redeemable Warrants.
The Bonds and Redeemable Warrants will be detachable and separately
transferable subject to restrictions described below.
Each Redeemable Warrant entitles the holder to acquire the number of shares
of Common Stock equal to the principal amount of the Bonds purchased, at an
exercise price of $2.50 per share, subject to adjustment, at any time for
six years form the date of issuance.
Maturity Date: Three years form the issue date of the Note.
Interest Payment
Date: Semi-annually on , 2001.
Minimum
Investment: [$25,000] in principal amount.
Sinking Fund: A 5% sinking fund of gross sales revenue will be established
for the retirement of the Bonds.
Ranking: The Bonds will be unsecured obligations of the Company and
will rank Pari Passu with all other existing and future
unsecured and subordinated indebtedness of the Company. The
Bonds will subordinated to (i) al existing and future
secured indebtedness of the Company, to the extent to the
value of the assets securing such indebtedness and (ii) all
existing and future senior indebtedness of the Company.
Capitalization: As of February 27, 1998, prior to the offering, 4,005,000
shares of common stock were outstanding. Warrants for
730,000 shares of common stock have been issued from a prior
offering. 400,000 warrants for common stock will be issued
in connection with this offering, and an additional 300,000
warrants are available to use at the discretion of the Board
of Directors of National Boston Medical, Inc.
Registration Rights:Demand Rights: At any time later than 12 months after an
initial public ------------- offering of equity securities
of the Company, holders of the Redeemable Warrants
representing at least 10% of all outstanding Warrant Shares
shall have the right to require the Company to file a
registration statement for the Warrant Shares. The Company
shall not be obligated to effect more than one registration
for each holder under this demand right provisions.
<PAGE>
Piggyback Registration: If at any time the Company
determines to register any equity securities, holders of the
Warrant Shares shall be entitled to have their equity
securities included in such registration. The number of the
Warrant Shares included in any registration shall be subject
to reduction at the discretion of the underwriters.
Expenses: The registration expenses (exclusive of
underwriting discounts and marketing expenses) and fees of a
single special counsel for the selling holders in each
demand and piggyback registration shall be borne by the
Company.
Sales to Investors: The offering of the Bonds have not been registered under the
Securities Act and the Units and the securities contained
therein are being offered in reliance upon the exemption
from registration under Sections 4(2) of the Securities Act
and the provisions of Regulation D promulgated thereunder.
Sales of the Bonds will be made only to "accredited
investors" as such term is defined in rule 501(a) of
Regulation D under the Act.
Absence of Market: No trading market exists for the Securities or the Common
Stock and its is not anticipated that an active market, if
any, will develop after the consummation of this Offering.
The Bonds, Redeemable Warrants and Warrant Shares will be
"restricted securities" under the Act and may not be resold
absent registration, or an available exemption thereunder,
such as Rule 144 promulgated under the Act, assuming certain
conditions are satisfied. There can be no assurance that
these conditions will ever be met.
Terms of the
Offering: The Bonds are being offered on a "best efforts, all or none"
basis as to the first $25,000 in principal amount and on a
"best efforts" basis as to an additional $1,475,000 in
principal amount. The Company may refuse any subscription,
in whole or in part. There is no assurance that the Maximum
Amount will be sold. The Company reserves the right to pay a
finders fee of the purchase price and reasonable expenses of
the purchase price to certain affiliates who introduce
investors to the Company. See "Plan of Distribution"
The Offering will expire on the earlier to occur of (I)
April 1, 1998, unless the Company agrees to extend this
Offering for an additional period not to extend beyond June
1, 1998 (the "Termination Date") and (ii) the sale of all of
the Bonds.
Use of Proceeds: The net proceeds of this Offering will be used for: (I)
research and development, (ii) marketing and sales, (iii)
repayment of certain indebtedness and (iv) working capital
for general corporate purposes. See "Use of Proceeds."
<PAGE>
Risk Factors: An investment in the bonds offered hereby involves
a high degree of risk. Prospective investors should review
carefully the information under "Risk Factors" and should be
able to withstand the loss of their entire investment.
<PAGE>
Summary Financial Data
The financial projections of the Company being furnished to prospective
investors in connection with the sale of the bonds are based on assumptions that
the Company believes are reasonable as of the date of this Memorandum. Such
assumptions may be incomplete or inaccurate, and unanticipated events and
circumstances may occur that could have a material adverse effect on the
Company's ability to achieve these projections. The financial projections
presented below are forward-looking projections that involve a number of risks
and uncertainties. In addition to the assumptions discussed above, among other
factors that could cause actual results to differ materially are the following:
dependence on medical advancements, market acceptance, government regulation and
the risk factors described elsewhere in this Memorandum. The projections should
be read in conjunction with "Risk Factors," and the Company's consolidated
financial statements included elsewhere in this Memorandum.
<TABLE>
<CAPTION>
Actual Projected
------------------- -------------------------------------
From Inception to Fiscal Year Ended December 31,
12/31/98 1998 1999 2000
-------- ---- ---- ----
<S> <C> <C> <C> <C>
Statement of Operations Data:
Sales.............................. $122,684 $6,757,169 $13,514,339 24,913,796
Cost of Sales...................... 18,600 1,419,005 2,838,001 5,231,897
Gross Profit....................... 104,084 5,338,164 10,676,328 19,681,899
Operating Expenses................. 632,600 2,607,129 3,528,911 3,910,694
Net Income (Loss)..................($528,516) $2,731,035 $7,147,417 15,771,205
---------- ---------- ---------- ----------
</TABLE>
December 31, 1997
<TABLE>
<CAPTION>
Actual
Balance Sheet Data:
<S> <C>
Cash....................................................................$ 29,842
Total Assets............................................................ 239,118
Total Liabilities....................................................... 285,788
Stockholders' Equity.................................................... 531,846
</TABLE>
<PAGE>
INVESTMENT CONSIDERATIONS
The investment considerations discussed below are qualified by the more
detailed information, including "Risk Factors" and financial statements and
bonds thereto, appearing elsewhere in this Memorandum. These Investment
Considerations contain certain forward-looking statements. The company's actual
results could differ materially from the results anticipated in these
forward-looking statements, as a result of certain factors set forth under "Risk
Factors" and elsewhere in this Memorandum.
Medical Advancements Provide Competitive Advantage
The Company has developed a new product called VIRUSHIELD. This amazing new
product provides a new three level delivery platform to the epidermal layer
of the skin. The first level provides healing and moisturizing through the
epidermal layer, while the second level creates a barrier (an invisible
glove) protecting the skin from penetration of blood, urine, latex proteins
and many of their items. The third level provides protection for up to four
hours from bacterial products presently available. This delivery platform
will provide a base for future product development.
Near Term Commercial Products
The Company presently is researching a foot product that utilizes our
medical improvements to provide a new level of relief from the common foot
funguses and bacteria's. Our goal to release the product late during the
fourth quarter of 1998 or the first quarter of 1999. Additional uses for
our product being developed are products for contact dermatitis and variety
of other skin irritations. It is the Company's medical advancements, which
provides a delivery system to the epidermal layer and a level of
protection, which accelerates the healing process over current products.
Our medical advancement reduce the cost of treating skin irritations.
Prominent Medical Advisory Board
The Company is assembling an impressive group of Doctors from around the
country who will be our Company's medical advisory board. This Doctor
advisory will review new and existing applications of VIRUSHIELD and aid in
the development of new products.
Patent Pending & Trademarking
Curtis L. Harrington & Associates, Patent Attorneys of Long Beach,
California recently filed our Patent Pending for VIRUSHIELD and the
Trademark for this product. This patent pending will Protect the rights of
our product and prevent any duplication of our delivery platform. This
patent pending should enable us to become the market leader in
antibacterial and antiviral products.
<PAGE>
Market Awareness & Product Distribution
The Companies market is a two tiered market. The first tier would be to the
distributors to the healthcare professionals (physicians, dentists, nursing
homes etc.) This is pretty straightforward in that the healthcare community
has already accepted the fact that protection from cross contamination in
the office or institution is essential, so at this level our mission is to
sell the product. The second tier would be distributors who service
restaurants and industry where the Company must sell both the concept of
good hygiene (due to changing hygiene practices) in the home as well as
selling our product. Therefore by utilizing our contacts, who presently
serve the restaurant industry, the Company can both increase awareness and
capitalize on VIRUSHIELD's uniqueness. The use of VIRUSHIELD in the
workplace will lead to an eventual consumer demand, which can be launched
at a later date.
Why The Company Will be Successful
The Company customer base is limitless. The Company is targeting the
healthcare professionals from physicians and dentists to institutions, such
as nursing homes and home healthcare organizations. The Company recognizes
that this is only the starting point. There is an increasing awareness in
this country of the transference of bacteria and viruses through hand
contact. As this contact awareness grows outside of the health care
industry and spreads to the general population, the Company can further
capitalize on the uniqueness of VIRUSHIELD in areas such as restaurants,
food service, daycare, hotels, ect.... Therefore, the opportunities for
VIRUSHIELD go well beyond our initial thrust.
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Bonds and Warrants
offered hereby (after deducting Placement Agent fees and estimated Offering
expenses) are estimated to be approximately $1,300,000.
The Company intends to use the net proceeds form this Offering for the
following purposes: (i) research and development, (ii) marketing and sales,
(iii) repayment of certain indebtedness and (v) working capital for general
corporate purposes. Pending use of the net proceeds for the above purposes, the
Company plans to invest the net proceeds of this Offering in short-term,
investment grade, and interest-bearing securities. The actual use of the
proceeds could differ materially from those outlined above as a result of
several factors including "Risk Factors" generally associated with investments
of this type. The Company believes that the anticipated proceeds from this
Offering with interest hereon and the Company's existing capital resources will
be sufficient to fund its operations as ongoing concern. The Company reserves
the right to increase or decrease the size of this Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
USE OF PROCEEDS
<S> <C>
MAXIMUM
Working Capital $450,000
Inventory VIRUSHIELD/Payment $465,000
to South Atlantic Industries
Retirement of short and long-term $ 46,700
Agent placement fees and offering expenses $195,000
Product Testing/FDA Approved Labs $ 53,300
Research and Development $120,000
Marketing and Advertising $170,000
TOTAL $1,500,000
</TABLE>
DIVIDEND POLICY
The policy of the Company is to retain earnings to provide funds for the
operation and expansion of its business and, accordingly, the Company has paid
no cash dividends on its capital stock and does not anticipate that it will pay
dividends on its capital stock in the foreseeable future. Any payment of future
cash dividends and the amounts thereof will be dependent upon the Company's
earnings, financial requirements, and other factors deemed relevant by the
Company's Board of Directors.
<PAGE>
BUSINESS
This Memorandum contains certain forward-looking statements within the
meaning of the federal securities laws. Actual results and the time of certain
event could differ materially from those projected in the forward-looking
statements due to a number of factors, including those set forth under "Risk
Factors" and elsewhere in this Memorandum.
Introduction
The Company is a Massachusetts based Delaware Corporation founded
specifically to market innovative and unique products developed and manufactured
throughout the world.
The first product to be rolled out is VIRUSHIELD. VIRUSHIELD is an FDA
registered, anti-cross infectant barrier that when applied properly to the hands
provides continuous waterproof protection against viruses and bacteria such as,
but not limited to E. Coli, Staph. Aureus, Steptococcus, Salmonella, Rhinovirus,
Hepatitis A, Herpes I & II, Polio Virus and Rotavirus.
Currently the Company marketing strategy includes marketing to distributors
who service restaurants, healthcare facilities, and doctors. In addition, is
targeting international distributors to export VIRUSHIELD.
Mission
The Company is a dynamic growth company with a vision toward introducing
quality innovative products for the health care industry, expanding to other
businesses as appropriate. VIRUSHIELD will be target marketed to an audience
consisting of healthcare professionals to include physicians, dentists, home
health care attendants, long term care facilities and hospitals. Additional
target markets will include but not be limited to restaurants, day care centers,
and the airline industry.
Industry Overview
VIRUSHIELD and subsequent products will be introduced into an industry
dominated by Fortune 100 companies such as Procter & Gamble, Johnson & Johnson
and many other major pharmaceutical concerns. In order to overcome the barriers
to entry set forth by these traditional companies, the Company has engaged a
marketing and distribution strategy, which embraces the role of the Company
clients as a key element in reaching the consuming public. With VIRUSHIELD as
the flagship produce The Company is in a position to capitalize on the emerging
awareness of the public to the problem of cross contamination.
<PAGE>
PRODUCTS
VIRUSHIELD is chemically engineered through the use of naturally occurring
ingredients found throughout the world. Future products from The Company will be
introduced only after intense scrutiny of the uniqueness and quality of the
product, the needs of our present and future clients, and the condition of the
marketplace.
Description
VIRUSHIELD - Is a revolutionary, anti-microbial moisturizing lotion. It
disinfects the skin, while providing continuous anti-bacterial and anti-viral
protection for a minimum of four hours. Simultaneously, VIRUSHIELD forms a
waterproof layer, which enhances healing and protects the skin's surface.
Product Testing
VIRUSHIELD has been tested by FDA-certified, independent labs, and in beta
sites, all with significantly positive results. Independent lab tests indicated
that for the most-difficult-to-eradicate bacteria and viruses, VIRUSHIELD has
demonstrated unprecedented kill rates. Laboratory tests have demonstrated that
over a 4-hour period of time, VIRUSHIELD exceeded expectations. IN beta test
sites, informal interviews with VIRUSHIELD users indicated that awareness of
infection control was heightened, and even traditional methods of infection
control, including hand washing was increased. The reasoning provided by the
users was the VIRUSHIELD not only seemed to help decrease the length and
severity of their own personal illnesses, but because VIRUSHIELD also provides a
waterproof protection to the hands, washing was not as aggravating to the skin
and thus was done more frequently. Dry, chapped and irritated hands were also
reported to have shown significant improvement by healthcare workers.
More detailed testing is an ongoing priority for VIRUSHIELD.
Quality Level
VIRUSHIELD has been subjected to numerous toxicological and antimicrobial
assays at FDA certified laboratories that confirm its safety and efficacy.
Breadth Of Product Line
VIRUSHIELD is the initial product the Company will introduce first to the
medical and restaurant community, then branch out to other market segments, and
finally the consuming public. Future products are slated which utilize the same
chemical engineering to reduce microbial growth and cross-contamination in
strategically selected multiple areas.
The company realized the need for ongoing, strategic product innovations
based on marketplace needs and is currently poised to introduce new product
lines in to the healthcare industry.
<PAGE>
South Atlantic Industries
South Atlantic Industries is a private label manufacturer of OTC syrups and
suspensions, lotions, soaps, cremes and gels. South Atlantic Industries have
been in business since 1991. South Atlantic Industries is a contract
manufacturer for National Boston Medical, Inc.
South Atlantic Industries capabilities include manufacturing to the
customer's specifications, filling bottles, jars, tubes and bag-in-boxes. South
Atlantic has in-house silk screening, labeling and tamper evident sealing
capabilities.
South Atlantic Industries is a FDA registered facility and adheres to GMP
guidelines.
South Atlantic Industries has been contracted to be the primary production
facility for VIRUSHIELD. Roger Perry, its president was instrumental in the
development of VIRUSHIELD.
MARKET RESEARCH & STRATEGY
Market Trends
Physicians and healthcare workers are beginning to recognize the current
market place's level of risk. The world's population is multiplying at an
uncontrollable rate; the volume of international travel has sharply increased;
more people today are living in clusters (urban versus rural areas);
drugresistant bacteria is increasingly prevalent; antibiotics are significantly
overprescribed, rendering them less effective; and people are more aware of the
need to protect themselves from cross contamination. The World's population is
significantly more vulnerable with the movement of people from country to
country, new strands of bacteria and viruses are introduced each day.
The global consumer is also becoming aware and concerned about the
emergence of new infectious microorganisms, as well as the reemergence of others
that were once thought to be eradicated or under control. Thus, consumers are
looking for ways to better protect themselves and their families from the risks
associated with infection. VIRUSHIELD is a product that enables the consumer to
take an active role in prevention and reduction of infection through the use of
a unique anti-cross contaminant barrier.
Competition
In a doctor's office, the products that are presently used to control the
spread of infection include latex gloves, surgical scrub solutions, alcohol gels
and barrier lotions. These products provide benefits; however, latex gloves
protect only the person wearing them as microbes can be spread from the exterior
of the glove. Surgical scrubs are effective, but temporary; as soon as the clean
hand contacts a microbe, the surface is compromised and becomes a potential
cross contaminating factor. Alcohol gels and barrier lotions may be effective at
killing some microbes, however, they can have a harsh effect on the skin with
frequent use. In addition, these alcohol products do not provide a
time-activated, waterproof barrier. These factors can lead to a false sense of
protection, or time gaps in usage, which may lead to additional cross
contamination factors.
<PAGE>
The following may be considered by the public as competitive products: Keri
Lotion, Derma Shield, Dermaplus, Purell, and Bactiguard. Each are examples of
products currently marketed which claim to provide some antibacterial effect.
These products are not time activated, waterproof or antiviral.
The following is a comparison that shows VIRUSHIELD versus or primary
competition.
<TABLE>
<CAPTION>
VIRUSHIELD
THE 3 PRODUCTS IN ONE DIFFERENCE PRODUCT COMPARISON
VS. PURELL
<S> <C> <C>
1. Kills most Bacteria on contact yes yes
(Staph, e-coli, pseudomonas, salmonella)
2. Kills most Viruses on contact
(rhinovirus, common cold, hepatitis A) yes no
3. Kill rate stability for 4 hours yes no
4. Test results published in literatures yes no
5. Barrier protection impervious to body fluids yes no
6. Waterproof film protects from frequent
hand washing yes no
7. Long lasting antimicrobial protection
for 3-4 hours yes no
8. Barrier protects against skin irritants, such
as latex proteins yes no
9. Includes vitamins and nutrients for healthy
skin yes no
10. Moisturizes and conditioners without alcohol
and refresh dry and cracked skin. yes no
</TABLE>
Marketing Rollout
The Company has developed a strategy to identify 5 market segments, 1)
Hospital, Medical, Dental, 2) Nursing Homes and Day Care Facilities, 3)
Commercial, 4) Government and 5) International. It is the intent to enter into
contracts with existing distributors to penetrate market segments.
o Market Segments - VIRUSHIELD is applicable in many different types of
businesses. Each different business contains opportunities for our
product. At this time the Company has decided these markets into five
segments.
(A) Hospital, Medical & Dental - These medical markets are all very aware
of the problems of bacteria and viruses in the workplace and represent
the easiest entry for VIRUSHIELD into the marketplace. The barrier
properties of VIRUSHIELD play a significant role in this medical
segment, industry estimates that over 15% of healthcare workers suffer
form some
<PAGE>
for of Latex Intolerance. All early materials were targeted at this
segment and presently the Company is under negotiation with multiple
large distributors, including BAS International, Johnson & Johnson and
McKesson
(B) Nursing Homes & Day Care Center - This market is very similar to the
first segment, due to government regulations. This effects how
VIRUSHIELD can be paid for and what portion of the budget can be
applied to VIRUSHIELD for effective cost reporting. Many Nursing Homes
rely on government reimbursement, and our opportunities may be
slightly limited based on these reimbursement structures. However, the
problem of cross contamination is so high in these areas that the
Company feels confident the Company can capture a significant portion
of the market.
(C) Commercial - Grocery Stores, banks and all other businesses are
categorized as commercial. Unlike the above two categories where
knowledge of bacteria and viruses have always been a well documented
part of the work place, only recently have a non medical related
businesses bean to review how cross contamination in the work place
increases sick days. Institutions can have a substantial impact on the
earnings of a company. The Company plans to penetrate this area slowly
and already introduced the VIRUSHIELD product to Publix, Kroger,
Winn-Dixie and other commercial institutions. Initial indications are
suggesting that our sales projections may be conservative.
(D) Government- Government represents many market segments. Our primary
focus is Veterans Hospitals that are located across the United States.
This government area has substantial upside, however government
bureaucracy and the bid system are expected to delay our entry into
this market.
(E) International - Exporting our product has significant upside. The
Company has entered into agreements with Maui Dream Inc., Investment
International and Leosons which together have a potential to reach
sales of $3,000,000 in 1998. This market segment could quickly double
or triple our projections based on the contracts the Company has
executed and the additional interest the Company are developing at
this time.
Advertising and Promotion
The Company recognizes the need for product exposure and has undertaken an
aggressive approach of attending local, regional and national trade shows to
promote VIRUSHIELD. The Company will also be planning direct mail, journal
advertising and client testimonials to increase awareness of the growing
vulnerability to the public to cross contamination.
Channels of Distribution
Distributors will distribute VIRUSHIELD directly to their business on
behalf of the Company. The product will be available in a variety of sizes and
dispensing systems.
<PAGE>
Pricing
VIRUSHIELD will be priced at a competitive level and there are volume
discounts available for large direct purchasers.
Sales Forecast
Projected sales are based on several variables such as the number of
distributors in the field, exporting the product internationally and developing
a relationship to private label VIRUSHIELD and distribute direct to the
consumer.
OPERATIONS
Quality Control
The manufacturing process of VIRUSHIELD will include a thorough and
multilevel quality control process. The Company applies a self-imposed,
voluntary, pharmaceutical standard for manufacturing.
All shipments are inspected upon receipt. Distributors are reasonable for
examining any product installed or delivered. Distributors are responsible for
ensuring their distributors clients' continued satisfaction with product
quality. The Company will also conduct random sampling of distributor's
customers to assure quality and satisfactory service.
Distributors
A comprehensive training program will be established for all new
distributors and their sales force. The overall training program will address
and introduce the distributors and their sales force to:
Philosophy of Company
Product Information
Industry Overview
Service Responsibilities and Commitment to Customer Service
Research and Development
The Company and South Atlantic Industries will be responsible for all
product research and development. The Company will as look to acquire additional
products through acquisitions to provide new opportunities for our distribution
system.
ORGANIZATION & MANAGEMENT
Legal Form of Organization
The Company is a Delaware Corporation.
<PAGE>
Daniel Hoyng is management and sales professional with more than a decade of
management experience. He most recently served as a vice president of marketing
and sales for Companion Radio, where he was responsible for the development of a
sales force and launch of the product to the long term care industry.
Previously, he functioned as a Divisional Director for Healthcare Services
Group, Inc., a company specializing in housekeeping and laundry services to the
long term care industry. Prior to that, Mr. Hoyng served as a Sales Manager and
then General Manager for ARA/Cory Refreshment Services. He holds a bachelor's
degree in Communications from Saint Joseph's College and has completed
additional master's level work on a Masters of Religion at the Athenaeum of
Ohio.
Bruce Randall is a sales and management professional with more than a decade of
experience in the electronic field. He most recently served as Director of Sales
and Marketing for Handy & Harman Electronic Materials Corporation,, where he was
invited to return and develop an international sales force for their Electronic
Materials Division. During his tenure he worked to establish strategic working
relationships with companies in his chosen focus markets. Previously Mr. Randall
has held Sales management positions with Judd Wire and Sumitomo Electric and
Montrose Products Company. He also played a key role in the start up company
Reel-Tech where he was Operations Manager. Mr. Randall holds a Masters of Arts
degree in International Business from Johnson and Wales.
Raymond G. Volpe has compiled an exemplary professional career in the
educational and business environments. He earned a B.S. in secondary education
at the University of Scranton in 1971, M.S. in history at Iona College in 1975
and professional certificate in administration and supervision at new Paltz
State in 1976. The past 17 years have been devoted to the financial and
healthcare arena. Raymond is a student, teacher, public speaker, motivator and
leader. Currently, Mr. Volpe is passionately active in healthcare as both a
consummate professional and personal care giver.
Ralph Kristiansen is an engineering professional, and has been in sales
management with more than 30 years experience. Most recently is a partner in
Systems Technology, an engineering, fabrication and automation company, which
manufacture and build one of a kind highly technical production equipment.
Systems Technology has worked on projects for Patriot Missle, Seaman, Northfolk
Southern, Chrysler, etc. Previously Mr. Kristiansen was engineering manager for
Virginia Plastics, where he holds two patents on modular connectors.
Robert Vincent Allen having participated in the explosive growth of the Silicon
Valley since 1980, Mr. Allen has been a telecommunications consultant, system
engineer, marketing manager, sales person and corporate educator. His technology
expertise includes voice networking, video conferencing and wide are data
communications for corporations such as Fujitsu, ROLM, IBM and Siemens. Mr.
Allen received his bachelor's degree from Ohio State University and graduated
from the IBM executive management-training program.
Patrick Michael Lawless has been employed by Sprint Communications Corporation
for over eight years. He was responsible for the development of the Alternative
Channels Division in California and Nevada. The territory now generates revenue
of $120 million annually. Mr. Lawless was responsible for Hiring of over 100
Authorized Agents under Contract with Sprint. He also helped
<PAGE>
develop the Marketing and Sales Material, as well as the training curriculum for
the Partners Program. The Alternate Channels Group now makes up 25% of the
Spring Long Distance Division Core Business. Mr. Lawless was honored as
Presidents Club Winner in 1996 and 1997 for growing the Alternate Channels
Division. He received his Bachelors of Science Degree from Kansas State
University in 1987. Patrick and his wife Robin our Parents of twin boys Zachary
and Sean, born February 1996.
The executive officers, key employees and Directors of the Company
are as follows:
<TABLE>
<CAPTION>
NAME POSITION
<S> <C>
Daniel Hoyng President, Chairman of the Board
Bruce Randall Executive Vice President, Clerk
Raymond Volpe Divisional Vice President Southeast, Director
Ralph Kristiansen Divisional Vice President MidAtlantic, Director
Patrick Lawless Divisional Vice President Southwest, Director
Robert Allen Divisional Vice President Northwest, Director
</TABLE>
FINANCIAL PLAN
Initial Financial Requirements
The nature of our marketing strategy, lends itself to a business that
requires $1,500,000 capital during start-up and ultimately provides a generous
cash stream for continued growth and expansion.
Exit Strategy
The Company recognizes the global possibilities of the product VIRUSHIELD.
The company expects the need for capital to arise for the expansion of the
business and anticipates a public offering in 12-24 months. The officers of
National Boston medical, Inc. has visited and made numerous contacts with
various financial institutions and planners who are very excited about the
possibility of brining National Boston medical, Inc. to public in 1999 when the
company achieves the anticipated forecasts for 1998.
Employees
As of January 1, 1998, the Company employed 10 people, two or whom is
employed on a part time basis. Management believes its labor relations are
satisfactory.
<PAGE>
Litigation
The Company currently has filed a lawsuit to collect an unpaid dept of
$18,700. The Company is not part to any additional litigation.
Properties
The Company currently leases its corporate offices located at 434 Taunton
Green, Third Floor, Taunton, Massachusetts 02780. The Company believes it has
adequate space to conduct its operations.
DESCRIPTION OF SECURITIES
The Company is offering minimum of $25,000 in principal amount and a
maximum of $1,500,000 in principal amount of unsecured 12% Bonds due , 2001
together with six year warrants to purchase Common Stock. The Bonds and
Redeemable Warrants will be detachable and separately transferable subject to
restrictions imposed by the Securities and Exchange Act of 1933, as amended.
Principal together with interest on the Note will accrue semi-annually at
the rate of 12% per annum and will be due and payable on , 2001.
Each Redeemable Warrant entitles the holder to acquire such number of
shares of common stock of the Company, par value zero (the "Common Stock"),
equal to the principal amount of the Bonds purchased at an exercise price of
$2.50 per share, subject to adjustment, at any time for xis years from the date
of issuance.
PLAN OF DISTRIBUTION
Placement Plan
The Minimum Offering of $25,000 in principal amount (the "Minimum Amount")
of the Bonds is being offered on a "best efforts, all or none" basis and the
remaining $1,475,000 in principal amount (the "Maximum Amount") are being
offered on a "best efforts" basis. All funds received from subscribers to the
Bonds will be held in an non-interest bearing escrow account for the benefit of
the subscribers by [BankBoston] (the "Escrow Agent") until a Closing on such
Bonds or earlier termination of this Offering. This Offering will expire on the
earlier to occur of (i) April 1, 1998, unless the Company agrees to extend this
Offering for an additional period not to extend beyond June 1, 1998 (the
"Termination Date") and (ii) the sale of all of the Bonds. In the event that
subscriptions for the Minimum Amount, are not received by the Termination Date,
the Offering will terminate and all funds will be returned promptly by the
Escrow Agent without any deduction therefrom or interest thereon. The Bonds will
be offered in denominations of [$25,000] with a minimum purchase of $25,000 in
principal amount per investor and integral multiples thereof, the principal
amount. Pending each Closing, subscriptions to be accepted at such Closing may
be revoked, provided that the written notice of revocation is sent by certified
or registered mail, return receipt requested, and is received by the Company at
<PAGE>
least two business days prior to the Closing. Refunds shall then be promptly
made without interest and without deduction. The Bonds will be delivered
promptly to subscribers after each respective Closing.
The Company shall pay a finders fee of 13% of the principal amount of Bonds
placement to agents, who introduce investors to the Company.
The Company reserves the right, in its sole discretion, to reject any
subscription in whole or in part for any reason.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 1, 1998 by (i) each
person who is known to the Company to own beneficially more than 5% of the fully
diluted shares of the Company's Common Stock; (ii) by each director and officer
of the Company; and (iii) by all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
Number of Percentage of Shares
Name and Address Shares Owned After Offering
<S> <C> <C>
Daniel Hoyng 750,000 15%
310 Nichols Drive
Taunton, MA 02780
Bruce Randall 750,000 15%
59 Michael Dr.
Bristol, MA 02809
David Woo 450,000 9%
75 Gulfstream Rd.
Suite 107
Dania, FL 33004
Arden Schwartz 450,000 9%
75 Gulfstream Rd.
Suite 107
Dania, FL 33004
Robert Allen 300,000 6%
225 Bay Street
Apt. 104
San Francisco, FA 94133
<PAGE>
Raymond Volpe 300,000 6%
7800 Fairway Trail
Boca Raton, FL 33487
Ralph Kristiansen 300,000 6%
1095 Lakewood Forest Rd.
Moneta, VA
Patrick Lawless 300,000 6%
21 Bawley St.
Laguna Niguel, CA 92677
</TABLE>
Common Stock
As of the date of this Memorandum, there were 4,005,000 shares of Common
Stock issued. Upon completion of this offering, there will be 5,000,000 shares
of stock issued. An additional 10,000,000 shares is authorized, but there are no
current plans to issue. The holders of Common Stock are entitled to one vote for
each share held of record on all matters submitted to a vote of the
stockholders. In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share equally (based on
number of shares held) in all assets remaining after payment of liabilities and
liquidation preferences of any outstanding Shares. Holders of Common Stock have
no rights to convert their Common Stock into any other securities. All shares of
outstanding Common Stock are fully paid and nonassessable. There are presently
no agreements for special voting rights or rights of first refusal. The Company
presently has 590 shares of Preferred Stock authorized.
ACCOUNTING MATTERS
Independent Accountants: Keane, Chiuve & McGillivray, P.C.
100 Conifer Hill Drive
Suite 507
Danvers, MA 01923
ADDITIONAL INFORMATION
Prospective investors are invited to review any materials available to the
Company relating to its operations and any other matters regarding this
memorandum or this Offering. Arrangements to see or receive such materials may
be made by calling Daniel Hoyng, President or Bruce Randall, Chief Operations
Officer at 1-800-807-2259. Management will make available to prospective
investors the opportunity to ask questions of and receive answers from its
representatives concerning the terms and conditions of this Offering and to
obtain any additional information relevant to evaluating an investment in the
Shares or to verifying the accuracy of the information set forth herein, to the
extent that management possesses such information or can acquire it without
unreasonable effort or expense.
<PAGE>
EXHIBIT A
THE DEVELOPMENT TIMELINE
This Exhibit contains certain forward-looking statements, including
statements relating to the timing of some of the Company's products. The
Company's actual results could differ materially from the results anticipated in
these forward-looking statements, as a result of certain of the factors set
forth under "Risk Factors" and elsewhere in this Memorandum.
The following timeline indicates the quick development of The Company Many
company take years to bring a concept from idea to an actual sale.
The Company has progressed at a pace that will allow the company to
progress from an idea to a net profit in less than a year.
The Company
Developmental Time Line
April, 1997 Enter into agreement with manufacturer to test potential
marketability of Revolutionary Antimicrobial Moisturizing Lotion.
Search for office and warehouse space. Att3end various meetings
around the US regarding inspection and development. Office
planning, determine equipment, specifications, equipment ordering
and delivery.
May 13, 1997 Office opens with Daniel Hoyng and Administrative Assistant.
Bruce Randall joins team while maintaining a full-time position
with Handy and Harman. Bruce develops a strategy for raising
capital. Preparation of business strategy, business plans,
meeting accountants, lawyers and bankers.
June 15, 1997 Employee interviews begin at new office. Peter Coletta with 25
years experience as Senior Management with Bristol Myers Squibb
joins the team as Sales Manager. First Sales Representative
hired. Formation of initial sales strategy, product agenda.
June 30, 1997 Ray Volpe joins team and begins to organize a plan to develop the
Florida market. Information training meetings in Florida
regarding the product, the market direction analyzed.
July - August Product is placed in over 15 Nursing Homes and Doctor offices.
Positive feed back. Product undergoes slight formula changes to
maximize its healing potential as well as protective qualities.
Cosmetic qualities are re-engineered for smell, appearance, and
tactile consistency.
August 11,1997 Marek Lozowicki comes on board as Corporate Computer Systems
Manager. Development begins on computer software that will help
track the development of the company.
<PAGE>
August 20,1997 Initial corporators meetings, corporation filings, corporate
formation strategy.
August 25,1997 Ralph Kristiansen joins the team to develop Mid-Atlantic States
potential. Bruce Randall joins the team on a full time basis.
Meetings in Mid-Atlantic States, analyze market, distributor
meetings.
September 1997 50 location trials are achieved. The new product is a complete
success with 100% product acceptance. Product undergoes final
testing and changes, lemon scent and yellow color added to give a
nice "hand cream look" versus the previous medical look.
October 1997 Product location trials continued to be tracked. A decision is
made to secure worldwide exclusive rights from the manufacturer
for the product and to begin patent process.
November 4, 1997 Visited manufacturer, inspected facility for total
capability. Exclusive worldwide rights granted and Patent
Pending process begins. Formulate and initiate patent
information, interview legal counsel, initiate patent,
trademark and copyright documentation.
November 5, 1997 Interview various venture capitalists, merchant bankers, and
consultants for funding strategy. A corporate contract is
being sought to raise $1,000,000 to secure proper launch of
The Company.
November 10, 1997 A decision is made to sell through a network of
Distributors. Marketing materials begin development.
Strategies to attach the Distributor network for Doctor,
Hospital, Nursing Homes and Restaurants.
November 17, 1997 Distributor Agreements are finalized and printed. First
Distributor order is consummated. Prepare new generation of
packaging labels, brochures, and marketing materials.
December 15, 1997 Marketing materials available for Distribution. Financial
negotiations began for factoring product sales, bank credit
lines, etc.
December 20, 1997 Over 20 major distributors in negotiations to carry
The Company's product. Begin funding, presentations,
documentation with attorneys, fund raisers, etc.
January 6, 1998 Sales force launches full attack to the Distributor network.
January 12, 1998 Over $150,000 in sales, with only minimal marketing efforts,
over 20 million in contracts under negotiation. A contract
executed with Leo Sons out of Albany for a potential
$1,000,000 in sales during 1998.
<PAGE>
FUTURE
January 31, 1998 Patent application is filed with Patent Pending Approved
Trademark filing also approved.
April 1998 First net profit expected
May 1998 First month of positive cash flow expected.
December 1998 $4,000,000 in annual sales achieved.
<PAGE>
EXHIBIT B
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF THE COMPANY
Page
Unaudited Consolidated Balance Sheet............................B-2
Unaudited Consolidated Statement of Operations..................B-4
Unaudited Consolidated Statement of Cash Flows..................B-5
Unaudited Consolidated Statement of Retained Earnings...........B-6
<PAGE>
EXHIBIT B
A Developmental Company
UNAUDITED BALANCE SHEET
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 29,842
Accounts Receivable, AMR(1) $ 175,000
Inventories $ 19,200
Prepaid expenses and other current assets $ 2,750
Total current assets $ 226,792
Equipment $ 13,216
Less: accumulated depreciation $ 970
Equipment, Net $ 12,246
TOTAL ASSETS $ 239,038
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
LIABILITIES
Notes Payable, Bank
BankBoston Account #50346107,
(checking overdraft reserve credit) $ 36,000
Fleet Bank $ 14,100
BankBoston $ 14,100
Total Notes Payable Bank $ 64,200
Notes Payable Individuals
Marek Lozowicki $ 13,500
Bob Allen $ 5,000
Total Notes Payable Individuals $ 18,500
Accounts Payables $ 153,008
Total Liabilities $ 235,708
STOCKHOLDERS' EQUITY (DEFICIT)(2)
Common stock (zero par value) 5,000,000 authorized
Total Additional Paid in Capital $ 531,846
Operating Profit/Loss YTD $ 528,516
TOTAL STOCKHOLDER'S EQUITY (DEFICIT) $ 3,330
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 239,038
</TABLE>
<PAGE>
BALANCE SHEET FOOTNOTES
National Boston medical, Inc. procured the rights to several developmental
products from American medical Research, LLC. National Boston medical, Inc.
has decided not to utilize these products and American medical Research has
agreed to treat our payments as a loan, in return for receiving the rights
back to promote and sell their products. (Repayment should occur in the
first quarter of 1998).
National Boston Medical, Inc. as a result of this offering will have a $800,000
available for allocation throughout the balance sheet $46,700 will retire
all debts.
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
A Developmental Company
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Period from Inception
May, 1997 Through
31-Dec-97
<S> <C>
Revenue:
Sales $ 122,689
Operating Expenses:
Research and development
Selling, general and administrative $ 651,205
Net Loss $(528,516)
</TABLE>
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
A Development Company
UNAUDITED STATEMENT OF CASH FLOWS
Year to Date December 31, 1997
<TABLE>
<S> <C> <C>
Cash Flows from Operating Activities
Cash Collected from Customers $ 122,689
Less: Payments to Suppliers and Employees $ 651,205
Net Cash provided by Operating Activities $ (528,516)
Cash Flows form Investing Activities
Payment to procure rights to additional
developmental products $ (175,000)
Net Cash used for Investing Activities $ (175,000)
Cash Flows from Financing Activities
Proceeds from Borrowings $ 201,512
Proceeds from Common Stock $ 531,846
Net Cash from financing activities $ 733,358
Cash, May 1, 1997 Balance Sheet $ -
Cash, November 31, 1997 Balance Sheet $ 29,842.00
</TABLE>
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
A Developmental Company
UNAUDITED STATEMENT OF RETAINED EARNINGS
December 31, 1998
<TABLE>
<S> <C> <C>
Beginning Balance $ (528,516)
Subtotal $ (528,516
Less: Cash Dividends
Preferred Stock $ -
Common Stock $ -
10% Stock Dividend $ -
Subtotal $ -
Retained Earnings, December 31, 1997 $ (528,516)
</TABLE>
<PAGE>
Exhibit C
Assumptions - The following assumptions were made in putting together the
projected income statements for 1998 through 2002.
A Market Segments - VIRUSHIELD is applicable in many different types of
businesses. Each different segment has opportunities for our product. At
this time the Company has decided to identify our markets into five
segments.
B Hospital, Medical & Dental - These medical markets are all very aware of
the problems of bacteria and viruses in the workplace and represent the
easiest entry of VIRUSHIELD into the marketplace. The barrier properties of
VIRUSHIELD play a significant role in this medical segment, industry
estimates that over 15% of healthcare workers suffer from som3e form of
Latex Intolerance. All early materials were targeted at this segment and
presently the Company is under negotiation with multiple large
distributors, including BAS International, Johnson & Johnson and McKesson
C. Nursing Homes & Day Care Center - This market is very similar the first
segment, due to government regulations. This effects how VIRUSHIELD can be
paid for and what portion of the budget can be applied to VIRUSHIELD for
effective cost reporting. Many Nursing Homes rely on government
reimbursement, and our opportunities may be slightly limited based on these
reimbursement structures. However, the problem of cross contamination is so
high n these areas that the Company feels confident the Company can capture
a significant portion of the market.
D. Commercial - Grocery Stores, banks and all other businesses are categorized
as commercial. Unlike the above two categories where knowledge of bacteria
and viruses have always been a well documented part of the workplace, only
recently have non medical related businesses began to review how cross
contamination in the work place increases sick days. Institutions can have
a substantial impact on the earnings of a company. The Company plans to
penetrate this area slowly and already introduced the VIRUSHIELD product to
Publix, Kroger, Winn-Dixie and other commercial institutions. Initial
indications are suggesting that our sales projections may be conservative.
E. Government - Government represents many market segments. Our primary focus
is Veterans Hospital that are located across the United States. This
government area has substantial upside, however government bureaucracy and
bid system are expected to delay our entry into this market.
F. International - Exporting our product has significant upside. The Company
has entered into agreements with Maui Dreams Inc., Investment International
and Leosons which together have the potential to reach sales of $3,000,000
in 1998. This market segment could quickly double or triple our projections
based on the contracts the Company has executed and the additional interest
the Company are developing at this time.
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
Projected Income Statement(1)
For year Ending December 31, 1998 through 2002
<TABLE>
<CAPTION>
Sales/Market Segment 1998 1999 2000 2001 2002
---- ---- ---- ----- -------
<S> <C> <C> <C> <C> <C>
Hospital, Medical & Dental $2,552,035 $5,104,070 $8,932,184 $13,398,123 $16,747,730
% of Total Sales 38% 38% 36% 34% 31%
Nursing Homes & Day Care Centers $1,134,238 $2,268,476 $3,969,832 $5,954,749 $7,443,436
% of Total Sales 17% 17% 16% 15% 14%
Commercial $543,489 $1,086,978 $1,902,211 $2,853,317 $3,566,646
% of Total Sales 8% 8% 8% 7% 7%
Government $472,599 $945,198 $1,890,396 $3,308,194 $4,962,290
% of Total Sales 7% 7% 8% 8% 9%
International $1,043,050 $2,086,100 $4,172,200 $7,301,349 $10,952,024
% of Total Sales 15% 15% 17% 18% 20%
Direct Marketing $1,011,758 $2,023,517 $4,047,034 $7,082,309 $10,623,462
15% 15% 16% 18% 20%
- ----------------------------------------------------------------------------------------------------------------
Total Sales $6,757,169 $13,514,339 $24,913,796 $39,898,102 $54,295,590
Cost of Goods Sold
% of Total Sales 21% 21% 21% 21% 21%
- ----------------------------------------------------------------------------------------------------------------
Total Cost of Goods Sold 1,419,005 2,838,001 5,231,897 8,378,601 11,402,074
Gross Profit $4,054,302 $8,108,603 $14,948,278 $23,938,861 $32,577,354
Gross Margin 60% 60% 60% 60% 60%
Operating Expenses
Sales & Marketing $1,366,617 $1,708,271 $2,049,925 $2,357,414 $2,593,156
% of Total Sales 20% 13% 8% 6% 5%
Research & Development $234,450 $293,063 $351,675 $404,426 $444,869
% of Total Sales 3% 2% 1% 1% 1%
G & A (without Depreciation) $1,004,817 $1,256,022 $1,507,226 $1,733,310 $1,906,641
% of Total Sales 15% 9% 6% 4% 4%
Depreciation $1,245 $1,556 $1,868 $2,148 $2,362
% of Total Sales 0% 0% 0% 0% 0%
- ----------------------------------------------------------------------------------------------------------------
Total Operating Expenses $2,607,129 $3,258,911 $3,910,694 $4,497,298 $4,947,028
% of Total Sales 39% 24% 16% 11% 9%
Income From Operations 2,731,035 7,417,416 15,771,205 27,022,202 37,946,488
% of Total Sales 21% 36% 44% 49% 51%
Interest Income $29,098 $46,558 $69,836 $87,295 $96,025
Income before Taxes 2,760,133 7,463,974 15,841,041 27,109,498 38,042,513
Taxes on Income $910,844 $2,463,111 $5,227,544 $8,946,134 $12,554,029
- ----------------------------------------------------------------------------------------------------------------
Net Income After Taxes 1,849,289 5,000,862 10,613,498 18,163,364 25,488,484
% of Total Sales 15% 24% 30% 33% 34%
EPS (assumes 6,500,000 shares issued) $0.28 $0.77 $1.63 $2.79 $3.92
<PAGE>
Value based on 20x's earnings (20% $5.69 $15.39 $32.66 $55.89 $78.43
below current industry average as of
12/15/97)
ROI based on $2.50 per share 127.60% 515.49% 1206.28% 2135.49% 3037.04%
</TABLE>
NOTE:This Exhibit contains certain forward-looking statements, including
statements relating to the timing of the actual Sales of the Company's
products. The Company's actual results could differ materially form the
results Anticipated in these forward-looking statements, as a result of
certain of the factors set forth under "Risk Factors" And elsewhere in this
Memorandum
<PAGE>
Gross Profit Margin
The Companies gross profit on product sales provides a competitive
advantage. The Company is able to maintain low manufacturing costs and strong
abilities to deliver VIRUSHIELD to the consumer at a competitive prices.
Operating Expenses
The Company has maintained a low overhead since inception. Our marketing
strategy of using distributors, and brokers for sales has reduced our sales
cost. Contract manufacturing and shipping help keep manufacturing and delivery
under control. In the next two years the company plans to spend about 3% of its
revenue on the development of new and exciting products. This cost may decrease
or increase based on the other areas of need within the corporation.
Net Income After Taxes
Our Net Income Projections clearly show how our overhead costs will
decrease as a percentage of revenue, as sales increase. The net income starts at
15% and in year five reaches 34%. This increase in net income provides a
significant margin for unexpected occurrences, changes in the market or price of
raw materials. The company can easily withstand any or all of the above changing
influences and still maintain a higher net income after taxes than most
companies today.
<PAGE>
EXHIBIT D
INVESTOR SUITABILITY REQUIREMENTS
General
Investment in the Common Stock offered by The Company, a Delaware
corporation, involves significant risks and is suitable only for persons of
adequate financial means who have no need for liquidity with respect to this
investment and who can bear the economic risk of a complete loss of their
investment. This offering is made in reliance on exemptions form the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws or regulations.
The suitability standards discussed below represent minimum suitability
standards for prospective investors. The satisfaction of such standards by a
prospective investor does not necessarily mean that the Shares are a suitable
investment for such prospective investor. Prospective investors are encouraged
to consult their personal financial advisors to determine whether an investment
in the Shares is appropriate. The Company may reject subscriptions, in whole or
in part, in its absolute discretion.
The Company will require each investor to represent in writing, among other
things, that (i) by reason of the investor's business or financial experience,
or that the investor's professional advisor, the investor is capable of
evaluating the merits and risks of an investment in the Shares and of protecting
its own interest in connection with the transaction, (ii) the investor is
acquiring the Shares for its own account, for investment only and not with a
view toward the resale or distribution thereof, (iii) the investor is aware that
the Share have not been registered under the Securities Act ore any state
securities laws and that transfer thereof is restricted by the Securities Act,
applicable state securities laws, and the share purchase agreement to be entered
into in connection with the purchase of the Shares, and the investor is aware of
the absence of a market for the Shares, and (iv) such investor meets the
suitability requirements set forth below.
Suitability Requirements
Each investor must represent in writing that he or she qualifies as an
"accredited investor," as such term is defined in Rule 501(a) of regulation D
under the Securities Act, and must demonstrate the basis for such qualification.
To be an accredited investor, an investor must fall within any of the following
categories at the time of the sale of Shares to that investor:
A. A bank as defined in Section 3(a)(2) of the Securities Act, or a savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act, whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended; and insurance company as
defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in
<PAGE>
Section 2(a)(48) of the act; a Small Business Investment Company dealer by
the United States Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit
of its employees, if such plan has total assets in excess of $5,000,000;
and employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of that act, which is either a bank,
savings and loan association, insurance company or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000, or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors;
B. A private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940;
C. An organization described in Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended, a corporation, a Massachusetts or similar business
trust, or a partnership, not formed for the specific purpose of acquiring
the Shares, with total assets in excess of $5,000,000;
D. A director of executive officer of the Company;
E. A natural person who had an individual net worth, or joint net worth with
that person's spouse, at the time of such person's purchase of the Shares
exceeds $1,000,000;
F. A natural person who had an individual income in excess of $200,000 in each
of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation
of reaching the same income level in the current year;
G. A trust, with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring the shares offered, whose purchase is
directed by a sophisticated person as described in rule 506(b)(2)(ii) of
Regulation D; and
H. An entity in which all of the equity owners are accredited investors (as
defined above).
As used in this memorandum, the term "net worth" means the excess of total
assets over total liabilities. In computing net worth for the purpose of (5)
above, the principal residence of the investor must be valued at cost, including
cost of improvements, or a recently appraised value by an institutional lender
making a secured loan, net of encumbrances. In determining income, an investor
should add to the investor's adjusted gross income any amounts attributable to
tax-exempt income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to an IRA or Keogh
retirement plan, alimony payments and any amount by which income for long term
capital gains has been reduced in arriving at adjusted gross income.
In order to meet the conditions for exemption from registration
requirements under the securities laws of certain jurisdictions, investors who
are residents of such jurisdictions may be required to meet additional
suitability requirements.
<PAGE>
EXHIBIT E
BOND
(INDENTURE)
Interest: 12% Face Value: $25,000.00 U.S.
Twenty-Five thousand
NATIONAL BOSTON MEDICAL
Know all men that National Boston Medical Inc., a Delaware Corporation having
it's principal place of business at 43 Taunton Green, Taunton, Massachusetts is
held and firmly bound unto:
Name:
--------------------------------
Address:
-------------------------------
-------------------------------
to the payment of which sum National Boston Medical, Inc. binds itself, their
successors, and assigns, firmly by these presents.
Signed, sealed and dated this day of 1998.
Now therefore, the condition of the foregoing obligation is that:
1. The term is for three years.
2. The interest is at 12% (twelve percent) payable semi-annually on the amount
outstanding during said term.
3. Interest payments are payable either:
a) in cash (U.S.)
b) in stock (value to be set by National Boston Medical Inc. Board of
Directors or if stock becomes publicly traded that price will take
precedence.
c) option to accept interest payments in cash or stock belongs to the
bond holder.
4. Warrant: National Boston Medical Inc. as principal obligor warrants to the
bondholder that it will exchange said $25,000.00 Bond (Indenture), at any
time during said three (3) year term or (3) years from the date of
surrender, upon presentations to National Boston Medical Inc. at it's
principal place of business, for common stock of the corporation, National
Boston Medical, Inc.
Exercise of this warrant and presentation shall cause 10,000 common shares
(at $2.50 per share) of the National Boston Medical, Inc. to be issued to
the bondholder, in exchange for said bond, and cause such issuance to be
recorded on the books and records of the corporation.
<PAGE>
5. National Boston Medical, Inc. agrees, as part of the conditions, for
the issuance of said bond, that:
a) it will create a sinking fund called the "Bond Retirement Fund"
b) said "Bond Retirement Fund" shall be funded by National Boston
Medical, Inc. reserving 5% (five percent) of it's gross sales from
it's general business account and placing said 5% into a separate
National Boston Medical, Inc. "Bond Retirement Fund bank account' for
the three year period following the issuance of said bonds.
c) National Boston Medical, Inc. shall have the sole right to retire said
bond within 30 (thirty) days of issue upon payment of $25,500.00
(twenty-five thousand five hundred) to the bondholder.
d) National Boston Medical, Inc. shall have the sole right to retire said
bond at anytime after 30 days for the sum of $25,250.00 (twenty-five
thousand two hundred fifty) of said bond.
e) Notice by the National Boston Medical, Inc. to the shareholder, at the
last recorded address, on the books and records of the corporation, by
certified mail, postmarked within the time frame, shall be deemed
sufficient notice to trigger the repurchase of the bonds under items
5c and 5d by National Boston Medical, Inc.
f) Upon retirement, or for the retirement and payment of the
aforementioned bonds, National Boston Medical, Inc. may terminate it's
"Bond Retirement Fund account".
6. In the event the Company needs to raise additional capital, beyond its
initial offering, all Bond holders will be given right of the first refusal
to purchase additional stock or bonds.
Witness the seal of the National Boston Medical, Inc. corporation this ___ day
of__________ 1998
National Boston Medical, Inc.
by:
------------------------
President
Corporate Seal
<PAGE>
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned hereby subscribes for the purchase of Corporate Bonds in
the increments of $25,000 set forth below as described in the Confidential
Private Placement Bond, dated February 27, 1998 issued by National Boston
Medical, Inc., a corporation organized under the laws of Delaware. The entire
Subscription Agreement, of which this is the signature page, is provided as
additional documentation to the Bond (Indenture).
1. Dated: , 1998
2. Number of Bonds Purchased:
3. Subscription Price ($25,000 per unit)
-----------------------------------------------------
Signature of Subscriber (and Taxpayer Identification or
title, if applicable) Social Security Number
- ------------------------------- --------------------------------
Signature of Joint Purchaser Taxpayer Identification or
(if any) Social Security Number
Name and Residence Address Mailing Address, if Different
(Not Post Office Address) from Residence Address:
________________________
Name (please print) Name (please print)
________________________
Number and Street Number and Street
________________________
City State Zip Code City State Zip Code
Subscription for Bonds accepted as of , 1998
----- ----------------------------
NATIONAL BOSTON MEDICAL, INC.
By:
----------------------------
<PAGE>
EXHIBIT F
South Atlantic Industries, Inc.
(864) 458-8001 Fax (864) 458-7418
I certify that the product VIRUSHIELD was made to specifications to ensure
consistency with the test date prepared by ViroMed Labs and Leberco-Celsis Lab
or early manufacturing runs of this product, by this manufacturer.
Following is the summary of the actual test data. Actual results available upon
request for this manufacturer.
<TABLE>
<CAPTION>
Assay Reduction @
Test Date Number Test Organism 20 minutes
- --------- ------ ------------- ----------
FROM LEBERCO-CELSIS LABS
<S> <C> <C> <C>
3-31-97 974626-1 Escherichia Coli ATTC 8739 99.999%
3-31-97 974627 Staphylococcus aureaus ATCC 6538 98.668%
3-31-97 974627-2 Escherichia coli 0157:H7 ATCC 35150 99.999%
3-31-97 974627-4 Salmonella enteritidis ATCC 13076 99.999%
3-31-97 974627-3 Salmonella typhi ATCC 6539 99.999%
FROM VIROMED LABS
3-21-97 3614 Rhinovirus 37 96.84%
6-12-97 3891 Hepatitis A Virus variant 18F
Of ATCC VR-1033 >=90.00%
</TABLE>
1. Elimination of Bacteria or Viral colonies.
<PAGE>
Face Value $_____________ U.S.
NATIONAL BOSTON MEDICAL INC.
Know all men that National Boston Medical Inc., a Delaware Corporation having
it's principal place of business at 43 Taunton Green, Taunton, Massachusetts is
held and firmly bound unto:
Name:
Address:
to the payment of which sum National Boston Medical, Inc. binds itself, their
successors, and assigns, firmly by these presents.
Signed, sealed and dated this day of 1998.
Now therefore, the condition of the foregoing obligation is that:
1. The term is for three years.
2. The interest is at 12% (twelve percent) payable semi-annually on the amount
outstanding during said term.
3. Interest payments are payable either:
a) in cash (U.S.)
b) in stock (value to be set by National Boston Medical Inc. Board of
Directors or if stock becomes publicly traded that price will take
precedence.
c) option to accept interest payments in cash or stock belongs to the
bond holder.
4. Warrant: National Boston Medical Inc. as principal obligor warrants to the
bondholder that it will exchange said $25,000.00 Bond (Indenture), at any
time during said three (3) year term or (3) years from the date of
surrender, upon presentations to National Boston Medical Inc. at it's
principal place of business, for common stock of the corporation, National
Boston Medical, Inc.
Exercise of this warrant and presentation shall cause 10,000 common shares
(at $2.50 per share) of the National Boston Medical, Inc. to be issued to
the bondholder, in exchange for said bond, and cause such issuance to be
recorded on the books and records of the corporation.
5. National Boston Medical, Inc. agrees, as part of the conditions, for the
issuance of said bond, that:
a) it will create a sinking fund called the "Bond Retirement Fund"
<PAGE>
b) said "Bond Retirement Fund" shall be funded by National Boston
Medical, Inc. reserving 5% (five percent) of it's gross sales from
it's general business account and placing said 5% into a separate
National Boston Medical, Inc. "Bond Retirement Fund bank account' for
the three year period following the issuance of said bonds.
c) National Boston Medical, Inc. shall have the sole right to retire said
bond within 30 (thirty) days of issue upon payment of $25,500.00
(twenty-five thousand five hundred) to the bondholder.
d) National Boston Medical, Inc. shall have the sole right to retire said
bond at anytime after 30 days for the sum of $25,250.00 (twenty-five
thousand two hundred fifty) of said bond.
e) If said bonds are retired under the terms and conditions specified in
item 5 b c or d the bond holder herein retains his rights to
accumulated interest under item 2 together with the warrant under item
4 to purchase 10,000 shares at 2.50 per share.
f) Notice by the National Boston Medical, Inc. to the shareholder, at the
last recorded address, on the books and records of the corporation, by
certified mail, postmarked within the time frame, shall be deemed
sufficient notice to trigger the repurchase of the bonds under items
5c and 5d by National Boston Medical, Inc.
g) Upon retirement, or for the retirement and payment of the
aforementioned bonds, National Boston Medical, Inc. may terminate it's
"Bond Retirement Fund account".
6. In the event the Company needs to raise additional capital, beyond its
initial offering, all Bond holders will be given right of the first refusal
to purchase additional stock or bonds.
Witness the seal of the National Boston Medical, Inc. corporation this day of
1998 ------- ------------
National Boston Medical, Inc.
by:
---------------------------
President
Corporate Seal
<PAGE>
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned hereby subscribes for the purchase of Corporate Bonds in
the increments of $25,000 set forth below as described in the Confidential
Private Placement Bond, dated ___________________ issued by National Boston
Medical, Inc., a corporation organized under the laws of Delaware. The entire
Subscription Agreement, of which this is the signature page, is provided as
additional documentation to the Bond (Indenture).
1. Dated: , 1998
2. Number of Bonds Purchased:
3. Subscription Price ($25,000 per unit)
-----------------------------------------------------
Signature of Subscriber (and Taxpayer Identification or
title, if applicable) Social Security Number
- ------------------------------- --------------------------------
Signature of Joint Purchaser Taxpayer Identification or
(if any) Social Security Number
Name and Residence Address Mailing Address, if Different
(Not Post Office Address) from Residence Address:
________________________ ________________________
Name (please print) Name (please print)
________________________ ________________________
Number and Street Number and Street
________________________ ________________________
City State Zip Code City State Zip Code
Subscription for Bonds accepted as of , 1998
----- -------------------------
NATIONAL BOSTON MEDICAL, INC.
By:
----------------------------
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
IN WHOLE OR PART IN THE ABSENCE COUNSEL REASONABLE SATISFACTORY TO THE COMPANY
IN FORM AND SUBSTANCE REASONABLE SATISFACTORY TO THE COMPANY THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT EXISTS WITH RESPECT TO THE PROPOSED SALE,
TRANSFER, PLEDGE, HYPOTHECATION OF OTHER DISPOSITION.
NATIONAL BOSTON MEDICAL, INC.
COMMON STOCK PURCHASE WARRANT
CERTIFICATE TO PURCHASE
SHARES OF COMMON STOCK
VOID AFTER 5:OO P.M. NEW YORK LOCAL TIME ON
3 YEARS FROM DATE OF ISSUANCE
This Warrant Certificate certifies that , or registered assigns, is the
registered Holder ("Holder") of ______________ Common Stock Purchase Warrants
("Warrants") to purchase shares of common stock $.01 par value per share
("Common Stock"), of National Boston Medical, Inc., a Delaware corporation (the
"Company"). Each Warrant enables the Holder to purchase form the Company at any
time until 5:00 p.m. New York, New York local time on [3 years from date
issuance] one fully paid and non-assessable share of Common Stock (individually,
a "Share" and collectively the "Shares") upon presentation and surrender of this
Warrant Certificate and upon payment of the purchase price of $2.50 per share
(the "Exercise Price"); provided, however, that if the current market price per
Share of Common Stock exceeds $3.00 for sixty (60) consecutive trading days
during which the Shares underlying the Warrants to be redeemed were the subject
of an effective and current registration statement under the Securities Act of
1933, as amended (the "Act"), then the Company may, in its sole option, redeem
some or all of the Warrants at a redemption price of $.05 for Shares underlying
the Warrants to be redeemed. For purposes of computing the exercise price the
term "current marked price per share of Common Stock" shall mean the "Market
Price" as defined in Section 11(a) hereof. Payment shall be made in lawful money
of the United States of America by certified check payable to the Company. Such
payment shall be made at the principal office of the Company at 43 Taunton
Green, Suite 3, Taunton, MA 02780. As hereinafter provided, the Exercise Price
and number of Shares purchasable upon the exercise of the Warrants are subject
to modification or adjustment upon the happening of certain events.
The Warrants represented by this Warrant Certificate are issuable upon the
conversion of the Convertible Securities in a private placement as described in
a certain Confidential Private Placement Term Sheet dated December 10, 1997 (the
"Private Placement") for a six (6) year period, commencing on the date of
issuance.
<PAGE>
1. Upon surrender to the Company, this Warrant Certificate may be exchanged
for Another Warrant Certificate or Warrant Certificates evidencing a like
aggregate number of Warrants. If this Warrant Certificate shall be exercised in
part, the Holder shall be entitled to receive upon surrender hereof another
Warrant Certificate or Warrant Certificates evidencing the number of Warrants
not exercised.
2. No Holder shall be deemed to be the Holder of Common Stock or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose nor shall anything contained herein be construed to
confer upon the Holder any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof or to give or withhold consent to any
corporate action (whether upon any reorganization, issuance of stock,
reclassification or conversion of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meeting or to receive
dividends or subscription rights or otherwise until a Warrant shall have been
exercised and the Common Stock purchasable upon the exercise thereof shall have
become issuable.
3. Each Holder consents and agrees with the Company and any other Holder
that:
(a) this Warrant Certificate is exercisable by the Holder in person or
by attorney duly authorized in writing at the principal office of the
Company in whole or in part;
(b) anything herein to the contrary notwithstanding, in no event shall
the Company be obligated to issue Warrant Certificates evidencing other
than a whole number of Warrants or issue Certificates evidencing other than
a whole number of Shares upon the exercise of this Warrant Certificate;
provided, however, that the Company shall pay with respect to any such
fraction of a share an amount of cash based upon the current market value
(or book value, if there shall be no public market value for shares
purchasable upon exercise hereof); and
(c) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute true and lawful owner
hereof for all purposes whatsoever.
4. The Company shall maintain books for the transfer and registration of
Warrants. Upon the transfer of any Warrants, the Company shall issue and
register the Warrants in the names of the new Holders. The Warrants shall be
signed manually by the Chairman, Chief Executive Officer, President or any Vice
President and the Secretary (or Assistant Secretary) of the Company. Subject to
Paragraph 10, the Company shall transfer, from time to time, any outstanding
Warrants upon the books to be maintained by the company for such purpose upon
transfer. Upon any transfer, a new Warrant Certificate shall be issued to the
transferee and the surrendered Warrants shall be canceled by the company.
Warrants may be exchanged at the option of the Holder, when surrendered at the
office of the Company, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Shares. Subject to the terms of this Warrant
Certificate, upon such surrender and payment written order of the Holder of such
Warrants and in such name or names as such Holder may designate, a certificate
or certificates for the number of full Shares so purchased upon the exercise of
<PAGE>
such Warrants. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become the Holder of record of such Shares as of the date of the surrender of
such Warrants and payment of the Exercise Price; provided, however, that if, at
the date of surrender and payment, te transfer books of the Shares shall be
closed, the certificates for the Shares shall be issuable as of the date on
which such books shall be opened and until such date the Company shall be under
no duty to deliver any certificate for such Shares; provided, further, however,
that such transfer books, unless otherwise required by law or by applicable rule
of any national securities exchange, shall not be closed at any one time for a
period longer than 20 days. The rights of purchase represented by the Warrants
shall be exercisable, at the election of the Holders, either in whole or from
time to time in part (but in no event with respect to less than 100 Shares).
5. The Company will pay any documentary stamp taxes attributable to the
initial issuance of the Shares issuable upon the exercise of the Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for Shares in a name other than that of the
Holder in respect of which such Shares are issued, and in such case the Company
shall not be required to issue or deliver any certificate for Shares or any
Warrant until the person requesting the same has paid to the Company the amount
of such tax or has established to the Company's satisfaction that such tax has
been paid.
6. In case the Warrant Certificate shall be mutilated, lost stolen or
destroyed, the Company may, in its discretion, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate, lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction and an indemnity, if requested,
also satisfactory to it.
7. There have been reserved, and the company shall at all times keep
reserved, out of the authorized and unissued Common Stock, a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
this Warrant Certificate. The Company agrees that all Shares issuable upon
exercise of the warrants shall be, at the time of delivery of the certificates
for such Shares, validly issued and outstanding, fully paid and nonassessable.
8. Subject and pursuant to the provisions of this paragraph, the purchase
price and number of Shares subject to this Warrant Certificate shall be adjusted
from time to time as set forth hereinafter:
(a) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in common Stock, then
the Exercise Price shall be proportionately decreased as of the close of
business on the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up there-of, the
Exercise Price immediately prior to such subdivision shall be
proportionately decreased, and , if the company shall at any time
<PAGE>
combine the outstanding Common Stock by recapitalization, reclassification
or combination thereof, the Exercise Price immediately prior to such
combination shall be proportionately increased. Any such adjustment to the
Exercise Price shall become effective at the close of the business on the
record date for such subdivision or combination.
(c) In case the Company after the date hereof shall distribute to all
of the Holders of outstanding share of Common Stock any securities or other
assets (other than a cash distribution made as a dividend payable out of
earnings or out of any earned surplus legally available for dividends under
the laws of the State of Florida), the Board of Directors shall be required
to make such equitable adjustment in the Exercise Price, as in effect
immediately prior to the record date for such distribution, as may be
necessary to preserve for the Holder rights substantially proportionate to
those enjoyed hereunder by the Holder immediately prior to the happening of
such distribution. Any such adjustment to the Exercise Price shall become
effective at the close of business on the record date for such
distribution.
(d) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the company with
another corporation, of the sale of all or substantially all of its assets
to another corporation, shall be effected in such a way that Holders of
common stock shall be entitled to receive stock, securities, cash, or
assets with respect to or in exchange for Common Stock, then as a condition
of such reorganization, reclassification, consolidation, merger or sale,
the Company or such successor or purchasing corporation, as the case may
be, shall execute a supplemental Warrant Certificate providing that each
Holder shall have the right thereafter and until the expiration date to
exercise a Warrant for the kind and amount of stock securities, cash or
assets receivable upon such reorganization, reclassification,
consolidation, merger or sale by a Holder of the number of shares of Common
Stock for the purchase of which such Warrant might have been exercised
immediately prior to such reorganization, reclassification, consolidation,
merger or sale, subject to further adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Paragraph 8.
(e) If at any time after the date of issuance hereof the Company shall
grant or issue any shares of Common Stock, or grant or issue any rights or
options for the purchase of, or stock or other securities convertible into,
Common Stock (such convertible stock or securities being herein
collectively referred to as "Convertible Securities" other than:
(i) shares issued in a transaction described in subparagraph (f)
of this paragraph 8; or
(ii) shares issued, subdivided or combined in transactions
described in subparagraphs (a) or (b) of this Paragraph 8;
for a consideration per share which is less than the then current market
price per share of Common Stock. Then the Exercise Price in effect
immediately prior to such issuance or sale (the "Applicable Exercise
Price") shall, and thereafter upon each issuance or sale, the Applicable
Exercise Price shall, simultaneously with such issuance or sale, be
adjusted, so that such Applicable Exercise Price shall equal a price
<PAGE>
determined by multiplying the Applicable Exercise Price by a fraction, the
numerator of which shall be:
(A) the sum of (x) the total number of shares of Common
Stock outstanding immediately prior to such issuance plus (y) the number of
shares of Common Stock which the aggregate consideration received, as determined
in accordance with subparagraph (g) below for the issuance or sale of such
additional Common Stock or Convertible Securities deemed to be an issuance of
Common Stock as provided in subparagraph (h) below, would purchase (including
and consideration received by the Company upon the issuance of any shares of
Common Stock or Convertible Securities since the date the Applicable Exercise
Price became effective not previously included in any computation resulting in
an adjustment pursuant to this subparagraph (e)) at the then current market
price per share of Common Stock; and the denominator of which shall be
(B) the total number of shares of Common Stock outstanding
(or deemed to be outstanding as provided in subparagraph (g)) immediately after
the issuance or sale of such additional shares.
For purposes of this Paragraph 8 the current market "current market price per
share' of Common Stock at any date shall be deemed to be the average daily
closing prices for thirty (30) consecutive business days before such date. The
closing price for each day shall be the last sale price regular way or, in case
no such reported sale takes place on such day the average of the last reported
bid and ask prices regular way, in either case on the principal national
securities exchange, on which the Common Stock is admitted to trading or listed,
or if not listed or admitted to trading on such exchange the average of the
highest reported bid and lowest reported ask prices as reported by NASDAQ, or
other similar organization if NASDAQ is no longer reporting such information, or
if not so available, the fair market price as determined by the Board of
Directors of the Company. The current market price per share of common stock
shall be reduce appropriately to take into account the restricted nature of any
securities issued by the Company and the issuance or sale of larger blocks of
its securities.
If, however, the Applicable Exercise Price thus obtained would result in the
issuance of a lesser number of shares upon conversion than would be issued at
the initial Exercise Price specified in the first paragraph hereof, the
Applicable Exercise Price shall be such initial Exercise Price.
(f) Anything in this Paragraph 8 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be made in connection with:
(i) the grant, issuance of exercise of any Convertible Securities
pursuant to the Company's qualified or non-qualified Employee Stock Option
Plans or any other bona fide employee benefit plan or incentive
arrangement, previously adopted, or as may hereafter be adopted, by the
Company's Board of Directors, for the benefit of the Company's employees,
consultants or directors, as any such plans or arrangements may hereafter
be amended from time to time;
<PAGE>
(ii) the issuance of any shares of Common Stock pursuant to the grant
or exercise of Convertible Securities outstanding as of the date hereof;
(iii) to shareholders of any corporation or other entity the stock or
assets of which is acquired by, or which merges into the company (the
"Target Company") in proportion to their stock holdings of the Target
Company immediately prior to such acquisition or of such merger
beneficially own in excess of fifteen (15%) of the issued and outstanding
Capital Stock of the Company ("Affiliate") or, if the Target Company is an
Affiliate, that the Company has obtained a fairness opinion from a
recognized investment banking firm as to the consideration receive by the
Company in connection with such acquisition or merger; or
(iv) in a bona fide public offering pursuant to a firm commitment
underwriting.
(g) For the purpose of subparagraph (a) above, the following provisions
shall also be appealed:
(i) In the case of the issuance or sale of additional shares of Common
Stock for cash, the consideration received by the Company therefor shall be
deemed to be the amount of cash received by the Company for such shares,
before deducting therefrom any commissions, compensations or other expenses
paid or incurred by the Company for any underwriting of, or otherwise in
connection with, the issuance of sale of such shares.
(ii) In the case of the issuance of Convertible Securities, the
consideration received by the Company therefore shall be deemed to be the
amount of cash, if any, received by the Company for the issuance of such
rights or Convertible Securities, plus the minimum amounts of cash and fair
value of other consideration, if any, payable to the Company upon the
exercise of such rights or options or payable to the Company on conversion
of such Convertible Securities.
(iii) In the case of the issuance of Common Stock or Convertible
Securities for a consideration in whole or in part, other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as reasonably determined in good faith by the Board of Directors of
the Company (irrespective of accounting treatment thereof); provided,
however, that if such consideration consists of the cancellation of debt
issued by the Company, the consideration shall be deemed to be the amount
the Company received upon issuance of such debt (gross proceeds) plus
accrued interest and, in the case of original issue discount or zero coupon
indebtedness, accredited value to the date of such cancellation, but not
including any premium or discount at which the debt may then be trading or
which might otherwise be appropriate for such class of debt.
(iv) In case of the issuance of additional shares of Common Stock upon
the conversion or exchange of any obligations (other than Convertible
Securities), the amount of the consideration received by the Company, for
such obligations ro shares or converted or exchanged, before deducting form
such consideration so received by the company any expenses or commisssions
<PAGE>
or compensations incurred or paid by the company for any underwriting of,
or otherwise in connection with, the issuance or sale of such obligations
or shares, plus any consideration received by the Company in adjustment of
interest and dividends. If obligations or shares of the same class or
series of a class as the obligations or shares so converted or exchanged
shall be deemed to be the average amount of each of the consideration
received by the Company upon the original issuance of all such obligations
or shares. The amount of consideration received by the Company upon the
original issuance of the obligations or shares so converted or exchanged
and the amount of the consideration, if any, other than such obligations or
shares received by the Company upon such conversion or exchange shall be
determined in the same manner as provided in subparagraphs (i) through
(iii) above with respect to the consideration received by the Company in
case of the issuance of additional shares of Common Stock or Convertible
Securities.
(h) For the purposes of the adjustments provided for in subparagraph (e)
above, if at any time, the Company shall issue any Convertible Securities the
Company shall be deemed to have issued at the same time of the issuance of such
Convertible Securities the maximum number of shares of Common Stock issuable
upon conversion of the total amount of such Convertible Securities.
(i) On the expiration, cancellation or redemption of any Convertible
Securities, the Exercise Price then in effect hereunder shall forthwith be
readjusted to such Exercise Price as would have been obtained (a) had the
adjustments made upon the issuance or sale or such expired, cancelled or
redeemed Convertible Securities been made upon the basis of the issuance of only
the number of shares of Common Stock, therefore actually delivered upon the
exercise or conversion of such Convertible Securities ( and the total
consideration received therefore) and (b) had all subsequent adjustments been
made only on the basis of the Exercise Price as readjusted under this
subparagraph (i) for all transactions (with would have affected such adjusted
Exercise Price) made after the issuance or sale of such Convertible Securities.
(j) Anything in this Paragraph 8 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 5% in such Exercise Price; provided,
however, that any adjustment which by reason of this subparagraph (j) are not
required to be made shall be carried forward and taken into account in making
subsequent adjustments. All calculations under this Paragraph shall be made to
the nearest cent or to the nearest tenth of a share, as the case may be.
(k) Upon any adjustments of any Exercise Price, then and in each such case
the Company shall promptly deliver a notice to the registered Holder of this
Holder of this Warrant, which notice shall state the Exercise Price resulting
from such adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise hereof, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(l) Upon any adjustment of the Exercise Price pursuant to any provisions
contained in this Paragraph 8, the number of Shares issuable upon exercise of
this Warrant shall be changed to the number of Shares determined by dividing
<PAGE>
(i) the aggregate Exercise Price payable for the purchase of all Shares issuable
upon exercise of the Warrant immediately prior to such adjustment by (ii) the
Exercise Price per Share in effect immediately after such adjustment.
9. In case at any time:
(i) The Company shall pay any dividend payable in stock upon the
Common Stock or make any distribution (other than regular cash dividends)
to the Holders of the Common Stock;
(ii) The Company shall offer for subscription pro-rata to the Holders
of the Common Stock any additional shares of stock of any class or other
rights;
(iii) There shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any or more of such cases, the Company shall give written notice to the
holder of the date on which (x) the books of the Company shall close or a record
shall be taken for such dividend, distribution, or subscription rights, or (v)
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the Holders of Common Stock of record
shall participate in such dividend, distribution, or subscription rights or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
notice shall be given at least 20 days prior to the record date or the date on
which the Company's transfer books are closed in respect thereof. Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of any of the matters set forth in this Paragraph.
10.(a) The Holder of this Warrant Certificate, each transferee hereof and
any Holder and transferees of any Shares, by his or its acceptance thereof,
agrees that (a) no public distribution of Warrants or Shares will be made in
violation of the Securities Act of 1933 as amended (the "Act"), and (b) during
such period as the delivery of a prospectus with respect to Warrants or Shares
may be required by the Act, no public distribution of Warrants or Shares will be
made in a manner or on terms different from those set forth in, or without
delivery of, a prospectus then meeting the requirements of Section 10 of the Act
and in compliance with all applicable state securities laws. The Holder of this
Warrant Certificate and each transferee hereof further agrees that if any
distribution of any of the Warrants or Shares is proposed to be made by them
otherwise than by delivery of a prospectus meeting the requirements of Section
10 of the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed distribution will not be in
violation of the Act or of applicable state law. Furthermore, it shall be a
condition to the transfer of the Warrants that any transferee thereof deliver to
the Company his or its written agreement to accept and be bound by all of the
terms and conditions contained in this Warrant certificate.
<PAGE>
(b) This Warrant or the Shares or any other security issued or issuable
upon exercise of this Warrant may not be sold or otherwise disposed of except as
follows:
(1) To a person who in the opinion of counsel for the Holder,
reasonably acceptable to the Company, is a person to whom this Warrant or Shares
may legally be transferred without registration and without the delivery of a
current prospectus under the Act with respect thereto and then only against
receipt of an agreement of such person to comply with the provisions of this
Section (1) with respect to any resale or other disposition of such securities
which agreement shall be satisfactory in form and substance to the Company and
its counsel; provided that the foregoing shall not only apply to any such
Warrant, Shares or other security as to which such Holder shall have received an
opinion letter form counsel to the Company as to the exemption thereof from the
registration under the Act pursuant to Rule 144(k) under the Act; or
(2) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof for
such sale or disposition.
(c) Each certificate for Shares issued upon exercise of this Warrant shall
bear a legend relating to the non-registered status of such Shares under the
Act, unless at the time of exercise of this Warrant such Shares are subject to a
currently effective registration statement under the Act.
11.(a) The Warrants are redeemable by the Company, at its sole option, in
whole or in part from time to time, at a redemption price equal to $.05 per
Share underlying the Warrant to be redeemed at any time commencing from the date
o issuance, upon not less than thirty (30) days' prior written notice, if the
current marker price per Share of Common Stock exceeds $3.00 for any sixty (60)
consecutive trading day period during which the Shares underlying the Warrants
to be redeemed were the subject of an effective and current registration
statement under the Act. The sixty (60) consecutive trading day period ending on
the third business day prior to the date the notice of redemption is given is
hereinafter referred to as the "Measurement Period". Notwithstanding the
foregoing, the Company shall not be entitled to redeem any of the Warrants
represented by this Certificate, unless the issuance of the Shares into which
the Warrants are exercisable has been registered under the Act at all times
during the applicable Measurement Period and shall continue to be so registered
at all times between the date on which the notice of redemption is given and the
"Redemption Date" (as hereinafter defined). For purposes hereof, "Market Price"
shall mean the average of the daily closing prices for five (5) consecutive
business days prior to such dividend payment date. The closing price for each
day shall be the last sale price regular way, or, in case no such report of sale
takes place on such day, the average of the last reported bid and asked prices
regular way in either case on a principal national securities exchange on which
the Common Stock is admitted to trading or listed, or if not listed or admitted
to listing on such exchange, the average of the highest reported bid and lowest
reported ask price as reported by NASDAQ, or similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.
(b) In the event the Company shall elect to redeem all or any port of the
Warrants, the Company shall fix a date for redemption (the "Redemption Date").
<PAGE>
Notice ofredemption shall be mailed by first class mail, postage prepaid, by the
Company not less than 30 days from the date fixed for redemption to the
registered Holder of this Warrant Certificate at its last address as it shall
appear on the Company's Warrant Certificate registry books. Any notice mailed in
the manner herein provided shall be conclusively presumed to have been duly
given whether or not the Holder receives such notice. Any right to exercise a
Warrant being redeemed shall terminate at 5:00 PM (New York time) on the
business day immediately preceding the Redemption Date.
(c) From and after the date specified for redemption, the Company shall, at
the place specified in the notice of redemption, upon presentation and surrender
of this Certificate to the Company by or on behalf of the Holder thereof,
deliver or cause to be delivered to or upon the written order of the Holder a
sum in cash equal to the redemption price of each Warrant being redeemed. Form
and after the date fixed for redemption and upon the deposit or setting aside by
the Company of a sum sufficient to redeem all the Warrants called for
redemption, such Warrants shall expire and become void and all rights hereunder
with respect thereto, except the right to receive payment of the redemption
price, shall cease,
(d) If less than all of the Common Stock purchase warrants sold in the
Private Placement are called for redemption by the Company, the particular
Common Stock purchase Warrants to be redeemed shall be selected at random by the
Company in such manner as the Company in its discretion may deem fair and
appropriate. If there shall be drawn for redemption less than all of the
Warrants represented by this Warrant Certificate, the Company shall execute and
deliver, upon surrender of this Warrant Certificate, without charge to the
Holder, a new Warrant Certificate representing the unredeemed balance of the
Warrants represented by this Warrant Certificate.
12. In connection with the Private Placement, the Company has obligated
itself to use its best efforts to (i) prepare and file under the Act a
registration statement relating to the Shares (the term "registration statement"
as used herein being deemed to include any form which may be used to register a
distribution of Convertible Securities to the public for cash); (ii) prepare and
file with the appropriate state blue sky authorities the necessary documents to
register or qualify the Shares, provided that the Company shall only be required
to register or qualify the Shares in the states where the Convertible Securities
have been registere3d or qualified; and (iii) use its best efforts to cause such
registration statement to become effective and to keep such registration
statement state blue sky filings current and effective for six (6) years;
provided however, the Company will have no such obligation to keep effective a
registration statement with regard to the Shares which is then outstanding if it
agrees to purchase the Shares at the then current market price of the Shares.
All expenses in connection with preparing and filing any registration
statement (and any registration or qualification under the blue sky laws of the
states in which the offering will be made under such registration statement)
shall be borne in full by the Company except that the underwriting commissions
and expenses attributable to the Shares so registered and the fees and
disbursements of counsel, if any to the holders of the Shares shall be borne by
such holders. The Company may include other securities in any such registration
statement.
<PAGE>
As a precaution to such registration and qualification each holder of the
Shares will provide the Company with sufficient information to permit and
qualification and will indemnify the Company, and each person who controls the
Company within the meaning of Section 15 of the Act, from and against any and
all losses, claims, damages, expenses and liabilities caused by any untrue
statement of a material fact contained in any registration statement or
contained in a prospectus furnished under the Act or cause by any omission to
state of a material fact therein necessary to make the statement therein not
misleading, insofar as such losses, claims, damages, expenses and liabilities
are caused by such untrue statement or omission based upon information furnished
in writing to the Company by any such holder expressly for use in any
registration statement or prospectus. In addition, each holder will execute and
deliver all such documents and undertakings as the Company may deem necessary or
desirable for purposes of compliance with applicable federal and state
securities laws. The Company's obligations as set forth above with respect to
each holder are contingent on such holder's satisfaction of his or its
obligations set forth above.
13.(a) This Warrant shall be governed by and construed in accordance with
the substantive laws of the State of Massachusetts, without giving effect to
conflict of laws principles.
(b) This Warrant Certificate constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous Agreements and
understandings, inducements or conditions whether express or implied, oral or
written. Neither this Warrant Certificate nor any portion or provision hereof
may be changed, waived or amended orally or any manner other than by an
agreement in writing signed by the Holder and the Company.
(c) Except as otherwise provided in this warrant Certificate, all notices,
requests, demands and other communications required or permitted under this
Warrant Certificate or by law shall be in writing and shall be deemed to have
been duly given, made and received only when delivered against receipt or when
deposited in the United States mails, certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Company: National Boston Medical, Inc.
43 Taunton Green, Suite 3
Taunton, MA 02780
Attention: Daniel J. Hong, President
Holder: At the address shown for the
Holder in the registration
book maintained by the Company.
(d) If any provision of this Warrant Certificate is prohibited by or is
unlawful or unenforceable under any applicable law or any jurisdiction, such
provision shall, as to such jurisdiction be in effect to the extent of such
prohibition in any jurisdiction shall not invalidate such provision in any other
jurisdiction; and provided, further that where the provisions of any such
<PAGE>
applicable law may be waived, that they hereby are waived by the Company and the
Holder to the full extent permitted by law and to the and that this Warrant
instrument shall be deemed to be a valid and binding agreement in accordance
with its terms.
IN WITNESS WHEREOF, has caused this Warrant Certificate to be signed by its
duly authorized officers as of the Day of , .
NATIONAL BOSTON MEDICAL, INC.
By:
------------------------
Name:
Title: President/CEO
EXHIBIT 4.3
NATIONAL BOSTON MEDICAL, INC.
Certificate of Designation Establishing the 12% Convertible Cumulative
Redeemable Stock, Series A and Fixing the Powers, Designations, Preferences and
Relative, Participating, Optional and Other Special Rights, and the
Qualifications, Limitations and Restrictions, of the 12% Convertible Cumulative
Redeemable Preferred Stock, Series A.
There is hereby established a new series of the preferred stock ("Preferred
Stock") National Boston Medical, Inc., a Delaware corporation ("Corporation"),
to which the following powers, designations, preferences and relative,
participating, option and other special rights, and the qualifications,
limitations or restrictions, of the shares of such new series of preferred stock
shall apply:
1. Designation and Rank
The series (this "Series") of shares of Preferred Stock shall be designed
as 12% Convertible Cumulative Redeemable Preferred Stock, Series A (the "Series
A Preferred Stock"), and each share of Series A Preferred Stock shall have a
liquidation value of $25,000 per share. Shares of Series A Preferred Stock shall
have a liquidation preference of $25,000 per share equal to any dividends
declared but unpaid, without interest.
The Series A Preferred Stock shall rand prior to common stock of all
classes (collectively, "Common Stock") of the Corporation and to all other
classes and series of equity securities of the Corporation now or hereafter
authorized, issued or outstanding (the common Stock and such other classes and
series of equity, securities of the Corporation are collectively referred to
herein as the "Junior Stock"), other than any class or series of equity
securities of the Corporation expressly designated as ranking on a party with
(the "Parity Stock") or senior to (the "Senor Stock") the Series A Preferred
Stock as to dividend rights and rights upon liquidation, winding up or
dissolution of the Corporation. The Series A Preferred Stock shall be subject to
the creation of Senior Stock, Parity Stock and Junior Stock to the extent not
expressly prohibited by the Charter of the Corporation.
The number of shares of Series A. Preferred Stock may be increased or
decreased form time to time by a vote of not less than a majority of the members
of the board then in office, provided that no decrease shall reduce the number
of shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of any outstanding options, rights or warrants, if any, to purchase
shares of Series A Preferred Stock, or convertible into shares of Series A
Preferred Stock.
2. Dividends
(a) Payment of Dividends. Holders of shares of Series A Preferred Stock
shall be entitled to receive, if, when and as declared by the Board of
Directors, out of funds legally available therefor, cumulative cash (except as
provided below) dividends at an annual rate of 12% of the $25,000 liquidation
preference per share ($1,500.00 per share bi-annually), and no more. Such
cumulative dividends shall be payable, if declared, bi-annually on November 31,
<PAGE>
and May 31, in each year, or if such day is not a business day, on the next
business day (each such date, a "Dividend Payment Date"). If the Corporation
elects, the Corporation may make dividend payments in shares of Common Stock of
the Corporation issued at 90% of the then current market price of the Common
Stock ("Dividend Stock");' provided, however, no fractional shares or scrip
representing any factional shares shall be issued. Instead of any fractional
shares of Dividend Stock which would otherwise be issuable upon election of the
Corporation to make dividend payments in the form of Common Stock, the
Corporation shall pay a cash adjustment in respect of such fractional share of
Common Stock in an amount equal to the same fraction of 90% of the then current
market price of a share of Common Stock. For these purposes, the "current market
price" shall mean the average of the daily closing prices for thirty (30)
consecutive business day prior to such dividend payment date. The closing price
for each day shall be the last sale price regular way, or, in case no such
report of sale takes place on such day, the average of the last reported bid and
asked prices regular way in either case on a principal national securities
exchange on which the Common Stock is admitted to trading or listed, or if not
listed or admitted to listing on such exchange, the average of the highest
reported bid and lowest reported ask price as reported by NASDAQ, or similar
organization if NASDAQ is not longer reporting such information, or if not so
available, the fair market price as determined by the board of Directors. The
first Dividend Payment Date shall be May 31, 1998. Each declared dividend shall
be payable to holders or record of the Series A Preferred Stock as they appear
on the stock books of the Corporation at the close of business on such record
dates, not more than forty-five (45) calendar days nor fewer than ten (10)
calendar days preceding the Dividend Payment Date therefor, as determined by the
board of Directors (each such date, a "Record Date"). Annually dividend periods
(each a "Dividend Period") shall commence on a Dividend Payment Date provided,
however, that the first Dividend Period (the "Initial Dividend Period") shall
commence on and include November 30, 1997.
The amount of dividends payable on each share of the Series A Preferred
Stock for each full Dividend Period during which such share is outstanding shall
be $1,500.00. The amount of dividends payable for the Initial Dividend Period
and for any Dividend Period which, as to a share of Series A Preferred Stock
(determined by reference to the issuance date and the redemption or retirement
date thereof), is other than one full Dividend Period shall be computed on the
basis of a 360-day year composed of twelve (12) thirty (30) day months and the
actual number of days elapsed in the Initial Dividend Period of such Dividend
Period.
Holders of the Series A Preferred Stock shall not be entitled to any
interest, or any sum of money in lieu of interest, in respect of any dividend
payment or payments on the Series A Preferred Stock declared by the Board of
Directors which may be unpaid. Any dividend payment made on the Series A
Preferred Stock shall first be credited against the earliest declared but unpaid
cash dividend with respect to the Series A Preferred Stock.
(b) Dividends Cumulative. The right of holders of Series A Preferred Stock
to receive dividends shall commence to accrue and shall be cumulative from and
including the date of its original issuance and shall be cumulative whether or
not they have ben paid or declared.
(c) Priority as to Dividends. No full dividends shall be declared or paid
or set apart for payment on any Parity Stock or Junior Stock for any Dividend
<PAGE>
Period unless full dividends have been or contemporaneously are declared and
paid (or declared and a sum sufficient for the payment thereof set apart for
such payment) on the Series A Preferred Stock for such Dividend Period. When
dividends are not paid in full (or declared and a sum sufficient for such full
payment is not so set apart) for any Dividend Period on the Series A Preferred
Stock and any Parity Stock, dividends declared on the Series A Preferred Stock
and Parity Stock shall only be declared pro rata based upon the respective
amounts that would have been paid on the Series A Preferred Stock and such
Parity Stock had dividends been declared in full.
In addition to the foregoing restriction, the Corporation shall not
declare, pay or set apart funds for any dividends or other distributions (other
than in Common Stock or other Junior Stock) with respect to any Common Stock or
other Junior Stock of the Corporation or repurchase, redeem or otherwise
acquire, or set apart funds for repurchase, redemption or other acquisition of,
any Common Stock or other Junior Stock through a sinking fund or otherwise,
unless and until (i) the Corporation shall have paid full dividends on the
Series A Preferred Stock for the most recent preceding Dividends Periods or
funds have paid over to the dividend disbursing agent of the Corporation for
payment of such dividends, and (ii) the Corporation has declared a dividend on
the Series A Preferred Stock for the current Dividend Period, and sufficient
funds or Dividend Stock have been paid over or delivered to the dividend
disbursing agent for the Corporation for the payment of such dividend for such
current Dividend Period..
No dividend shall be paid or set aside for holders of Series A Preferred
Stock for any Dividend Period unless full dividends have been paid or set aside
for the holders of each class or series of equity securities of the Corporation,
if any, ranking prior to the Series A Preferred Stock as to dividends for such
Dividend Period.
(d) Any reference to "dividends" or "distributions" in this Section 2 shall
not be deemed to include any distribution made in connection with any voluntary
or involuntary dissolution, liquidation or winding up of the Corporation.
3. Redemption
(a) General. The shares of Series A Preferred Stock may be redeemed by the
Corporation or its successors or any acquiring or resulting entity with respect
to the Corporation (including by any parent or subsidiary of the Corporation,
any such successor, or any such acquiring or resulting entity), as applicable,
at its option, in whole or in part, at any time or from time to time, upon
notice as provided in subsection (b) of this Section 3, by resolution of the
board of Directors of the Corporations or its successor or any acquiring or
resulting entity with respect to the Corporation (including by any parent of
subsidiary of the Corporation, any such successor, or any such acquiring or
resulting entity), as applicable, at price equal to $27,500 per share, plus, in
each case, an amount in cash equal to all declared and unpaid dividends to the
date fixed for redemption, without interest, or the holders, at their sole
option, may elect on or before the redemption date (as set forth in the notice
of said redemption) to convert the shares of Series A Preferred Stock into
shares of Common Stock of the Corporation as set forth in Section 6 hereinbelow.
<PAGE>
The aggregate redemption price payable to each holder of record of Series A
Preferred Stock to be redeemed shall be rounded to the nearest cent ($0.01).
If less than all of the outstanding shares of Series A Preferred Stock are
to be redeemed, the Corporation will select those shares to be redeemed pro
rata, by lot or such other methods as the Board of Directors in its sold
discretion determines to be equitable. If redemption is being affected by the
Corporation, on and after the redemption date, dividends shall cease to accrue
on the shares of Series A Preferred Stock called for redemption, and they shall
be deemed to case to be outstanding, provided that the redemption price
(including any declared but unpaid dividends to the date fixed for redemption)
has been duly paid or provided for. If redemption is being effected by an entity
other than the Corporation, on and as of the redemption date such entity shall
be deemed to own the shares being redeemed for all purposes hereof provided that
the redemption price (including the amount of any declared but unpaid dividends
to the date fixed for redemption) has been duly paid or provided for.
(b) Notice of Redemption. Notice of any redemption, setting forth (i) the
date and place fixed for said redemption, (ii) the redemption price and (iii) a
statement that dividends on the shares of Series A Preferred Stock (A) to be
redeemed by the Corporation will cease to accrue on such redemption date, or (B)
to be redeemed by an entity other than the Corporation will thereafter accrue
solely for the benefit of such entity, shall be mailed, postage prepaid, at
least thirty (30) days, but not more than sixty (60) days, prior to said
redemption date to each holder of record of Series A Preferred Stock to be
redeemed at his or her address as the same shall appear on the stock books of
the Corporation. If less than all of the shares of Series A Preferred Stock
owned by such holder are then to be redeemed, such notice shall specify the
number of shares thereof that are to be redeemed and the numbers of the
certificates representing such shares. Notice of any redemption shall be given
by first class mail, postage prepaid. Neither failure to mail such notice, nor
any defect therein or in the mailing thereof, to any particular holder shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice which was mailed in the
manner herein provided shall be conclusively presumed to have been duly given
wether or not the holder receives such notice.
If such notice of redemption shall have been so mailed , and if, on or
before the redemption date specified in such notice, all funds necessary for
such redemption shall have been set aside by the Corporation (or other entity as
provided in Subsection (a) of this Section 3) separate and apart from its funds
in trust for the account of the holders of shares of Series A Preferred Stock to
be redeemed (so as to be and continue to be available thereof), then, on and
after said redemption date, notwithstanding that nay certificate for shares of
Series A Preferred Stock so called for redemption shall not have been
surrendered for cancellation or transfer, the shares of Series A Preferred Stock
(A) so called for redemption by the corporation shall be deemed to be no longer
outstanding and all rights with respect to such shares of Series A Preferred
Stock so called for redemption shall forthwith case and terminate, or (B) so
called for redemption by an entity other than the Corporation shall be deemed
owned for all purposes hereof by such entity, except in each case for the right
of the holders thereof to receive, out of the funds so set aside in trust, the
amount payable on redemption thereof, but without interest, upon surrender (and
endorsement or assignment for transfer, if required by the Corporation of such
other entity) of their certificates.
<PAGE>
In the event that holders of shares of Series A Preferred Stock that shall
have been redeemed shall not within two (2) years (or any longer period if
required by law) after the redemption date claim any amount deposited in trust
with Corporation or trust company for the redemption of such shares, such
Corporation or trust company shall, upon demand and if permitted by applicable
law, pay over to the Corporation (or other entity that redeemed the shares) any
such unclaimed amount so deposited with it, and shall thereupon, be relieved for
all responsibility in respect thereof, and thereafter the holders of such shares
shall, subject to applicable escheat laws, look only to the Corporation (or
other entity that redeemed the shares) for payment of the redemption price
thereof, but without interest from the date of redemption.
(c) Status of Shares Redeemed. Shares of Series A Preferred Stock redeemed,
purchase or otherwise acquired for value by the Corporation shall, after such
acquisition, have the status of authorized and unissued shares of Preferred
Stock and may be reissued by the Corporation at any time as share of any series
of Preferred Stock other than as shares of Series A Preferred Stock.
4. Liquidation Preference
(a) Liquidating Distributions. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of shares of Series A Preferred Stock shall be entitled to receive for each
shares thereof, out of the assets of the Corporation legally available for
distribution to shareholders under applicable law, or the proceeds thereof,
before any payment or distribution of the assets shall be made to holders of
shares of Common Stock or any other Junior Stock (subject to the rights of the
holders of any class or series of equity securities having preference with
respect to distributions upon liquidation and the Corporation's general
creditors, including its depositors), liquidating distributions in the amount of
$25,000 per share, plus an amount per share equal to any dividends declared bu
unpaid, without interest.
If the amounts available for distribution in respect of shares of Series A
Preferred Stock and any outstanding Parity Stock or not sufficient to satisfy
the full liquidation rights of all of the outstanding shares of Series A
Preferred Stock and such Parity Stock, then the holders of such outstanding
shares shall share ratably in any such distribution of assets in proportion to
the full respective preferential amounts to which they are entitled, the holders
of shares of Series A Preferred Stock will not be entitled to any further
participation in any liquidating distribution of assets by the Corporation. All
distributions made in respect of Series A Preferred Stock in connection with
such a liquidation, dissolution or winding up of the corporation shall be made
pro-rata to the holders entitled thereof.
(b) In the event of liquidation, National Boston Medical, Inc. further
grants to the Series A Preferred Stock an assignment of all product rights,
including the manufacturing and formula rights to the products of the
Corporation, together with the assignment of executory contracts relating to
those products. Exercise of these rights is at the sole option of the preferred
stockholders.
(c) Consolidation, Merger or Certain Other Actions. Neither the
consolidation, merger or other business combination of the Corporation with or
into any other person, nor the sale of all or substantially all of the assets of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
<PAGE>
of the Corporation for purposes of this Section 4.
5. Voting Rights
Holders of shares of Series A Preferred Stock shall have no voting rights.
6. Conversion Rights
The holders of shares of Series A Preferred Stock shall have rights to
convert such shares into shares of the common stock of the Corporation. The
Series A Preferred Stock are convertible at the option of the holder, in whole
or in part, at any time (the "Initial Conversion Date") and prior to maturity
into Common Stock of the Corporation at the price per share of Common Stock
which equals (i) $2.50 per share, or (ii) such adjusted price as may from time
to time be adjusted (the "Conversion Price"). No fractional shares or scrip
representing any factional shares shall be issued; instead of any fractional
shares of such Common Stock which would otherwise be issuable upon such
conversion, the Corporation shall pay a cash adjustment in respect of such
fractional shares of Common Stock in an amount equal to the same fraction of the
then current market price of a share of Common Stock. Accrued dividends through
the date of conversion will be paid to the holder in cash or, at the election of
the Corporation, in Common Stock valued at the then current market price of a
share of Common Stock. For these purposes, "current market price" shall have the
meaning ascribed thereto in Section 2(a) hereof. In the event that the
Corporation shall, at any time prior to the exercise of conversion rights
hereunder: (i) declare or pay to the holders of the Common Stock a dividend
payable in any kind of shares of stock into the same or different number of
share with or without par value, or in shares of any class or classes; or (iii)
transfer its property as an entirety or substantially as an entirety to any
other company; or (iv) make any distribution of its assets to holders of its
Common Stock as a liquidation or partial liquidation dividend or by way of
return of capital; then, upon the subsequent exercise of conversion rights, the
holder thereof shall receive, in addition to or in substitution for the shares
of Common Stock to which it would otherwise be entitled upon such exercise, such
additional shares of stock or scrip of the Corporation, or such reclassified
share of stock of the Corporation, or such shares of the securities or property
of the Corporation resulting from such transfer, or such assets of the
Corporation, which it would have been entitled to received had it exercised such
conversion rights prior to the happening of any of the foregoing events.
Additionally, in the event of any of the foregoing events or transactions, the
Conversion Price shall be appropriately adjusted if necessary.
Each Series A Preferred Stock if converted into Common Stock, as prescribed
above, will also entitle the holder to Warrants to purchase a number of shares
of Common Stock, at a price of $2.50 per share, during a five (5) year period,
commencing on the date of issuance of the shares of Common Stock so converted
equal to the number of shares of Common Stock received by the holder upon such
conversion. The Warrants are redeemable by the Corporation, at its sole option,
at a redemption price of $2.50 per share underlying the Warrants to be redeemed,
at any time commencing from the date of issuance, upon not less than thirty (30)
days prior written notice, if the current market price of the Common Stock
equals or exceeds $5.00 per shares for any sixty (60) consecutive trading day
period during which the shares of Common Stock underlying the Warrants to be
redeemed are the subject of an effective and current registration statement
under the Act. If notified by the Corporation of its intent to redeem the
<PAGE>
Warrants as set forth hereinabove, the holders of such Warrants, at their sole
discretion and option, may elect to convert those Warrants to an equal number of
shares of Common Stock by so notifying the Corporation within thirty (30) days
form receipt of the notification off the Corporation's intent to redeem same.
7. No Sinking Fund
No sinking fund shall be established for the retirement of shares of Series
A Preferred Stock.
8. Preemptive or Subscription Rights
No holder of shares of Series A Preferred Stock shall have any preemptive
or subscription rights in respect of any shares of the Corporation that may be
issued.
9. No Other Rights
The shares of Series A Preferred Stock shall not have any designation
preferences or relative, participating, optional or other special rights except
as set forth herein, or as otherwise required by law.
10. Compliance with Applicable Law
Declaration by the Board of Directors and payment by the corporation of
dividends to holders of the Series A Preferred Stock and repurchase, redemption
or other acquisition by the Corporation (or another entity as provided in
subsections (a) and (b) of Section 3 hereof) of shares of Series A Preferred
Stock shall be subject in all respect to any and all restrictions and
limitations placed on dividends, redemptions or other distributions by the
Corporation (or any such other entity) under (i) laws, regulations and
regulatory conditions or limitations applicable to or regarding the Corporation
(or any such other entity) from time to time and (ii) agreements betwe4en the
Corporation and its creditors from time to time effect.
Signatures:
National Boston Medical, Inc.
By: ___________________________ By:
Daniel Hoyng, President/CEO Signature of Purchaser
Date:_________________________ Date:_________________________
By:
Signature of joint Purchaser (if any)
Date:
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
IN WHOLE OR IN PART IN THE ABSENCE COUNSEL REASONABLE SATISFACTORY TO THE
COMPANY IN FORM AND SUBSTANCE REASONABLE SATISFACTORY TO THE COMPANY THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT EXISTS WITH RESPECT TO THE PROPOSED
SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION.
NATIONAL BOSTON MEDICAL, INC.
COMMON STOCK PURCHASE WARRANT
CERTIFICATE TO PURCHASE
SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M. NEW YORK LOCAL TIME ON
5 YEARS FROM DATE OF ISSUANCE
This Warrant Certificate certifies that , or registered assigns, is the
registered Holder ("Holder") of Common Stock Purchase Warrants ("Warrants") to
purchase shares of common stock $.01 par value per shares ("Common Stock"), of
National Boston Medical, Inc., a Delaware corporation (the "Company"). Each
Warrant enables the Holder to purchase from the Company at any time until 5:00
p.m. New York, New York local time on [5 years from date of issuance] one fully
paid and non-assessable share of Common Stock (individually, a "Share" and
collectively the "Shares") upon presentation and surrender of this Warrant
Certificate and upon payment of the purchase price of $2.50 per shares (the
"Exercise Price"); provided, however, that if the current market price per Share
of Common Stock exceeds $5.00 for sixty (60) consecutive trading days during
which the Shares underlying the Warrants to be redeemed were the subject of an
effective and current registration statement under the S3ecurities Act of 1933,
as amended (the "Act"), then the Company may, in its sole option, redeem some or
all of the Warrants at a redemption price of$2.50 for Shares underlying the
Warrants to be redeemed. For purposes of computing the exercise price the term
"current market price per Share of Common Stock" shall mean the "Market Price"
as defined in Section 11(a) hereof. Payment shall e made in lawful money of the
United States of America by certified check payable to the Company. Such payment
shall be made at the principal office of the Company at 43 Taunton Green, Suite
3, Taunton, MA 02780. As hereinafter provided, the Exercise Price and number of
Shares purchasable upon the exercise of the Warrants are subject to modification
or adjustment upon the happening of certain events.
The Warrants represented by this Warrant Certificate are issuable upon the
conversion of the Preferred Shares in a private placement as described in a
certain Confidential Private Placement Term Sheet dated November 17, 1997 (the
"Private Placement") for a five (50) year period, commencing on the date of
issuance.
1. Upon surrender to the Company, this Warrant Certificate may be
exchanged for another Warrant Certificate or Warrant Certificates evidencing a
like aggregate number of Warrants. If this
<PAGE>
Warrant Certificate shall be exercise in part, the Holder shall e entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates evidencing the number of Warrants not exercised.
2. No Holder shall be deemed to the Holder of Common Stock or any
other securities of the Company that may at any time be issuable on the exercise
hereof for any purpose nor shall anything contained herein be construed to
confer upon the Holder any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof or to give or withhold consent to any
corporate action (wither upon any reorganization, issuance of stock,
reclassification or conversion of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings or to receive
dividends or subscription rights or otherwise until a Warrant shall have been
exercised and the Common Stock purchasable upon the exercise thereof shall have
become issuable.
3. Each Holder consents and agrees with the Company and any other
Holder that:
(a) this Warrant Certificate is exercisable by the holder in person or
by an attorney duly authorized in writing at the principal office of the
Company in whole or in part;
(b) anything herein to the contrary notwithstanding, in no event shall
the Company be obligated to issue Warrant Certificates evidencing other
than a whole number of Warrants or issue certificates evidencing other than
a whole number of Shares upon the exercise of this Warrant Certificate;
provided, however, that the Company shall pay with respect to any such
fraction of a share an amount of cash based upon the current market value
(or book value, if there shall be no public market value for shares
purchasable upon exercise hereof); and
(c) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute true and lawful owner
hereof for all purposes whatsoever.
4. The Company shall maintain books for the transfer and registration
of Warrants. Upon the tr4ansfer of any Warrant, the Company shall issue and
register the Warrants in the names of the new Holders. The Warrants shall be
signed manually by the Chairman, Chief Executive Officer, President or any Vice
President and the Secretary (or Assistant Secretary) of the Company. Such to
Paragraph 10, the Company shall offer, from time to time, any outstanding
Warrants upon the books to be maintained by the Company for such purpose upon
surrender thereof for transfer properly endorsed or accompanied by appropriate
instruction for transfer. Upon any transfer, a new Warrant Certificate shall be
issued to the transferee and the surrendered Warrants shall be canceled by the
Company. Warrants may be exchanged at the option of the Holder, when surrendered
at the office of the Company, for another Warrant, or other Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Shares. Subject to the terms of this Warrant
Certificate, upon such surrender and payment of the purchase price, the Company
shall issue and deliver with all reasonable dispatch to or upon the written
order of the Holder of such Warrants and in such name or names as such Holder
may designate, a certificate or certificates for the number of full Shares so
purchase upon the exercise of such Warrants. Such certificate or certificates
shall be deemed to have been issued and any person so designated to be
<PAGE>
named therein shall be deemed to have become the Holder of record of such Shares
as of the date of the surrender of such Warrants and payment of the Exercise
Price; provided, however, that if, at the date of surrender and payment, the
transfer books of the Shares shall be closed, the certificates for the Shares
shall be issuable as of the date on which such books shall be opened and until
such date the Company shall be under no duty to deliver any certificate for such
Shares; provided, further, however, that such transfer books, unless otherwise
required by law or by applicable rule of any national securities exchange, shall
not be closed at any one time for a period longer than 20 days. The rights of
purchase represented by the Warrants shall be exercisable, at the election of
the Holders, either in whole or from time to time in part (but in no event with
respect to less than 100 Shares).
5. The Company will pay any documentary stamp taxes attributable to
the initial issuance of the Shares issuable upon the exercise of the warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificates for Shares in the name other than that of the
Holder in respect of which such Shares are issued, and in such case the Company
shall not be required to issue or deliver any certificate for Shares or any
Warrant until the person requesting the same has paid to the Company the amount
of such tax or has established to the Company's satisfaction that such tax has
been paid.
6. In case the Warrant Certificate shall be mutilated, lost, stolen
or destroyed, the Company may, in its discretion, issue and deliver in exchange
in substitution for and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction and an indemnity, if requested,
also satisfactory to it.
7. There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and unissued Common Stock, a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
this Warrant Certificate. The Company agrees that all Shares issuable upon
exercise of the Warrants shall be, at the time of delivery of the certificates
for such Shares, validly issued and outstanding, fully paid and nonassessable.
8. Subject and pursuant to the provisions of this paragraph, the
purchase price and number of Shares subject to this Warrant Certificate shall be
adjusted from time to time as set forth hereinafter:
(a) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, then
the Exercise Price shall be proportionately decreased as of the close of
business on the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the
Exercise Price immediately prior to such subdivision shall be
proportionately decreased, and, if the Company shall at any time combine
the outstanding Common Stock by recapitalization, reclassification or
combination thereof, the Exercise Price immediately prior to such
<PAGE>
combination shall be proportionately increased. Any such adjustment to the
Exercise Price shall become effective at the close of business on the
record date for such subdivision or combination.
(c) In case the Company after the date hereof shall distribute to all
of the Holders of outstanding shares of Common Stock any securities or
other assets (other than a cash distribution made as a dividend payable out
of earnings or out of any earned surplus legally available for dividends
under the laws of the State of Delaware), the Board of Directors shall be
required to make such equitable adjustment in the Exercise Price, as in
effect immediately prior to the record date for such distribution, as may
be necessary to preserve for the Holder rights substantially proportionate
to those enjoyed hereunder by the Holder immediately prior to the happening
of such distribution. Any such adjustment to the Exercise Price shall
become effective at the close of business on the record date for such
distribution.
(d) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets
to another corporation, shall be effected in such a way that Holders of
Common Stock shall be entitled to receive stock, securities, cash, or
assets with respect to or in exchange for Common Stock, then as a condition
of such reorganization, reclassification, consolidation, merger or sale,
the Company or such successor or purchasing corporation, as the case may
be, shall execute a supplemental Warrant Certificate providing that each
Holder shall have the right thereafter and until the expiration date to
exercise a Warrant for the kind and amount of stock, securities, cash or
assets receivable upon such reorganization, reclassification,
consolidation, merger or sale by Holder of the number of shares of Common
Stock for the purchase of which such Warrant might heave been exercised
immediately prior to such reorganization, reclassification, consolidation,
merger or sale, subject to further adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Paragraph 8.
(e) If at any time after the date of issuance hereof the Company shall
grant or issue any shares of Common Stock, or grant or issue any rights or
options for the purchase of, or stock or other securities convertible into,
Common Stock (such convertible stock or securities being herein
collectively referred to as "Convertible Securities" other than:
(i) shares issued in a transaction described in subparagraph (f)
of this Paragraph 8; or
(ii) shares issued, subdivided or combined in transactions
described in subparagraphs (a) or (b) of this Paragraph 8;
for a consideration per shares which is less than the then current market
price per shares of Common Stock, then the Exercise Price in effect
immediately prior to such issuance or sale (the "Applicable Exercise
Price") shall, and thereafter upon each issuance or sale, the Applicable
Exercise Price shall, simultaneously with such issuance or sale, be
adjusted, so that such Applicable Exercise Price shall equal a price
determined by multiplying the Applicable Exercise Price by a fraction, the
numerator of which shall be:
<PAGE>
(A) the sum of (x) the total number of shares of Common
Stock outstanding immediately prior to such issuance plus (y) the number of
shares of Common Stock which the aggregate consideration received, as determined
in accordance with subparagraph (g) below for the issuance or sale of such
additional Common Stock or Convertible Securities deemed to be an issuance of
Common Stock as provided in subparagraph (h) below, would purchase (including
any consideration received by the Company upon the issuance of any shares of
Common Stock or convertible Securities since the date the Applicable Exercise
Price became effective not previously included in any computation resulting in
an adjustment pursuant to this subparagraph (e)) at the then current market
price per share of Common Stock, and the denominator of which shall be
(B) the total number of shares of Common Stock
outstanding (or deemed to be outstanding as provided in subparagraph (g))
immediately after the issuance or sale of such additional shares.
For purposes of this Paragraph 8 the current market "current market price per
share" of Common Stock at any date shall be deemed to be the average daily
closing prices for the thirty (30) consecutive business days before such date.
The closing price for that day shall be the last sale price regular way or, in
case no such reported sales takes place on such day the average of the last
reported bid and ask prices regular way, in either case on the principal
national securities exchange, on which the Common Stock is admitted to trading
or listed, or if not listed or admitted to trading on such exchange, the average
of the highest reported bid and lowest reported ask prices is reported by
NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors of the Company. The current market price per share of Common
Stock shall be reduced appropriately to take into account the restricted nature
of any securities issued by the Company and the issuance or sale of larger
blocks of its securities.
If, however, the Applicable Exercise Price thus obtained would result in the
issuance of a lesser number of shares upon conversion than would be issued at
the initial Exercise Price specified in the first paragraph hereof, the
Applicable Exercise Price shall be such initial Exercise Price.
(f) Anything in this Paragraph 8 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be made in connection with:
(i) the grant, issuance or exercise of any Convertible Securities
pursuant to the Company's qualified or non-qualified Employee Stock Option
Plans or any other bona fide employee benefit plan or incentive
arrangement, previously adopted, or as may hereafter, be adopted, by the
Company's Board of Directors, for the benefit of the Company's employees,
consultants or directors, as any such plans or arrangements may hereafter
be amended from time to time;
(ii) the issuance of any shares of Common Stock pursuant to the grant
or exercise of Convertible Securities outstanding as of the date hereof;
(iii) to shareholders of any corporation or other entity the stock or
assets of which is acquired by, or which merges into the Company (the
"Target Company") in proportion to their stock holdings of the Target
<PAGE>
Company immediately prior to such acquisition or merger, upon such
acquisition or merger, provided that the Target Company does not at the
time of such merger beneficially own in excess of or, if the Target Company
is an Affiliate, that the Company has obtained a fairness opinion from a
recognized investment banking firm as to the consideration receive by the
Company in connection with such acquisition or merger; or
(iv) in a bona fide public offering pursuant to a firm commitment
underwriting.
(g) For the purpose of subparagraph (a) above, the following provisions
shall also be applied:
(i) In the case of the issuance or sale of additional shares of Common
Stock for cash, the consideration received by the Company therefor shall be
deemed to be the amount of cash received by the company for such shares,
before deducting therefrom any commissions, compensations or other expenses
paid or incurred by the Company for any underwriting of, or otherwise in
connection with, the issuance or sale of such shares.
(ii) In the case of the issuance of Convertible Securities, the
consideration received by the Company therefore shall be deemed to be the
amount of cash if any, received by the Company for the issuance of such
rights or Convertible Securities, plus the minimum amounts of cash and fair
value of other consideration if any, payable to the Company upon the
exercise of such rights or options or payable to the Company on conversion
of such Convertible Securities.
(iii) In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in part, other than
cash, the consideration other than cash shall be deemed to be the fair
market value thereof as reasonably determined n good faith by the Board of
Directors of the Company (irrespective of accounting treatment thereof);
provided, however, that if such consideration consists of the cancellation
of debt issued by the Company, the consideration shall be deemed to be the
amount the Company received upon issuance of such debt (gross proceeds)
plus accrued interest and, in the case of original issue discount or zero
coupon indebtedness, accredited value to the date of such cancellation, but
not including nay premium or discount at which the debt may then be trading
or which might otherwise be appropriate for such class of debt.
(iv) In case of the issuance of addition shares of Common Stock upon
the conversion or exchange of any obligations (other than Convertible
Securities), the amount of the consideration received by the Company for
such obligations or shares converted or exchanged, before deducting from
such consideration so received by the Company any expenses, commissions or
compensations incurred or paid by the Company for any underwriting of, or
otherwise in connection with, the issuance or sale of such obligations or
shares, plus any consideration received by the Company in adjustment of
interest and dividends. If obligations or shares of the same class or
series of a class as the obligations or shares so converted or exchanged
have been originally issued for different amounts of consideration, then
the amount of consideration received by the Company upon the original
issuance of each of the obligations or shares so converted or exchanged
shall be deemed to be the average amount of upon the original issue
<PAGE>
of all such obligations or shares. The amount of compensation received by
the Company upon the original issuance of the obligations or shares so
converted or exchanged and the amount of the consid3eration, if any, other
than such obligations or shares received by the Company upon such
conversion or exchange shall be determined in the same manner as provided
in subparagraphs (i) through (iii) above with respect to the consideration
received by the Company in case of the issuance of additional shares of
Common Stock or Convertible Securities.
(h) for purposes of the adjustments provided for in subparagraph (e) above,
if at any time, the Company shall issue any Convertible Securities the Company
shall be deemed to have issued at the same time of the issuance of such
Convertible Securities the maximum number of shares of Common Stock issuable
upon conversion of the total amount of such Convertible Securities.
(i) On the expiration, cancellation or redemption of any Convertible
Securities, the Exercise price then in effect hereunder shall forthwith be
readjusted to such Exercise Price as would have been obtained (a) had the
adjustments made upon the issuance or sale of such expired, canceled or redeemed
Convertible Securities been made upon the basis of the issuance of only the
number of shares of Common Stock. Therefore actually delivered upon the exercise
or conversion of such Convertible Securities (and the total consideration
received therefor) and (b) had all subsequent adjustments been made only on the
basis of the Exercise Price as readjusted under this subparagraph (i) for all
transactions (which would have affected said adjusted Exercise Price) made after
the issuance or sale of such Convertible Securities.
(j) Anything in this Paragraph 8 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 5% in such Exercise Price; provided,
however, that any adjustments which by reason of this subparagraph (j) are not
required to be made shall be carried forward and taken into account in making
subsequent adjustments. All calculations under this Paragraph shall be made to
the nearest cent or to the nearest tenth of a share, as the case may be.
(k) Upon any adjustment of any Exercise Price, then and in each such case
the Company shall promptly deliver a notice to the registered Holder of this
Warrant, which notice shall state the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise hereof, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(l) Upon any adjustment of the Exercise Price pursuant to any provisions
contained in this Paragraph 8, the number of Shares issuable upon exercise of a
Warrant shall be changed to the number of Shares determined by dividing (i) the
aggregate Exercise Price payable for the purchase of all Shares issuable upon
exercise of the Warrant immediately prior to such adjustment by (ii) the
Exercise Price per Share in effect immediately after such adjustment.
9. In case at any time:
<PAGE>
(i) the Company shall pay any dividend payable in stock upon the
Common Stock or make any distribution (other than regular cash dividends)
to the Holders of the Common Stock;
(ii) the Company shall offer for subscription pro-rata to the Holders
of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization or reclassification
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets, to another
corporation; or
(iv) there shall e a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of such cases, the Company shall give written notice to
the Holder of the date on which (x) the books of the Company shall close or a
record shall be taken for such dividend, distribution, or subscription rights,
or (v) such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also specify the date as of which the Holders of Common Stock
of record shall participate in such dividend, distribution, or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding up, as the
case may be. Such notice shall e given at least 20 days prior to the record date
or the date on which the Company's transfer books are closed in respect thereof.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any of the matters set forth in the Paragraph.
10. (a) The Holder of this Warrant Certificate, each transferee hereof and
any Holder and transferees of any Shares, by his or its acceptance thereof,
agrees that (i) no public distribution of Warrants or Shares will be made in
violation of the Securities Act of 1933 as amended (the "Act"), and (b) during
such period as the delivery of a prospectus with respect to Warrants or Shares
may be required by the Act, no public distribution of Warrants or Shares will be
made in a manner or on terms different from those set forth in, or without
delivery of, a prospectus then meeting the requirements of Section 10 of the Act
and in compliance with all applicable state securities laws. The Holder of this
Warrant Certificate and each transferee hereof further agrees that if any
distribution of any of the Warrants or Shares is proposed to be made by them
otherwise than by delivery of a prospectus meeting the requirement of Section 10
of the Act, such action shall be taken only after submission to the Company of
an opinion of counsel, reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed distribution will not be in
violation of the Act or of applicable state law. Furthermore, it shall be a
condition to the transfer of the Warrants that any transferee thereof deliver to
the Company his or its written agreement to accept and be bound by all of the
terms and conditions contained in this Warrant Certificate.
(b) This Warrant or the Shares or any other security issued or issuable
upon exercise of this Warrant may not be sold or otherwise disposed of except as
follows:
(1) To a person who, in the opinion of counsel for the Holder
reasonably acceptable
<PAGE>
to the Company, is a person to whom this Warrant or Shares may legally
be transferred without registration and without the delivery of a current
prospectus under the Act with respect thereto and then only against receipt
of an agreement of such person to comply with the provisions of this
Section (1) with respect to any resale or other disposition of such
securities which agreement shall be satisfactory in form and substance to
the Company and its counsel; provided that the foregoing shall not only
apply to any such Warrant, Shares or other security as to which such Holder
shall have received an opinion letter from counsel to the Company as to the
exemption thereof from the registration under the Act Pursuant to Rule
144(k) of the Act; or
(2) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering
thereof for such sale or disposition.
(c) Each certificate for Shares issued upon exercise of this Warrant shall
bear a legend relating to the non-registered status of such Shares under the
Act, unless at the time of exercise of this Warrant such Shares are subject to a
currently effective registration statement.
11. (a) The Warrants are redeemable by the Company, at its sole option, in
whole or in part from time to time, at a redemption price equal to $2.50 per
Share underlying the Warrant to be redeemed at any time commencing from the date
of issuance, upon not less than thirty (30) days prior written notice, if the
current market price per Share of Common Stock exceeds $5.00 for any sixty (60)
consecutive trading day period, during which the Shares underlying the Warrants
to be redeemed were the subject of an effective and current registration
statement under the Act., provided, however, that if notified by the Corporation
of its intent to redeem the Warrants as set forth hereinabove, the Holders of
such Warrants, at their sole discretion and option, may elect to convert those
Warrants to an equal number of shares of Common Stock by so notifying the
Corporation within thirty (30) days from receipt of the notification of the
Corporation's intent to redeem same. The sixty (60) consecutive trading day
period ending on the third business day prior to the date the notice of
redemption is given hereinafter referred to as the "Measurement Period".
Notwithstanding the foregoing, the Company shall not be entitled to redeem any
of the Warrants represented by this Certificate, unless the issuance of the
Shares into which the Warrants are exercisable has been registered under the Act
at all times during the applicable Measurement Period and shall continue to be
so registered at all times between the date on which the notice of redemption is
given and the "Redemption Date" (as hereinafter defined). For purposes hereof,
"Market Price" shall mean the average of the daily closing prices for five (5)
consecutive business days prior to such dividend payment date. The closing price
for each day shall be the last sale price regular way, or, in case no such
report of sale takes place on such day, the average of the last reported bid and
asked prices regular way in either case on a principal national securities
exchange on which the Common Stock is admitted to trading or listed, or if not
listed or admitted to listing on such exchange, the average of the highest
reported bid and lowest reported ask price as reported by NASDAQ or similar
organization if NASDAQ is no longer reporting such information, or if not so
available, the fair market price as determined by the Board of Directors.
(b) In the event the Company shall elect to redeem all or any part of the
Warrants, the Company shall fix a date for redemption (the "Redemption Date").
Notice of redemption shall be mailed by first class mail, postage prepaid, by
the Company not less than 30 days from the date fixed
<PAGE>
for redemption to the registered Holder of this Warrant Certificate at its last
address as it shall appear on the Company's Warrant Certificate registry books.
Any notice mailed in the manner herein provided shall be conclusively presumed
to have been duly given whether or not the Holder receives such notice. Any
right to exercise a Warrant being redeemed shall terminate at 5:00 P.M. (New
York time) on the business day immediately preceding the Redemption Date.
(c) From and after the date specified for redemption, the Company shall, at
the place specified in the notice of redemption, upon presentation and surrender
of this Certificate to the Company by or on behalf of the Holder thereof,
deliver or cause to be delivered to or upon the written order of the Holder a
sum in cash equal to the redemption price of each Warrant being redeemed. Form
and after the date fixed for redemption and upon the deposit or setting aside by
the Company of a sum sufficient to redeem all the Warrants called for
redemption, such Warrants shall expire and become void and all rights hereunder
with respect thereto, except the right to receive payment of the redemption
price, shall cease.
(d) If less than all of the Common Stock purchase warrants sold in the
Private Placement are called for redemption by the Company, the particular
Common Stock purchase warrants to be redeemed shall be selected at random by the
Company in such manner as the Company in its discretion may deem fair and
appropriate. If there shall be drawn for redemption less than all of the
Warrants represented by the Warrant Certificate, the Company shall execute and
deliver, upon surrender of this Warrant Certificate, without charge to the
Holder, a new Warrant Certificate representing the unredeemed balance of the
Warrants represented by this Warrant Certificate.
12. In accordance with the Private Placement, the Company has obligated
itself to use its best efforts to (i) prepare and file under the Act a
registration statement relating to the Shares (the term "registration statement"
as used herein being deemed to include any form which may be used to register a
distribution of securities to the public for cash); (ii) prepare and file with
the appropriate state blue sky authorities the necessary documents to register
or qualify the Shares, provided that the Company shall only be required to
register or qualify the Shares in the states where the Preferred Shares have
been registered or qualified; and (iii) use its best efforts to cause
registration statements to become effective and to keep such registration
statement and state blue sky filing current and effective for five (5) years;
provided, however, the Company will have no such obligation to keep effective a
registration statement with regard to the Shares which is then outstanding if it
agrees to purchase the Shares at the then current market price of the Shares.
All expenses in connection with preparing and filing any registration
statement (and any registration or qualification under the blue sky laws of the
states in which the offering will be made under such registration statement)
shall be borne in full by the Company, except that the underwriting commissions
and expanses attributable to the Shares so registered and the fees and
disbursements of counsel, if any, to the holders of the Shares shall be borne by
such holders. The Company may include other securities in any such registration
statement.
As a precondition to such registration and qualification each holder of the
Shares will provide the Company with sufficient information to permit and
qualification and will indemnify the Company, and each person who controls the
Company within the meaning of Section 15 of the Act, from and against any and
<PAGE>
all losses, claims, damages, expenses and liabilities caused by any untrue
statement of a material fact contained in any registration stateem4etn or
contained in a prospectus furnished under the Act or caused by any omission to
state of a material fact therein necessary to make the statements therein not
misleading, insofar as such losses, claims, damages, expenses and liabilities
are caused by such untrue statement or omission based upon information furnished
in writing to Company by any such holder expressly for use in any registration
statement or prospectus. In addition, each holder will execute and deliver all
such documents and undertakings as the Company may deem necessary or desirable
for purposes of compliance with applicable fede3ral and state securities laws.
The Company's obligation as set forth above with respect to each holder are
contingent on such holder's satisfaction of his or its obligations as set forth
above.
13. (a) This Warrant shall be governed by and construed in accordance with
the substantive laws of the State of Ohio, without giving effect to conflict of
laws principles.
(b) This Warrant Certificate constitutes and expresses the entire
understanding between the parties hereto with respect to the matter hereof, and
superseded all prior and contemporaneous Agreement and understandings,
inducements or conditions whether express or implied, oral or written. Neither
this Warrant Certificate nor any provision hereof may be changed, waived or
amended orally or any manner other than by an agreement in writing signed by the
Holder and the Company.
(c) Except as otherwise provided in this Warrant Certificate, all notices,
requests, demands and other communications required or permitted under this
Warrant Certificate or by law shall be receipt or when deposited in the United
States mails, certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
Company: National Boston Medical, inc.
43 Taunton Green, Suite 3
Taunton, MA 02780
Attention: Daniel J. Hoyng, President
Holder: At the address shown for the Holder
in the registration book maintained by Company.
(d) If any provision of this Warrant Certificate is prohibited by or is
unlawful or unenforceable under any applicable law or any jurisdiction, such
provision shall, as to such jurisdiction be in effect to the extent of such
prohibition in any jurisdiction shall not invalidate such provision in any other
jurisdiction; and provided, further that where the provisions of any such
applicable law may be waived, that they hereby are waived by the Company and the
Hoder to the full extent permitted by law and to the and that this Warrant
instrument shall be deemed to be a valid and binding agreement in accordance
with its terms.
<PAGE>
IN WITNESS THEREOF, has caused the Warrant Certificate to be signed by its
duly authorized officers as of the day of , 1998.
NATIONAL BOSTON MEDICAL, INC.
By:
Name:
Daniel J. Hoyng, President/CEO
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
(the "Company")
$2,000,000.00
$25,000 12% Convertible Cumulative Redeemable Preferred Stock, Series A
This Confidential Private Placement Term Sheet ("Term Sheet") relates to the
private placement of up to 80 shares of $225,000 12% Convertible Cumulative
redeemable Preferable Stock, Series A (each, a "Preferred Share"), each
convertible into (a) shares of the Company's common stock, $.01 par value per
share (the "Common Stock") at a price of $2.50 per share, and (b) redeemable
Common Stock purchase warrants ("Warrants") to purchase a number of shares of
Common Stock, at a price of $2.50 per shares, equal to such number of share of
Common Stock issued upon conversion of the Preferred Share; each Warrant will be
exercisable for a five (5) year period commencing on the date of conversion of
the Preferred Share; provided, however, that if the price of the Common Stock
exceeds $5.00 per share for sixty (60) consecutive trading days, during which
the shares of Common Stock underlying the Warrants to be redeemed are the
subject of an effective and current registration statement under the Act, then
the Company may, at its sole option, redeem some or all of the Warrants at a
redemption price of $2.50 per share underlying the Warrants to be redeemed,
provided however, that holders, upon notification of Corporation's intent to
convert, shall have the option to convert eh Warrants to Common Shares within
thirty (30) days of such notification . Dividend payments on each Preferred
Shares shall be made semi=annually on each May 31, and November 30 commencing
May 31, 1998 at the rate of 12% per annum payable in cash or, at the election of
the Company, in common Stock, (based on a 10% discount on the then current
market price of the Common Stock, as more fully defined herein). Each Preferred
Share may be redeemed any time upon thirty (30) days written notice to the
holder at price equal to $25,000 per share, or the holders, at their sole
option, may elect on or before the redemption date to convert the Series A
Preferred Stock into shares of Common stock. See "DESCRIPTION OF THE PREFERRED
SHARES" for a more complete description of the terms of the Preferred Shares and
the Warrants.
The Preferred Shares offered hereby are being offered by the Company only to
persons who meet the definition of "Accredited Investor" set forth in Rule
501(a) of Regulation D promulgated under the Securities Act of 1933, as amended
(the "Act). The company reserves the right to sell up to 20 Preferred Shares in
excess of 80 Preferred Shares. For more information concerning the offering
procedures see "TERMS OF THE OFFERING."
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AS AMENDED OR UNDER APPLICABLE STATE SECURITIES LAWS, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
<PAGE>
UPON THE ACCURACY OR ADEQUACY OF THIS TERM SHEET OR ENDORSED THE MERITS OF THIS
OFFERING. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS."
- ------------------------------------------------------------------------------
Price to Investor Selling Commission Proceeds to Company1
Per Preferred Share $ 25,000 $ 3,750 $ 21,250
Total Maximum2 $ 2,000,000 $ 300,000 $ 1,700,000
- ------------------------------------------------------------------------------
- --------
1The Company reserves the right to sell in excess of the maximum.
2Assumes a selling commission on each sale of the Preferred Shares
offered hereby.
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
SUBSCRIPTION INSTRUCTIONS
TO
SUBSCRIPTION AGREEMENT
FOR
PRIVATE PLACEMENT TERM SHEET, DATED NOVEMBER 17, 1997
1. Subscription Agreement
READ THE SUBSCRIPTION AGREEMENT IN ITS ENTIRETY. It contains certain
statements and certain representations required to be made by each subscriber.
Complete, date, and sign the signature page (page 9 of the Subscription
Agreement) and return the executed Subscription Agreement, together with payment
in full for the number of Preferred Shares subscribed for, to the Company at the
address set forth in item 3 below.
2. Certificate for Corporate, Partnership, Trust and Joint Purchasers
If the purchaser is a corporation, partnership, trust or two or more
individuals purchasing jointly, not the specific instructions that appear in the
Certificate of corporate, Partnership, trust and Joint Purchasers. Please date
and sign the Certificate.
3. Payment
You will be required to submit the executed Signature Page and tender the
correct purchase price in cash, check (made payable to "National Boston Medical,
Inc."), wire transfer or similar payment (or surrender of Notes) in order to
complete your subscription. The minimum investment is one Preferred Share at
$25,000 per Preferred Shares. See Paragraph 5 to the Subscription Agreement.
Deliver or mail items 1, 2 and 3 to: National Boston Medical, Inc., 43
Taunton Green, Suite 3, Taunton, MA, 02780, Attention Daniel J. Hoyng,
President.
ALL INFORMATION SHOULD BE TYPED OR PRINTED IN INK.
ANY CORRECTIONS MUST BE INITIALED.
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
SUBSCRIPTION AGREEMENT
To: National Boston Medical, Inc.
43 Taunton Green, Suite 3
Taunton, MA 02780
Attention: Daniel J. Hoyng, President
1. Agreed Subscription; Purchase Price. The undersigned hereby subscribes
for Shares of Series A, Preferred Stock (minimum subscription one Share) as
described in the Confidential Private Placement term Sheet, dated November 17,
1997 (the "Term Sheet") issued by National Boston Medical, Inc., a Delaware
corporation (the "Company") at price of $25,000 per Share. The undersigned
agrees to promptly tender to the Company payment of the full subscription price
of $25,000 in cash or principal amount of Notes outstanding per Share.
The undersigned agrees that this subscription is and shall be irrevocable,
but that it may be rejected, in whole or in part, by the Company, and that the
obligations of the undersigned hereunder will terminate if this subscription is
not accepted by the Company. The undersigned understands that the Company will
notify him if this subscription has been rejected for any reason. If this
subscription is rejected, the payment tendered by him will be returned to him
forthwith, without interest on deduction. If this subscription is accepted by
the Company, the amount of the payment tendered by him will be applied in
accordance with the description set forth in the Term Sheet and Section 5
hereof.
2. Acknowledgments of Subscriber; Economic Risk; No Liquidity. The
undersigned understands and agrees that an investment in the Preferred Shares is
not a liquid investment. In particular and in addition to the representations in
Section 3 hereof, the undersigned recognizes, acknowledges and agrees that:
2.1 The undersigned must bear the economic risk of investment in the
Preferred Shares (and the component securities) for an indefinite period of
time, since the Preferred Shares (and the component securities) have not been
registered under the Securities Act of 1933, as amended (the "Act") or
applicable state securities laws ("State Acts"), and, therefore, cannot be
transferred or sold unless either they are subsequently registered under the Act
and applicable State Act, or an exemption from registration is available and a
favorable opinion of counsel to that effect is obtained.
2.2 The undersigned will have only those limited rights to register under
the Act and applicable State Acts the Common Stock underlying the Securities
included in the Preferred Shares as are described in the Term Sheet.
3. Subscriber's Representations. The undersigned represents to and agrees
with the Company that:
<PAGE>
3.1 The undersigned and his purchaser representative(s), if any, have
carefully reviewed and understand the risks of and other considerations relating
to a purchase of the Preferred Shares.
3.2 The undersigned and his purchaser representative(s), if any, have been
afforded the opportunity to obtain any information necessary to verify the
accuracy of any representations or information set forth in the Term Sheet and
have had all of their inquiries to the Company answered in full, and have been
furnished all requested material relating to the Company, the offering and sale
of the Preferred Shares and any other matter described in the Term Sheet.
3.3 Neither the undersigned nor his purchaser representative(s), if any,
have been furnished any offering literature by the Company or any of their
affiliates, associates or agents, other than the Term Sheet and the exhibits and
attachments thereto.
3.4 The undersigned is acquiring the Preferred Shares for which he hereby
subscribes as principal for his own investment account, and not (1) with a view
to the resale or distribution of all or any part thereof, (2) on behalf of
another person who has not made the foregoing representation, or (3) in order
for any person to acquire less than the minimum subscription required hereunder,
unless a lesser subscription specifically has been accepted by the Company.
3.5 The undersigned is an accredit investor, as defined in Rule 501(a) of
Regulation D promulgated pursuant of the Act, by virtue of the fact that
(INITIAL APPLICABLE CHOICES):
(i) The undersigned had individual income (exclusive of any income
attributable to spouse) of more than $200,000 in each of the most recent
two year or joint income with the undersigned's spouse in excess of
$300,000 in each of such years and reasonable expects to have income of at
least the same level for the current year.
(ii) The undersigned has an individual net worth, or a combined net
worth with the undersigned's spouse, in excess of $1,000,000. For purposes
of this Subscription Agreement, "individual net worth" means the excess of
total assets at fair market value, including home and personal property,
over total liabilities.
(iii) The undersigned is a director or executive officer of the
Company.
Accredited Partnership, corporation, trust or other investors must
initial at least one of the following statements.
(iv) The undersigned is a bank as defined in section 3(a)(2) of the
Act, or a savings and loan association or other institution as defined in
secan 3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; an insurance company as defined in section
<PAGE>
2(13) of the Act; an investment company registered under the Investment
Company Act of 1940 or a business development company as defined in section
2(a)(48) of that Act; a Small Business Investment Company licensed by the
U.S. Small Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; a plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a
state or its political subdivision, for the benefit of its employees if
such plan has total assets in excess of $5,000,000; an employee benefit
plan within the meaning of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that
are accredited investors.
(v) The undersigned is a private business development company as
defined in section 2002(a)(22) of the Investment Advisors Act of 1940.
(vi) The undersigned is an organization described in section 501(c)(3)
of the internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed of the specific purpose for
acquiring the securities offered, with total assets in excess of
$5,000,000.
(vii) The undersigned is a trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person as described
in Rule 506(b)(2)(ii) of Regulation D.
(viii) All of the equity owners of the undersigned qualify as
accredited investors under one of the statements set forth above.
3.6 The undersigned has evaluated the risks of investing in the Company and
has substantial experience in making investment decisions of this type or is
relying on his investment decision.
3.7 The undersigned understands the fundamental aspects of and risks
involved in an investment in the Company's Preferred Shares, including (1) the
speculative nature of the investment, (2) the financial hazards involved,
including the risk of losing the entire investment, (3) the lack of liquidity
and the restrictions on transferability of the Preferred Shares (4) the very
limited registration rights regarding the Dividend Stock and Conversion Stock,
as such terms are defined in the Term Sheet, (5) the inherent risks relating to
the business of the Company, and (6) the fact that the Company has a history of
losses, a limited operating history, limited capital resources, may require
additional financing and has accumulated deficit.
3.8 The address set forth on the Subscription Agreement Signature Page
hereof is the undersigned's true and correct principal address, and the
undersigned has no present intention of becoming a resident of any other state
or jurisdiction.
3.9 The undersigned, if a corporation, partnership, trust or other form of
<PAGE>
business entity, (1) is authorized and otherwise duly qualified to purchase and
hold the Preferred Shares, (2) has its principal place of business at its
residence address set forth on the Subscription Agreement Signature Page hereof,
(3) has not been formed for the specific purpose of acquiring the Preferred
Shares, and (4) has submitted and executed all documents required pursuant to
the Certificate for Corporate, Partnership, Trust and Joint Purchasers and
Special Subscription Instructions. The person executing this Subscription
Agreement and all other documents related to the offering hereby represents that
he is duly authorized to execute and deliver all such documents on behalf of the
entity. IF THE UNDERSIGNED IS ONE OF THE AFOREMENTIONED ENTITIES, IT HEREBY
AGREES TO SUPPLY ANY ADDITIONAL WRITTEN INFORMATION THAT MAY BE REQUIRED BY THE
COMPANY.
3.10 All of the information that the undersigned has heretofore furnished
to the Company, or that is set forth herein with respect to himself, his
financial position, and his business and investment experience, is correct and
complete as of the date hereof, and, if there should be any materiel change in
such information prior to the closing of the sale of the Preferred Shares, the
undersigned will immediately furnish the revised or corrected information to the
Company.
3.11 The undersigned agrees to be bound by all of the terms and conditions
of the offering made by the Term Sheet including the Exhibits thereto.
3.12 No person other than the undersigned will have a direct or indirect
interest in the Preferred Shares subscribed for hereby.
3.13 The undersigned consents to the placement of a legend on any
certificate(s) or other document evidencing the Preferred Shares (if separately
certificated) including the Dividend Stock or Conversion Stock, stating that
such securities have not been registered under the Act and setting forth or
referring to the restrictions on transferability and sales thereof. The
undersigned is aware that the Company will make a notation in its appropriate
records with respect to the restrictions on the transferability of such
securities.
3.14 The undersigned understands that the Company will review this
Subscription Agreement and is hereby given authority by the undersigned to call
his bank or place of employment or otherwise review the financial standing of
the undersigned; and it is further agreed that the Company reserves the
unrestricted right to reject or limit in whole or in par any subscription and to
close the offer at any time.
3.15 To the extent the purchaser of the Preferred Shares is represented by
an investment advisor, the investment advisor makes the following additional
representations:
(i) it has full power and authority to execute and deliver this
Subscription Agreement on behalf of each of the purchasers for whom it is
executing this Subscription Agreement ("Represented Purchasers") such
Represented Purchaser's investments in the Preferred Shares are not
prohibited by applicable laws, and such investment advisor's acting on
behalf of such represented Purchasers with respect to such investments is
also not prohibited by applicable laws. Upon investment advisor's
<PAGE>
execution and delivery of this Subscription Agreement on behalf of a
Represented Purchaser, and upon execution and delivery of this Subscription
Agreement by the Company, this Subscription Agreement will constituted the
valid, binding and enforceable obligation of such Represented Purchaser.
(ii) it is an investment advisor registered as such under the
Investment Advisors Act of 1940. It is acting as an investment advisor to
each of the Represented Purchaser's funds be utilized to acquire the
Preferred Shares.
(iii) it has knowledge and experience in financial and busin3ess
matters in general and in similar investments in particular so as to be
capable of evaluating the merits and risk of an investment in the Preferred
Shares. Attached to the signature page of this Subscription Agreement is
the written evidence of discretionary authority of the investment advisor
with respect to each of the represented purchasers.
4. State Law Legends
4.1 Colorado Residents. The undersigned acknowledges that the Preferred
Shares, the Dividend Stock and the Conversion Stock have not been registered
under the Colorado Securities Act (the "Colorado Act"), and therefore cannot be
sold or transferred by the investor except in a transaction which is exempt
under the Colorado Act or pursuant to an effective registration thereunder.
4.2 Connecticut Residents. The undersigned acknowledges that the Preferred
Shares, the Dividend Stock and the Conversion Stock have not been registered
under the Connecticut Uniform Securities Act, as amended (the "Connecticut
Act"), and are subject to restrictions on transferability and sale of securities
as set forth herein. The undersigned hereby agrees that such securities will not
be transferred or sold without registration under the Connecticut Act or
exemption therefrom.
4.3 Florida Residents. As described in the introductory pages of the Term
Sheet, Florida investors have, under certain circumstances, a right of recission
pursuant to Section 517.061(11)(a)(5) of the Florida Securities and Investor
Protection Act.
4.4 Kansas. The undersigned acknowledges that the Preferred Shares, the
Dividend Stock and the Conversion Stock have not been registered under the
Kansas Securities Act (the "Kansas Act"), and therefore cannot be sold or
transferred by the investor except in a transaction which is exempt under the
Kansas Act or pursuant to an effective registration thereunder.
4.5 Minnesota. The undersigned acknowledges that the Preferred Shares, the
Dividend Stock and the Conversion Stock have not been registered under the
Minnesota Securities Act (the "Minnesota Act"), and therefore cannot be sold or
transferred by the investor except in a transaction which is exempt under the
Minnesota Act or pursuant to an effective registration thereunder.
<PAGE>
4.6 New Jersey Residents. The undersigned acknowledges that the Preferred
Shares, the Dividend Stock and the Conversion Stock have not been approved or
disapproved by the Bureau of Securities of the State of New Jersey, nor has the
Bureau passed on or endorsed the merits of this offering. Any representation to
the contrary is unlawful.
4.7 New York Residents. Each New York purchaser of the Preferred Shares
understands that this offering of Preferred Shares of the Company has not been
reviewed by the attorney general of the State of New York. The undersigned
understands that any offering literature used in connection with this offering
has not been pre-filed with the attorney general and has not been reviewed by
the attorney general prior to its use. The attorney general of the state of New
York has not passed on or endorsed the merits of this offering. Any
representation to the contrary is unlawful. The Preferred Shares are being
purchased for the undersigned's own account for investment, and not for
distribution or resale to others. The undersigned agrees that he will not sell
or otherwise transfer the Preferred Shares or the component securities unless
they are registered under the federal Securities Act of 1933 or unless and
exemption from such are registration is available. The undersigned represents
that he has adequate means of providing for this current needs and possible
personal contingencies, and that he has no need for liquidity of this
investment.
4.8 Ohio. The undersigned acknowledges that the Preferred Shares, the
Dividend Stock and the Conversion Stock have not been registered under the Ohio
Securities Act (the "Ohio Act"), and therefore cannot be sold or transferred by
the investor except in a transaction which is exempt under the Ohio Act or
pursuant to an effective registration thereunder.
4.9 Oregon. The undersigned acknowledges that the Preferred Shares, the
Dividend Stock and the Conversion Stock have not been registered under the
Oregon Securities Act (the "Oregon Act"), and therefore cannot be sold or
transferred by the investor except in a transaction which is exempt under the
Oregon Act or pursuant to an effective registration thereunder.
4.10 Texas Residents. The undersigned hereby acknowledges that the
Preferred Shares, the Dividend Stock and the Conversion Stock cannot be sold
unless they are subsequently registered under the Securities Act of 1933, as
amended, and the Texas Securities Act, or an exemption from registration is
available. The undersigned further acknowledges that because such securities are
not readily transferable, he must bear the economic risk of his investment for
an indefinite period of time.
5. Terms of Subscription and Closing
5.1 The subscription will begin as of the date of the Term Sheet and will
terminate at 11:59 p.m. eastern time on January 31, 1999 (the "Termination
Date"). The Preferred Shares will be offered on an eight (80) Preferred Shares
"best efforts," no minimum basis. The minimum subscription per subscriber shall
be one (1) Series A, Preferred Shares ($25,000).
5.2 The Company reserves the right in its discretion, to (i) offer and sell
up to 20 Preferred Shares in excess of the 80 shares maximum; and (ii) extend
the Termination Date. The Company is not required to notify any Preferred Shares
or the extension of the Termination Date.
<PAGE>
5.3 Upon receipt and acceptance by the company of subscription documents
and payment (collected funds or surrendered Notes) for Preferred Shares, the
Company shall, with reasonable dispatch, issue and mail the Preferred Shares so
purchased to investors (the "Closing"). Since there is no minimum offering, upon
receipt of payment (clearance of funds) and executed Subscription Agreement in
form and substance satisfactory to the Company, the company will issue Preferred
Shares as collected funds or surrendered Notes are received. Preferred Shares
will accrue dividends from the date of issuance.
5.4 Subscriptions will not be deemed accepted by the Company until the
latest to occur of (I) receipt from an investor of a duly executed and completed
Subscription Agreement; (ii) satisfaction, in the Company's sole discretion that
the subscriber is an accredited investor; and (iii) collected funds or
surrendered Notes with respect to such subscription. Subscriptions may not be
withdrawn by a subscriber after delivery of the executed Subscription Agreement.
The Company may, in its sole discretion, accept or reject the subscription of
any person in whole or in part.
6. The foregoing representations are true and accurate as of the date hereof,
shall be true and accurate as of the date of the execution of this Subscription
Agreement, and shall survive such date. If, in any respect, such representations
shall not be true and accurate prior to or upon the execution of this
Subscription Agreement, the undersigned shall give written notice of such fact
to the Company, specifying which representations are not true and accurate and
the reasons therefor, with a copy to his purchaser representative(s), if any.
7. This subscription is not transferable or assignable by the undersigned.
8. This subscription, upon acceptance by the Company, shall be binding upon
the heirs, executors, administrators, successors and assigns of the undersigned.
9. This Subscription Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Massachusetts without giving effect
to conflict of laws principles.
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned hereby subscribes for the number of Preferred Shares
set forth below as described in the Confidential Private Placement term Sheet,
dated November 17, 1997 issued by National Boston Medical, Inc., a corporation
organized under the laws of Delaware. The entire Subscription Agreement, of
which this is the signature page, is provided as additional documentation to the
Term Sheet.
1. Dated: , 1998
2. Number of Preferred Shares:
3. Subscription Price ($25,000 in cash, minimum subscription one (1)
preferred share)
-----------------------------------
Signature of Subscriber (and Taxpayer Identification or
title, if applicable) Social Security Number
Signature of Joint Purchaser Taxpayer Identification or
(if any) Social Security Number
Name and Residence Address Mailing Address, if Different
(Not Post Office Address) From Residence Address:
Name (please print) Name (please print)
Number and Street Number and Street
City State Zip Code City State Zip Code
Subscription for Preferred Shares accepted as of , 1998.
NATIONAL BOSTON MEDICAL, INC.
By:
EXHIBIT 4.4
SECURITIES SUBSCRIPTION AGREEMENT
THIS SECURITIES SUBSCRIPTION AGREEMENT dated as of March, 1998 (the
"Agreement"), is executed in reliance upon the exemption from registration
afforded by Rule 504 of Regulation D ("Regulation D") as promulgated by the
Securities and Exchange Commission ("SEC"), under the Securities Act of 1933, as
amended. Capitalized terms used herein and not defined shall have the meanings
given to them in Regulation D.
This Agreement has been executed by the undersigned "Buyer" in
connection with the private placement of 12% Series A Senior Subordinated
Convertible Redeemable Promissory Notes of Growth Industries, Inc., a
corporation organized under the laws of Nevada, with its principal executive
offices located at ___________________________________ (hereinafter referred to
as "Seller"). Buyer hereby represents and warrants to, and agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY NOT BE
OFFERED OR SOLD (AS DEFINED IN REGULATION D OF THE 1933 ACT) EXCEPT PURSUANT TO
REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
1933 ACT.
1. Agreement to Subscribe; Purchase Price
(a) Subscription. The undersigned Buyer hereby subscribes for and agrees to
purchase a portion of the Seller's 12% Series A Senior Subordinated Convertible
Redeemable Promissory Note substantially in the form of the Promissory Notes
attached as Exhibit A hereto and having an aggregate original principal face
amount of up to U.S. $500,000 (singly, a "Promissory Note," and collectively,
the "Promissory Notes"), at an aggregate purchase price as set forth in
subsection (b) herein. The Promissory Notes and the shares of common stock into
which they are to be converted (the "Underlying Shares") are sometimes herein
collectively referred to as the "Securities."
(b) Payment. The aggregate Purchase Price for the portion of the Promissory
Notes purchased by the Buyer shall be Five Hundred Thousand United States
Dollars (U.S. $500,000) (the "Purchase Price"), which shall be payable
simultaneously with the delivery of this Agreement by delivering immediately
available funds in United States Dollars by wire transfer to the designated
depository Barry B. Globerman, Esq., as Escrow Agent ("Escrow Agent") for
closing by delivery of securities versus payment.
(c) Closing. Subject to the satisfaction of the conditions set forth in
Section 7 and 8 hereof, the consummation of the transactions contemplated hereby
will occur on or before March ____, 1998.
<PAGE>
2. Buyer Representations and Covenants; Access to Information.
In connection with the purchase and sale of the Promissory Note, Buyer
represents and warrants to, and covenants and agrees with Seller as follows:
(i) Buyer is purchasing the Securities for its own account and Buyer
is qualified to purchase the Securities under the laws of its jurisdiction of
residence, and the offer and sale of the Securities will not violate the
securities or other laws of such jurisdiction; Buyer is not, and on the closing
date will not be, an affiliate of Seller;
(ii) All offers and ales of any of the Securities by Buyer shall be
made in compliance with any applicable securities laws of any applicable
jurisdiction and in accordance with Rule 504 or pursuant to registration of
securities under the 1933 Act or pursuant to an exemption from registration.
(iii) The transactions contemplated by this Agreement are not and will
not be part of a plan or scheme by Buyer, to evade the registration provisions
of the 1933 Act;
(iv) Buyer understands that the Securities are not registered under
the 1933 Act and are being offered and sold to it in reliance on specific
exclusions from the registration requirements of Federal and State securities
laws, and that Seller is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
Buyer set forth herein in order to determine the applicability of such
exclusions and the suitability of Buyer and any purchaser from Buyer to acquire
the Securities;
(v) Buyer has not conducted or permitted and shall not conduct or
permit any general solicitation relating to the offer and sale of any of the
Securities;
(vi) Buyer has the full right, power and authority to enter into this
Agreement and to consummate the transaction contemplated herein. This Agreement
has been duly authorized, validly executed and delivered on behalf of Buyer and
is a valid and binding agreement in accordance with its terms, subject to
general principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally;
(vii) The execution and delivery of this Agreement and the
consummation of the purchase of the Securities, and the transactions
contemplated by this Agreement do not and will not conflict with or result in a
breach by Buyer of any of the terms of provisions of, or constitute a default
under, the articles of incorporation or by-laws (or similar constitutive
documents) of Buyer or any indenture, mortgage, deed of trust, or other material
agreement or instrument to which Buyer is a party or by which it or any of its
properties or assets are bound, or any existing applicable law, rule or
regulation of the United States or any State thereof or any applicable decree,
judgment or order of any Federal or State Court, Federal or State regulatory
body, administrative agency or other United States governmental body having
jurisdiction over Buyer or any of its properties or assets;
(viii) All invitation, offers and sales of or in respect of, any of
theSecurities, by Buyer and any distribution by Buyer of any documents
<PAGE>
relating to any offer by it of any of the Securities will be in compliance with
applicable laws and regulations and will be made in such a manner that no
prospectus need be filed and no other filing need be made by Seller with any
regulatory authority or stock exchange in any country or any political
sub-division of any country other than as required by Regulation D and Rule 504
thereunder;
(ix) Buyer will not make any offer or sale of the Securities by any
means which would not comply with the laws and regulations of the territory in
which such offer or sale takes place or to which such offer or sale is subject
or which would in connection with any such offer or sale impose upon Seller any
obligation to satisfy any public filing or registration requirement or provide
or publish any information of any kind whatsoever or otherwise undertake or
become obligated to do any act other than as stated herein;
(x) Buyer (or others for whom it is contracting hereunder) has been
advised to consult its own legal and tax advisors with respect to applicable
resale restrictions and applicable tax considerations and it (or others for whom
it is contracting hereunder) is solely responsible (and Seller is not in any way
responsible) for compliance with applicable resale restrictions and applicable
tax legislation;
(xi) No Government Recommendation or Approval. Buyer understands that
Federal or State or foreign government agency has passed on or made any
recommendation or endorsement of this Securities;
(xii) Current Public Information. Buyer acknowledges that the Company
is not a "reporting Issuer" and it and its advisors, if any, have been furnished
with the opportunity to ask questions about, and request copies of materials
relating to, the business, finances and operations of Seller. Buyer further
acknowledges that it and its advisors, if any, have received complete and
satisfactory answers to such inquiries, to the extent made; on the basis of the
foregoing, the Buyer believes that an investment pursuant to the terms hereof is
an appropriate and suitable investment for the Buyer.
(xiii) Buyer's Sophistication. Buyer acknowledges that the purchase of
the Securities involves a high degree of risk, including the total loss of
Buyer's investment. Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
purchasing the Securities. Buyer understands that the Securities are not being
registered under the 1933 Act, and therefore Buyer must bear the economic risk
of this investment for an indefinite period of time; and
(xiv) Tax Status. Buyer is not a "10-percent Shareholder" (as defined
in Section 871(h)(3(B) of the U.S. Internal Revenue Code of 1986, as amended) of
Seller.
(xv) High Degree of Risk. The Buyer is able to bear the economic risk
of the investment.
<PAGE>
(xvi) Forward Looking Information. The Buyer acknowledges and
understands that any information provided about the Company's future plans and
prospects is uncertain and subject to all of the uncertainties inherent in
future predictions.
(xvii) Accredited Investor Status. The undersigned represents and
warrants that it is an "accredited investor" as defined in Regulation D and has
executed and delivered, simultaneously herewith, the Investor Suitability
Statement annexed hereto as Exhibit B.
(xix) Short Position. Neither the Buyer nor any of its affiliates will
directly or indirectly maintain any short position, purchase or sell out or call
options or otherwise engage in any hedging activities in any of the Securities
or any other securities of the Company until after April 20, 1998.
(xx) Independent Investigation. The Buyer in electing to subscribe for
the Promissory Notes hereunder, has relied solely upon the representations and
warranties of the Company set forth in this Agreement and on independent
investigation made by it and its representatives, if any, and the Buyer has been
given no oral or written representation or assurance from the Company or any
representation of the Company other than as set forth in this Agreement or in a
document executed by a duly authorized representative of the Company making
reference to this Agreement.
3. Seller Representations and Covenants.
(a) Reporting Company Status. Seller is not a "Reporting Issuer." Seller's
Common Stock no par value (the "Common Stock"), is listed and trades on the
NASDAQ Electronic Bulletin Board.
(b) Current Public Information. To the extent requested by the Buyer,
Seller has furnished Buyer with copies of materials relating to the business
finances and operations of the Seller's business.
(c) Concerning the Securities. The issuance, sale and delivery of the
Promissory Notes have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued, fully paid and non-assessable. The Common Stock
issuable upon conversion of the Promissory Note has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Promissory Notes, shall be duly and validly issued, fully paid, and
non-assessable and will not subject the holders thereof, if such persons are
non-U.S. persons, to personal liability by reason of being such holders. There
are no pre-emptive rights of any shareholder of Seller.
(d) Subscription Agreement. This Agreement has been duly authorized,
validly executed and delivered on behalf of Seller and is a valid and binding
agreement in accordance with its terms, subject to general principles of equity
and to bankruptcy or other laws affecting the enforcement of creditors' rights
generally.
<PAGE>
(e) Non-Contraveration. The execution and delivery of this Agreement and
the consummation of the issuance of the Securities and the transactions
contemplated by this Agreement do not and will not conflict with or results in a
breach by Seller of any of the terms or provisions of, or constitute a default
under, the articles of incorporation or by-laws of Seller, or any indenture,
mortgage, deed of trust, or other material agreement or instrument to which
Seller is a party or by which it or any of its properties or assets are bound,
or any existing applicable law, rule or regulation of the United States of any
State thereof or any applicable decree, judgment or order of any Federal or
State court, Federal or State regulatory body, administrative agency or other
United States governmental body having jurisdiction over Seller or any of its
properties or assets.
(f) Approvals. Seller is not aware of any authorization, approval or
consent of any U.S. government body which is legally required for the issuance
and sale of the Promissory Notes and the Common Stock issuable upon conversion
thereof as contemplated by this Agreement.
(g) Failings. Seller undertakes and agrees pursuant to the sale of its
securities under Regulation D to make all necessary filing in connection with
the sale of its securities as required by the laws and regulations of the United
States.
4. Exemption.
Reliance on Representations. Buyer understand that the offer and sale of
the Securities are not being registered under the 1933 Act. Seller and Buyer are
relying on the rules governing offers and sales made pursuant to Rule 504 of
Regulation D.
5. Transfer Agent Instructions.
(a) Promissory Notes. Upon the conversion of the Promissory Notes, the
holder thereof shall submit such Promissory Note together with a notice of
conversion to the Seller and the Seller shall instruct its transfer agent to
issue one or more Certificates representing that number of shares of Common
Stock into which the Promissory Note or Promissory Notes are convertible in
accordance with the provisions regarding conversion set forth in Exhibit A
hereto. The Seller shall act as Promissory Note Registrar and shall maintain an
appropriate ledger containing the necessary information with respect to each
Promissory Note.
(b) Common Stock to be Issued Without Restrictive Legend. Upon the
conversion of any Promissory Note up to the total of the "Conversion Amount" (as
defined in the Promissory Note), Seller shall instruct Seller's transfer agent
to issue Stock Certificates up to the total of the "Conversion Amount" (as
defined in the Promissory Note) without restrictive legend in the name of Buyer
(or its nominee) and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon such conversion,
as applicable. Seller warrants that no instructions other than these
instructions have been given to the transfer agent and that the Common Stock
shell otherwise be freely transferable on the books and records of Seller.
Nothing in this Section 5, however, shall affect in any way Buyer's or such
nominee's obligations and agreements to comply with all applicable securities
laws upon resale of the Securities and the restrictions on resale set forth in
Section 11.
(c) Subject to Section 11 hereof it shall be the Seller's responsibility to
take all necessary actions and to bear all such costs to issue the Certificate
<PAGE>
of Common Stock as provided herein, including the responsibility and cost for
delivery of an opinion letter to the transfer agent, if so required, provided
Buyer provides such certificates and information as may be reasonably required
to support that opinion. The person in whose name the certificate of Common
Stock is to be registered shall be treated as a shareholder of record on and
after the conversion date. Upon surrender of any Promissory Notes that are to be
converted in part, the Company shall issue to the Purchaser a new Promissory
Note equal to the unconverted amount, if so requested by Purchaser.
(d) The issuance of certificates representing the shares of Common Stock
issuable upon conversion of the Notes, does not in any manner imply that such
shares are free from the resale restrictions more fully described in Section 11
hereof.
6. Registration.
If upon conversion of the Promissory Notes effected by the Buyer pursuant
to the terms of this Agreement or payment of interest pursuant to the Promissory
Note the Company fails to issue certificates for shares of Common Stock issuable
upon such conversion (the "Underlying Shares") to the Buyer bearing no
restrictive legend (after the applicable Restrictive Period of the Conversion
shares) for any reason other than the Company's reasonable good faith belief
that the representations and warranties made by the Buyer in this Agreement or
the Notice of Conversion were untrue when made, or if Rule 504 is amended, then
the Seller shall be required, at the request of the buyer and at the Seller's
expense, to effect the registration of the Underlying Shares issuable upon
conversion of the Promissory Notes under the Act and relevant Blue Sky laws as
promptly as is practicable. The Seller and the Buyer shall cooperate in good
faith in connection with the furnishing of information required for such
registration and the taking of such other actions as may be legally or
commercially necessary in order to effect such registration. Following such
conversion, the Seller shall file such a registration statement within 60 days
of Buyer's demand therefor and shall use its diligent efforts to cause such
registration statement to become effective as soon as practicable thereafter.
Such diligent efforts shall include, but not be limited to, promptly responding
to all comments received from the staff of the Securities and Exchange
Commission, providing Buyer's counsel with a contemporaneous copy of all written
communications from and to the staff of the Securities and Exchange Commission
with respect to such registration statement and promptly preparing and filing
amendments to such registration statement which are responding to the comments
received form the staff of the Securities and Exchange Commission. Once declared
effective by the Securities and Exchange Commission, the Seller shall cause such
registration statement to remain effective until the earlier of (i) the sale by
the Buyer of all Underlying Shares registered or (ii) 120 days after the
effective date of such registration statement. In the event the Seller
undertakes to file a Registration Statement, except insofar as the right to sell
may be suspended (for a period of not more than 90 days) at the Seller's option
based on material nonpublic event or business emergencies, in which case, the
120 days will be lengthened by the number of days of suspension. The Seller
shall include on the applicable registration form the Buyer as a selling
shareholder in connection with the Common Stock and upon the effectiveness of
such Registration, Buyer shall have the option to sell the common Stock pursuant
thereto.
7. Authorized and Issued Shares. The Seller has at all times reserve
and have available all Common Stock necessary to meet conversion of the
Promissory Notes by all purchasers of the entire amount of Promissory Notes then
outstanding. If, at any time Buyer submits a Notice of Conversion and the Seller
<PAGE>
does not have sufficient authorized but unissued shares of Common Stock
available to effect, in full, a conversion of the Promissory Notes (a
"conversion Default", the date of such default being referred to herein as the
"Conversion Default Date"), the Company shall issue to the purchasers of the
Promissory Notes all of the shares of Common Stock which are available, and the
Notice of Conversion as to any Promissory Notes requested to be converted (the
"Unconverted Promissory Notes"), upon Buyer's sole option, may be deemed null
and void. The Seller shall provide notice of such Conversion Default ("Notice of
Conversion Default") to all existing purchasers of outstanding Promissory Notes,
by facsimile, within one (1) business day of such default (with the original
delivered by overnight or two day courier), and each such purchaser shall give
notice to the Seller by facsimile within five business days of receipt of the
original Notice of Conversion Default (with the original delivered by overnight
or two day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Seller agrees to pay to all purchasers of outstanding Promissory Notes
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Promissory Notes held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the "Authorization
Date") that the Seller authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Promissory Notes. The Seller shall send
notice ("Authorization Notice") to each Purchaser of outstanding Promissory
Notes that additional shares of Common Stock have been authorized, the
Authorization Date and the amount of Purchaser's accrued Conversion Default
Payments. The accrued Conversion Default shall be paid in cash or shall be
convertible into Common Stock at the Conversion Rate, at the Buyer's option,
payable as follows: (i) in the event Buyer elects to take such payment in cash,
cash payments shall be made to such Buyer of outstanding Promissory Notes by the
fifth day of the following calendar month, or (ii) in the event buyer elects to
take such payment in stock, the Buyer may convert such payment amount into
Common Stock at the conversion rate set forth in section 5(d) at anytime after
the 5th day of the calendar month following the month in which the Authorization
Notice was received, until the maturity date. Anything herein to the contrary
notwithstanding the foregoing shall not be applicable provided the Company has
previously delivered the Promissory Note and/or underlying shares, as the case
may be, to the Escrow Agent.
8. Delivery Instructions.
The Promissory Notes being purchased hereunder and 1,000,000 underlying
shares to be issued upon conversion thereof shall be delivered to the Escrow
Agent at such time and place as shall be mutually agreed by Seller and Buyer.
9. Conditions To Seller's Obligation to Seller.
Seller's obligation to sell the Promissory Notes is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement executed by
Buyer.
(b) Delivery into the closing depository of good funds by Buyer as payment
in full of the purchase price of the Promissory Notes.
(c) All of the representations and warranties of the Buyer contained in
this Agreement shall be true and correct on the Payment Date with the same force
<PAGE>
and effect as if made on and as of the Payment Date. The Buyer shall have
performed or complied with all agreements and satisfied all conditions on its
part to be performed, complied with or satisfied at or prior to the Payment
Date.
(d) No order asserting that the transactions contemplated by this Agreement
are subject to the registration requirements of the Act shall have been issued,
and no proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Company, be contemplated. No stop order
suspending the sale of the Promissory Notes shall have been issued, and no
proceedings for that purpose shall have been commenced or shall be pending or,
to the knowledge of the Company, be contemplated.
(e) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency that
would prevent the issuance of the Promissory Notes. No injunction, restraining
order or order of any nature by a federal or state court of competent
jurisdiction shall have been issued that would prevent the issuance of the
Promissory Note.
10. Conditions To Buyer's Obligation To Purchase.
Buyer's obligation to purchase the Promissory Notes is conditioned upon:
(a) The confirmation of receipt and acceptance by Seller of this Agreement
as evidenced by execution of this Agreement by the duly authorized officer of
Seller;
(b) delivery of the Promissory Notes to the Escrow Agent; and
(c) delivery of an unlegended certificate representing 100,000 Shares of
the Seller's Common Stock to Barry Globerman, Esq. As Escrow Agent.
11. Offering Materials and Resale Restrictions.
Except for this Subscription Agreement, no offering materials and documents
have been in connection with the offer and sale of the Securities. The
Securities have not been registered under the 1933 Act or applicable statue
securities laws; neither Buyer, nor any direct or indict purchaser of the
Securities from Buyer, may directly or indirectly offer or sell the Securities
unless the Securities are registered under the 1933 Act, any applicable state
securities laws, or any exemption from the registration requirements of the 1933
Act. Such statements shall appear (1) on the cover of any prospectus or offering
circular used in connection with the offer or sale of the Securities, (2) in the
underwriting section of any prospectus or offering circular used in connection
with the offer or sale of the Securities, and (3) in any advertisement made or
issued by Seller, Buyer, any other distributor, any of their respective
affiliates, or any person acting on behalf of any of the foregoing. In order to
prevent resale transactions in violation of state securities laws, the buyer may
only engage in resale transactions, to the extent otherwise permitted, in
jurisdictions in which an applicable exemption is available. Such restriction on
resales may limit the ability of investors to resell the underlying shares
acquired upon conversion of the Promissory Notes.
<PAGE>
12. No Shareholder Approval.
Seller hereby agrees that from the Closing Date until the issuance of
Common Stock upon the conversion of the Promissory Notes, Seller will not take
any action which would require Seller to seek shareholder approval for such
issuance unless such shareholder approval is required by law or regulatory body
(including but not limited to the Nasdaq Stock Market, Inc.) As a result of the
issuance of the Securities hereunder.
13. Miscellaneous.
(a) Except as specifically referenced herein, this Agreement constitutes
the entire contract between the parties, and neither party shall be liable or
bound to the other in any manner by any warranties, representations or covenants
except as specifically set forth herein. Any previous agreement among the
parties related to the transactions described herein is superseded hereby. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
(b) Buyer is an independent contractor, and is not the agent of Seller.
Buyer is not authorized to bind Seller, or to make any representations or
warranties on behalf of Seller.
(c) Seller makes no representations or warranty with respect to Seller, its
finances, assets, business prospects or otherwise. Buyer will advise each
purchaser, if any, and potential purchaser of the Securities, of the foregoing
sentence, and that such purchaser is relying on its own investigation with
respect to all such mattes, and that such purchaser will be given access to any
and all documents and Seller personnel as it may reasonably request for such
investigation.
(d) All representations and warranties contained in this Agreement by
Seller and Buyer shall survive the closing of the transactions contemplated by
this Agreement.
(e) This Agreement shall be construed in accordance with the laws of New
York applicable to contracts made and wholly to be performed within the State of
New York and shall be binding upon the successors and assigns of each party
hereto. Buyer and Seller hereby waive trial by jury and consent to exclusive
jurisdiction and venue in the State of New York. This Agreement may be executed
in counterparts, and the facsimile transmission of an executed counterpart of
this Agreement shall be effective as an original.
(f) Any controversy or claim relating to this Agreement ("Arbitrable
Dispute") shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA") as such
rules may be modified herein or as otherwise agreed by the parties in
controversy. The forum for arbitration shall be New York, New York. Buyer and
Seller agree to submit to the jurisdiction of the New York Courts for purposes
of confirming any award.
(g) Buyer and Seller each agree to indemnify and hold the other harmless
form any and all claims, damages and liabilities arising from breach of the
<PAGE>
others representations and/or covenants set forth herein.
14. Escrow Agent.
Company and Buyer hereby appoint the Escrow Agent to receive the proceeds
of all sales of Debentures (the "Funds") and the Debentures (hereinafter
referred to together as the "Escrowed Property"), and to hold and disburse the
Escrowed Property in accordance with the terms of this Agreement and Escrow
Agent accepts such appointment on the following terms and conditions:
(a) It is specifically understood and agreed that the only obligation of
Escrow Agent hereunder is to disburse the Escrowed Property pursuant to the
terms hereof, and the Escrow Agent shall have no obligation to Company, Buyer or
any other party whatsoever, including but not limited to any party claiming by
or through Company or Buyer upon such disbursement.
(b) Escrow Agent shall not be under any duty to give the Escrowed Property
any greater degree of care than it gives its own similar property, and it shall
have no liability hereunder, whether for negligence or otherwise, except for the
intentional breach of its duties hereunder. Escrow Agent shall have no duties or
responsibilities except those as expressly set forth herein, and no implied
duties or obligations may be read into this Agreement against the Escrow Agent.
(c) Escrow Agent may consult with counsel and shall be fully protected,
indemnified and held harmless with respect to any action taken or omitted by
Escrow Agent in good faith on advice of counsel.
(d) Escrow Agent makes no representation as to the validity, value,
genuineness or collectability of the Funds or of the Debentures or any other
document or instrument held by or delivered to Escrow Agent.
(e) Company and Buyer hereby unconditionally agree to indemnify the Escrow
Agent and hold it harmless from and against any and all taxes (except those
taxes duly payable by Escrow Agent as a result of the compensation derived by
Escrow Agent hereunder, but including any other federal, state and local taxes
of any kind and other governmental charges), expenses, damages, actions, suits
or other charges incurred by or brought or assessed against Escrow Agent:
(i) for anything done or omitted by Escrow Agent in the performance of
its duties hereunder; or
(ii) On account of its acting in its capacity as Escrow Agent or
stakeholder hereunder, except as a result of its intentional breach of its
duties under this Agreement.
(f) The agreements contained herein shall survive any termination of this
Agreement and the duties of the Escrow Agent hereunder.
AMOUNT SUBSCRIBED FOR $_________________________
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first set forth above.
Official Signatory of Seller:
Growth Industries, Inc.
By:
Accepted this ___ day of ________, 1998 Title:_____________________________
Official Signatory of Buyer:
By:
Title:
Address of Buyer:
- -----------------------------------
====================================
Fax No.: ____________________________
Tel No.: ____________________________
<PAGE>
EXHIBIT A
PROMISSORY NOTE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS.
No. 1 US $500,000
GROWTH INDUSTRIES, INC.
12% SERIES A SENIOR SUBORDINATED CONVERTIBLE REDEEMABLE
PROMISSORY NOTE DUE MARCH 31, 1999
THIS PROMISSORY NOTE is one of a duly authorized issue of Promissory Notes
of Growth Industries, Inc., a corporation duly organized and existing under the
laws of Nevada (the "Company") designated as its 12% Series A Senior
Subordinated Convertible Redeemable Promissory Notes Due March 31, 1999, in an
aggregate principal amount not exceeding Six Hundred Thousand Dollars (U.S.
$500,000).
FOR VALUE RECEIVED, the Company promises to pay to Thomas Kernaghan & Co.
the registered holder hereof and its successors and assigns (the "Holder"), the
principal face sum of Five Hundred Thousand Dollars (US $500,000) on March 31,
1999 (the "Maturity Date"), and to pay interest on the principal sum
outstanding, at the rate of 12% per annum due and payable monthly pursuant to
paragraph 4(b) herein. Accrual of interest shall commence on the date hereof and
shall continue until payment in full of the outstanding principal sum has been
made or duly provided for. The interest so payable will be paid to the person in
whose name this Promissory Note (or one or more predecessor Promissory Notes) is
registered on the records of the Company regarding registration and transfers of
the Promissory Notes (the "Promissory Notes Register"); provided, however, that
the Company's obligations to a transferee of this Promissory Note arises only if
such transfer, sale or other disposition is made in accordance with the terms
and conditions of the Securities Subscription Agreement dated as of March 1,
1998 between the Company and Thomas Kernaghan & Co. (the "Subscription
Agreement"). The principal of, and interest on, this Promissory Note are payable
in such coin or currency of the United States of America as at the time of
payment is Legal tender for payment of public and private debts, at the address
last appearing on the Promissory Note Register of the Company as designated in
writing by the Holder hereof from time to time. The Company will pay the
outstanding principal due upon this Promissory Note before or on the Maturity
Date, less any amounts required by law to be deducted or withheld, to the Holder
of this Promissory Note no later than the tenth (10th) day prior to the Maturity
Date by check or on the Maturity Date by write transfer and addressed to such
Holder at the last address appearing on the Promissory Note Register. The
forwarding of such check or wire transfer shall constitute a payment
<PAGE>
of outstanding principal hereunder and shall satisfy and discharge the liability
for principal on this Promissory Note to the extent of the sum represented by
such check or wire transfer plus any amounts so deducted. Interest shall be
payable in cash pursuant to paragraph 4(b) herein.
This Promissory Note is subject to the following additional provisions:
1. The Promissory Notes are issuable in denominations of Ten Thousand
Dollars (US$10,000) and integral multiples thereof. The Promissory Notes are
exchangeable for an equal aggregate principal amount of Promissory Notes of
different authorized denominations, as requested by the Holders surrendering the
same but not less than U.S. $10,000. NO service charge will be made for such
registration or transfer or exchange, except that transferee shall pay any tax
or other governmental charges payable in connection therewith.
2. The Company shall be entitled to withhold from all payments of principal
of, and interest on, this Promissory Note any amounts required to be withheld
under the applicable provisions of the United States income tax or other
applicable laws at the time of such payments.
3. This Promissory Note has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act") and applicable state securities laws. Prior to due presentment for
transfer of this Promissory Note, the Company and any agent of the Company may
treat the person in whose name this Promissory Note is duly registered on the
Company's Promissory Note Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Promissory Note be overdue, and neither the Company nor any such agent
shall be affected or bound by notice to the contrary.
4. (a) The Holder of this Promissory Note shall be entitled to convert the
outstanding principal balance of the Note in shares of the Company's common
stock ("Common Stock") 45 days from the issuance date, at a conversion price for
each share of Common Stock equal to the lower of (a) 80% of the closing bid
price of the Common Stock for the trading day immediately preceding the date of
receipt by the Company of notice of conversion ("Conversion Shares") or (b) 80%
of the closing bid price of the Common Stock for the five (5) days immediately
preceding the date of subscription by the Holder as reported by the National
Association of Securities Dealers Electronic Bulletin Board ("NASDAQ") (the
"Conversion Price"). IF the number of resultant Conversion Shares would as a
matter of law or pursuant to regulatory authority require the Company to seek
shareholder approval of such issuance, the Company shall, as soon as
practicable, take the necessary steps to seek such approval. If such approval is
not received within 30 days then Company shall be required to redeem the
Promissory Notes to be converted (with a copy, by facsimile or courier, to the
Company) to the Company with the form of conversion notice attached hereto as
Exhibit I, executed by the Holder of the Promissary Note evidencing such
Holder's intention to convert this Promissory Note or a specified portion (as
above provided) hereof, and accompanied by proper assignment hereof in blank.
Accrued but unpaid interest shall be subject to conversion at the option of the
Company. NO fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be rounded to the
nearest whole share. The transferee or issuee shall execute such investment
representations or other documents as are respectively required by counsel in
<PAGE>
order to ascertain the available registration exemption. The date on which
notice of conversion is given shall be deemed to be the date on which the Holder
has delivered this Promissory Note, with the assignment and conversion notice
duly executed, to the Company or, if earlier, the date set forth in such notice
of conversion if the Promissory Note is received by the Company within five (5)
business days thereafter. The transferee or issuee shall execute such investment
representations or other documents as are reasonably required by counsel in
order to ascertain the available registration exemption.
(b) Interest at the rate of 12% per annum shall be payable in arrears,
quarterly commencing upon issuance of this Promissory Note in cash or stock at
the Company's option as follows: Based on the average closing bid prices of the
Common Stock for the last 5 consecutive trading days prior to the interest due
date ("Market Price") the Company shall issue to the Holder shares of Common
Stock in an amount equal to the total monthly interest accrued and due divided
by 80% of the Market Price (the "Interest Shares"). Common Stock issued pursuant
hereto shall be issued pursuant to Regulation D or other applicable exemptions
to federal and state securities laws in accordance with the terms of the
Subscription Agreement.
(c) At any time within 60 days the Company shall have the option to pay to
the Holder 100% of the principal amount of the Promissory Note, plus accrued
interest in full, to the extent conversion has not occurred pursuant to
paragraph 4(A) herein. After 60 days the Company shall have the option to pay
the Holder 120% of the principal amount of the Promissory Note plus accrued
interest if the Promissory Note is not converted. The Company shall give the
Holder 5 days written notice and make payment hereunder within 3 business day
thereafter.
(d) Upon maturity, in the event this Promissory Note has not been converted
in full, to the extent it is unconverted, any outstanding principal balance
shall automatically convert as if Notice of Conversion has been received on
March 31, 1999 in accordance with paragraph 4(a) herein.
5. No provision of this Promissory Note shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Promissory Note at the time, place, and
rate, and in the coin currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, and diligence in taking any action to
collect amounts called for hereunder and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.
7. The Company agrees to pay all costs and expenses, including reasonable
attorneys' fees, which may be incurred by the Holder in collecting any amount
due under this Promissory Note.
8. If one or more of the following described "Events of Default" shall
occur and continue for 30 days unless a different time frame is noted below:
<PAGE>
(a) The Company shall default in the payment of principal or interest on
this Promissory Note; or
(b) Any of the representations or warranties made by the Company herein, in
the Subscription Agreement, or in any certificate or financial or other written
statements heretofore or hereafter furnished by the Company in connection with
the execution and delivery of this Promissory Note or the Subscription Agreement
shall be false or misleading in any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or obligation of the
Company under this Promissory Note and such failure shall continue uncured for a
period of thirty (30) days after notice from the Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make an assignment for
the benefit of creditors or commence proceedings for its dissolution; or (4)
apply for or consent to the appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the Company or
for a substantial part of its property or business without its consent and shall
not be discharged within thirty (30) days after such appointment; or
(f) Any government agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole
or any substantial portion of the properties or assets of the Company and shall
not be dismissed within thirty (30) days after such appointment; or
(g) Any money judgment, writ or warrant of attachment, or similar process,
in excess of One Hundred Thousand ($100,000) Dollars in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbounded or unstayed for a period of
fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty (60) days; or
(i) The Company shall have its Common Stock delisted from the
over-the-counter market; or
(j) The Company shall not deliver the Common Stock pursuant to paragraph
4(a) herein without restrictive legend within 3 business days of the date
delivery is required hereunder. Then, or at any time thereafter, and in each
<PAGE>
and every such case, unless such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder's sole
discretion, the Holder may consider this Promissory Note immediately due and
payable, without presentment, demand, protest or (further) notice of any find
(other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
9. (a) This Promissory Note represents a secured obligation of the Company
and only the Company pursuant to paragraph 9(b) herein. However, no recourse
shall be had for the payment of the principal of, or the interest on, this
Promissory Note, or for any claim based hereon, or otherwise in respect hereof,
against any incorporator, shareholder, officer or director, as such, past,
present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
(b) Company shall contemporaneously with the issuance of this Debenture
grant the Holder a first lien against the assets described in Exhibit B. All
Holders of the Debentures shall have equal priority in such liens, regardless of
the time of their purchase. The Company shall take all steps necessary to
perfect such lien and shall provide Holders with an Opinion of Counsel or other
evidence that such lien has been filed.
10. The Holder of this Promissory Note, by acceptance hereof, agrees that
this Promissory Note is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Promissory Note or the Shares of
Common Stock issuable upon exercise thereof, except under circumstances which
will not result in a violation of the Act or any applicable state Blue Sky law
or similar laws relating to the sale of securities.
11. In case any provision of this Promissory Note is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Promissory Note will not in
any way be affected or impaired thereby.
12. This Promissory Note and the agreements referred to in this Promissory
Note constitute the full and entire understanding and agreement between the
Company and the Holder with respect to the subject hereof. Neither the
Promissory Note nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
13. This Promissory Note shall be governed and construed in accordance with
the laws of New York. Holder hereby waives trial by jury and consents to
exclusive jurisdiction and venue in the State of New York.
<PAGE>
14. As set forth herein, the Company shall use all reasonable efforts to
issue and deliver, within three business days after the Holder has fulfilled all
conditions and submitted all necessary documents duly executed and in proper
form required for conversion (the "Deadline"), to the Holder or any part
receiving a Promissory Note by transfer from the Holder (together, a "Holder"),
at the address of the Holder on the books of the Company, a certificate or
certificates for the number of Shares of Common Stock to which the Holder shall
be entitled. The Company understands that a delay in the issuance of the Shares
of Common Stock beyond the Deadline could result in economic loss to the Holder.
As compensation to the Holder for such loss, the Company agrees to pay
liquidated damages to the Holder for last issuance of Shares upon conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond seven (7) business days form the
date of receipt by the Company of a Notice of Conversion and the transfer agent
of all necessary documentation duly executed and in proper form required for
conversion, including the original Promissory Note to be converted, all in
accordance with the Promissory Note, Subscription Agreement and the requirements
of the transfer agent):
<TABLE>
<CAPTION>
Liquidated Damages per
No. Business Days Late $100,000 of Promissory Note
----------------------- ---------------------------
<S> <C>
1 $500
2 $1,000
3 $1,500
4 $2,000
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
10 $5,000 + $1,000 each
Business Day Late beyond 10 days
</TABLE>
The Company shall pay the Holder any liquidated damages incurred under this
Section by check upon the earlier to occur of (i) issuance of the Shares to the
Holder or (ii) each monthly anniversary of the receipt of the Company of such
Holder's Notice of Conversion. Nothing herein shall limit the Holder's right to
pursue actual damages for the Company's failure to issue and deliver shares of
Common Stock to the Subscriber in accordance with the terms of the Promissory
Notes.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: March 1, 1998 GROWTH INDUSTRIES, INC.
By:/s/ Robert M. Bartlett
Title: _______________________________
<PAGE>
EXHIBIT B
ASSETS
==============================================================================
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT I
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order
to Convert this Promissory Note)
The undersigned hereby irrevocably elects to convert $___________ of the
above Promissory Note No.____ into Shares of Common Stock of Growth Industries,
Inc. (the "Company") according to the conditions set forth in such Promissory
Note, as of the date written below.
The undersigned represents that the representations contained in the
Subscription Agreement are true. If Shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Date of Conversion _______________________________
Applicable Conversion Price ________________________
Signature ____________________________________________________________________
(Print Name of Holder and Title of Signer)
Address:______________________________________________________________________
- -----------------------------------------------------------------------
*This original Promissory Note and Notice of Conversion must be received by the
Company by the fifth business date following the Date of Conversion.
EXHIBIT 4.5
Conversion of Securities and Share Exchange Agreement
National Boston Medical, Inc.
THE SECURITIES WHICH ARE THE SUBJECT OF EACH OF THESE AGREEMENTS HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), NOR HAVE THEY BEEN
REGISTERED UNDER ANY STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
Name: _______________________________________________________________
Address: _______________________________________________________________
--------------------------------------------------------------
Bondholder (Indenture)
The above-listed individual/entity (the "Bondholder") is the holder of a
bond (indenture) (the "Bond") dated the __________ day of ____________ 19___
with a face value of $__________________ issued by National Boston Medical,
Inc., a Delaware Corporation, whose principal place of business is 43 Taunton
Green, Taunton, Massachusetts (the "Company").
The term of the Bond is for three years (the "Term") and accrues interest
at a rate of 12% (twelve percent) payable semi-annually on the amount
outstanding during said term.
The Company, as principal obligor, has warranted to the Bondholder that it
will exchange said Bond at any time during the Term or (3) years from the date
of surrender, upon presentation to the Company at its principal place of
business for common stock of the Company a total of _________________ shares (at
$1.25 per share).
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
A. The Bondholder agrees to convert the Bond and accrued and unpaid interest
to the date of execution of this Agreement to legended common stock in the
Company simultaneously with the execution of this agreement.
<PAGE>
B. The conversion rate for this exchange shall be such that the Bondholder
shall receive one (1) legended share of the common stock of the Company for
every $1.10 as reflected on the face of the Bond. This conversion rate
represents an approximate 12% discount from the stated conversion rate. The
targeted Record Date for the conversion, subject to other provisions
contained herein, is August 19, 1998.
C. Execution of this Agreement releases the Company from its obligation to
maintain the Bond Retirement Fund.
D. Bondholder represents to the Company that his/her sole consideration for
consenting to the Transaction is the receipt of shares of the Company's
common stock and that he/she is taking the shares with the intention of
investing in the Company and not with the intention to distribute such
shares. Bondholder understands and acknowledges that all shares are
Restricted as that term is defined by the Securities Act of 1933 (the
"Act"). Bondholder agrees that his/her shares may not be sold, offered for
sale, transferred, pledged, hypothecated, or otherwise disposed of except
in compliance with the Act and applicable state securities laws, which
restrictions require the approval of the Company for the transfer of any
shares. Bondholder has been advised that the Company has no obligation to
cause the shares to be registered under the Act or to comply with any
exemption under the Act, including but not limited to that set forth in
Rule 144 promulgated under the Act, which would permit the shares to be
sold by Bondholder. Bondholder understands that it is not anticipated that
there will be any market for resale of the shares, and that it may not be
possible for the Bondholder to liquidate an investment in the shares.
Bondholder understands the legal consequences of the foregoing to mean that
he/she must bear the economic risk of his investment in the shares. He/She
understands that any instruments representing the shares may bear
restrictive legends restricting the transfer thereof.
E. Bondholder has the financial ability to bear the economic risk of an
investment in the Company, has adequate means of providing for his/her
current needs and personal contingencies, has no need for liquidity in such
investment, and could afford a complete loss of such investment.
Bondholder's overall commitment to investments that are not readily
marketable is not disproportionate to his/her net worth, and his/her
investment in the Company will not cause such overall commitment to become
excessive.
Accredited Investor Representation and Warranty
Bondholder also represents that he/she meets at least one of the following
criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation D of
the Securities Act of 1933 (the "Act"); or
<PAGE>
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit
of its employees if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self- directed plan, with investment decisions made
solely by persons that are accredited investors; or --
_________ (iii) Is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940; or --
_________ (iv) Is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer; or --
_________ (vi) He/She is a natural person whose individual net worth or joint
net worth with his spouse, at the time of his purchase, exceeds $1,000,000
(ONE MILLION DOLLARS); or --
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two most
recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who reasonably
expects to achieve at least the same income level in the current year; or
--
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
<PAGE>
purpose is directed by a sophisticated person as described in Rule
506(b)(2)(ii); or
_________ (ix) Is an entity in which all of the equity owners are accredited
investors.
6. Bondholder understands and acknowledges the fact that recission or other
such legal rights may exist in Bondholder's state of residence, the State
of Delaware or by Federal law. Bondholder hereby intends to and does hereby
waive, relinquish and extinguish such rights by converting his interest in
the Company from debt to equity (from a Bond to Common Stock) and accepts
such consideration in full and complete satisfaction of such rights.
7. Bondholder understands and has been informed that one of the Company's
underlying objectives behind the conversion of this Bond is to enable it to
enter into a Share Exchange Agreement with a corporation ("TBA") that is
then trading on the OTC Bulletin Board, but which has little or no
significant assets or liabilities. Bondholder understands and acknowledges
that the Company will achieve this Share Exchange by way of reverse merger,
whereby each Bond holder who converts his Bond into legended common shares
of the Company will receive a pro-rata share of the legended common shares
in the new company.
8. Bondholder, by execution of the signature page affixed hereto, hereby
irrevocably constitutes and appoints Daniel J. Hoyng or his/her designee
for a period of 90 (ninety) days from the date of execution of this
Agreement as true and lawful attorney for him/her and in his/her name,
place and stead for the purpose of taking any and all actions deemed
reasonably necessary by said attorney regarding the Share Exchange
Agreement as discussed herein and to execute any and all acts or documents
necessary to accomplish or effect that objective including but not limited
to: (a) the extension of any target date described either herein or in the
Share Exchange Agreement for a period of 60 (sixty) days; (b) to execute
any documents to effect the bond conversion; (c) to execute any documents
to effect the Share Exchange Agreement; (e) to execute, acknowledge, make,
swear to, verify, deliver, record, file and/or publish, for and on behalf
of such Bondholder, any and all instruments and documents required herein;
and (f) to execute any and all other instruments as may be deemed necessary
or desirable by said attorney to carry out the full provisions of this
Agreement. The power of attorney being hereby granted is a Special Power of
Attorney coupled with an interest, is irrevocable and shall survive the
death or legal incapacity of the granting Bondholder.
9. The Bondholder understands and acknowledges the significance of this
transaction and hereby acknowledges the Company's recommendation that
Bondholder consult with an independent personal financial advisor (as
necessary) prior to executing this Agreement between himself and the
Company. Bondholder understands and acknowledges that his/her consent to
the foregoing is irrevocable and final and that the Company intends to rely
on that consent immediately and irrevocably. In
<PAGE>
making his/her decision, Bondholder has relied solely upon independent
investigations made by him/her. He/She has received no representation or
warranty from the Company or from any affiliates, employees or agents of
the Company. In addition, he/she is not making a decision as a result of or
subsequent to (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or (ii) any seminar or meeting whose attendees,
including Bondholder, had been invited as a result of, subsequent to, or
pursuant to any of the foregoing.
10. Bondholder has been given a full opportunity to ask questions
of and to receive answers from the Company concerning the
terms and conditions of this Agreement and the business of the
Company, and to obtain additional information necessary to
verify the accuracy of the information given him/her or to
obtain such other information as is desired in order to
evaluate an investment in the Company. All such questions have
been answered to the full satisfaction of the Bondholder.
11. This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this
_____ day of July 1998.
By: _______________________________________________
Bondholder
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
<PAGE>
Warrantholder
The above-listed individual/entity ("Warrantholder") is the holder of
____________ Common Stock Purchase Warrants ("Warrants") dated the __________
day of ____________ 19___ entitling the Warrantholder at an exercise price of
$1.25 per share to purchase ______________ shares of the legended common stock
of National Boston Medical, Inc., a Delaware Corporation, whose principal place
of business is 43 Taunton Green, Taunton, Massachusetts (the "Company").
The term for exercise of the Warrants is three years from the date of issuance
(the "Term").
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. The Warrantholder agrees to exercise the Warrant to purchase legended
common stock in the Company simultaneously with the execution of this
agreement.
2. The conversion rate for the exchange shall be $1.25 per share.
3. The targeted Record Date for exercise of the Warrant, subject to other
provisions contained herein, is August 19, 1998. The Company fully
intends to exercise its right to buy-back any and all Warrants not
executed pursuant to this Agreement as soon as is practicable for the
Company and as provided for in Paragraph 1 of the Warrant document at
a redemption price of $.05 per share underlying the Warrants to be
redeemed.
4. Warrantholder represents to the Company that his/her sole
consideration for consenting to the Transaction is the receipt of
shares of the Company's common stock and that he/she is taking the
shares with the intention of investing in the Company and not with the
intention to distribute such shares. Warrantholder understands and
acknowledges that all shares are Restricted as that term is defined by
the Securities Act of 1933 (the "Act"). Warrantholder agrees that
his/her shares may not be sold, offered for sale, transferred,
pledged, hypothecated, or otherwise disposed of except in compliance
with the Act and applicable state securities laws, which restrictions
require the approval of the Company for the transfer of any shares.
Warrantholder has been advised that the Company has no obligation to
cause the shares to be registered under the Act or to comply with any
exemption under the Act, including but not limited to that set forth
in Rule 144 promulgated under the Act, which would permit the shares
to be sold by Warrantholder. Warrantholder understands that it is not
anticipated that there will be any market for resale of the shares,
and that it may not be possible for Warrantholder to liquidate an
investment in the shares. Warrantholder understands the legal
consequences of the foregoing to mean that he/she must bear the
<PAGE>
economic risk of his investment in the shares. He/She understands that
any instruments representing the shares may bear restrictive legends
restricting the transfer thereof.
5. Warrantholder has the financial ability to bear the economic risk of
an investment in the Company, has adequate means of providing for
his/her current needs and personal contingencies, has no need for
liquidity in such investment, and could afford a complete loss of such
investment. Warrantholder's overall commitment to investments that are
not readily marketable is not disproportionate to his/her net worth,
and his/her investment in the Company will not cause such overall
commitment to become excessive.
Accredited Investor Representation and Warranty
Warrantholder also represents that he/she meets at least one of the following
criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation
D of the Securities Act of 1933 (the "Act"); or --
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in
section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to
section 15 of the Securities Exchange Act of 1934; any insurance
company as defined in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in section 2(a)(48) of that Act; any
Small Business Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of
a state or its political subdivisions, for the benefit of its
employees if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 if the investment decision is made by a
plan fiduciary, as defined in section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or
registered investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors; or --
_________ (iii) Is a private business development company as defined in
section 202(a)(22) of the Investment Advisors Act of 1940; or
<PAGE>
_________ (iv) Is an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director,
executive officer, or general partner of a general partner of that
issuer; or --
_________ (vi) He/She is a natural person whose individual net worth or
joint net worth with his spouse, at the time of his purchase, exceeds
$1,000,000 (ONE MILLION DOLLARS); or --
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two
most recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who
reasonably expects to achieve at least the same income level in the
current year; or --
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered,
whose purpose is directed by a sophisticated person as described in
Rule 506(b)(2)(ii); or --
_________ (ix) Is an entity in which all of the equity owners are
accredited investors.
6. Warrantholder understands and acknowledges the fact that recission or other
such legal rights may exist in Warrantholder's state of residence, the
State of Delaware or by Federal law. Warrantholder hereby intends to and
does hereby waive, relinquish and extinguish such rights by exercising his
Warrant and by purchasing shares of the Company's Common Stock in
accordance with the terms as set forth herein and accepts such
consideration in full and complete satisfaction of such rights.
7. Warrantholder understands and has been informed that one of the Company's
underlying objectives behind the incentive to exercise this Warrant is to
enable it to enter into a Share Exchange Agreement with a corporation
("TBA") that is then trading on the OTC Bulletin Board, but which has
little or no significant assets or liabilities. Warrantholder understands
and acknowledges that the Company will achieve this Share Exchange by way
of reverse merger, whereby each Warrantholder who exercises his Warrant
will receive a pro-rata share of the legended common shares in the new
company. Warrantholder also understands
<PAGE>
and acknowledges that should he choose not to exercise the Warrant in
accordance with the terms as set forth herein, he would receive an
equivalent Warrant in the newly acquired Company. By converting the Warrant
herein, Warrantholder expressly relinquishes the right to retain a Warrant
in the newly acquired company.
8. Warrantholder, by execution of the signature page affixed hereto, hereby
irrevocably constitutes and appoints Daniel J. Hoyng or his/her designee
for a period of 90 (ninety) days from the date of execution of this
Agreement as true and lawful attorney for him/her and in his/her name,
place and stead for the purpose of taking any and all actions deemed
reasonably necessary by said attorney regarding the Share Exchange
Agreement as discussed herein and to execute any and all acts or documents
necessary to accomplish or effect that objective including but not limited
to: (a) the extension of any target date described either herein or in the
Share Exchange Agreement for a period of 60 (sixty) days; (b) to execute
any documents to effect the exercise of any Warrants; (c) to execute any
documents to effect the Share Exchange Agreement; (e) to execute,
acknowledge, make, swear to, verify, deliver, record, file and/or publish,
for and on behalf of such Warrantholder, any and all instruments and
documents required herein; and (f) to execute any and all other instruments
as may be deemed necessary or desirable by said attorney to carry out the
full provisions of this Agreement. The power of attorney being hereby
granted is a Special Power of Attorney coupled with an interest, is
irrevocable and shall survive the death or legal incapacity of the granting
Warrantholder.
9. Warrantholder understands and acknowledges the significance of this
transaction and hereby acknowledges the Company's recommendation that
Warrantholder consult with an independent personal financial advisor (as
necessary) prior to executing this Agreement between himself and the
Company. Warrantholder understands and acknowledges that his/her consent to
the foregoing is irrevocable and final and that the Company intends to rely
on that consent immediately and irrevocably. In making his/her decision,
Warrantholder has relied solely upon independent investigations made by
him/her. He/She has received no representation or warranty from the Company
or from any affiliates, employees or agents of the Company. In addition,
he/she is not making a decision as a result of or subsequent to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees, including Warrantholder,
had been invited as a result of, subsequent to, or pursuant to any of the
foregoing.
10. Warrantholder has been given a full opportunity to ask questions of and to
receive answers from the Company concerning the terms and conditions of
this Agreement and the business of the Company, and to obtain additional
information necessary to verify the accuracy of the information given
him/her or to obtain such other information as is desired in order to
<PAGE>
evaluate an investment in the Company. All such questions have been
answered to the full satisfaction of the Warrantholder.
11. This Agreement and the rights and obligations of the parties hereto shall
be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this _____
day of July 1998.
By: _______________________________________________
Bondholder
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
<PAGE>
Share Exchange and Merger Agreement
THIS CONSENT SHOULD ONLY BE EXERCISED BY THE EXISTING
STOCKHOLDERS OF NATIONAL BOSTON MEDICAL, INC.; BONDHOLDERS WHO
HAVE EXECUTED A CONVERSION AGREEMENT AND WARRANT HOLDERS
WHO HAVE EXECUTED AN EXERCISE AGREEMENT.
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
A. National Boston Medical, Inc. (the "Company") intends to enter into a
Share Exchange Agreement with a corporation ("TBA"), as a merger
whereby the common stockholders of the Company are to exchange 100% of
its issued and outstanding Common Stock for 90% (subject to a 5%
variance) of the issued and outstanding Common Stock in TBA, a company
then listed for stock quotations on the OTC Bulletin Board (the
"Transaction").
B. The Undersigned understands and acknowledges that as a result of the
Transaction, also known as a reverse merger, National Boston Medical,
Inc. will become a wholly-owned subsidiary of TBA and merge into TBA.
TBA will change its name to National Boston Medical, Inc.
C. The Undersigned understands and acknowledges that as a result of the
Transaction, he/she will be asked to and will in fact surrender
his/her shares of Common Stock in National Boston Marketing, Inc., and
as sole consideration will receive a quantity of Restricted (as that
term is defined by the Securities Act of 1933 (the "Act")) shares of
the Common Stock of TBA which is equivalent to his/her pro-rata share
in the Company.
D. As an incentive to consent to the Transaction, the Company will use
its best efforts to acquire an undetermined quantity of the
unrestricted stock of TBA, which the Company will then promptly
distribute to its stockholders pro-rata in the form of a Property
Distribution (the "Distribution"). Only stockholders as of the Record
Date will be entitled to receive such shares. The targeted Record
Date, subject to other provisions contained herein, is August 20,
1998. No Bondholder nor Warrantholder (not having converted their Bond
or not having exercised their Warrants as of the Record Date) will be
affected by such distribution, as none shall receive such distributed
shares.
<PAGE>
E. The Undersigned represents to the Company that his/her sole
consideration for consenting to the Transaction is the receipt of
shares of TBA's common stock and that he/she is taking the shares with
the intention of investing in TBA and not with the intention to
distribute such shares. The Undersigned understands and acknowledges
that all shares are Restricted as that term is defined by the
Securities Act of 1933 (the "Act"). The Undersigned agrees that
his/her shares may not be sold, offered for sale, transferred,
pledged, hypothecated, or otherwise disposed of except in compliance
with the Act and applicable state securities laws, which restrictions
require the approval of the Company for the transfer of any shares.
The Undersigned has been advised that the Company has no obligation to
cause the shares to be registered under the Act or to comply with any
exemption under the Act, including but not limited to that set forth
in Rule 144 promulgated under the Act, which would permit the shares
to be sold by the Undersigned. The Undersigned understands that it is
not anticipated that there will be any market for resale of the
shares, and that it may not be possible for the Undersigned to
liquidate an investment in the shares. The Undersigned understands the
legal consequences of the foregoing to mean that he/she must bear the
economic risk of his investment in the shares. He/She understands that
any instruments representing the shares may bear restrictive legends
restricting the transfer thereof.
F. The Undersigned has the financial ability to bear the economic risk of
an investment in the Company, has adequate means of providing for
his/her current needs and personal contingencies, has no need for
liquidity in such investment, and could afford a complete loss of such
investment. The Undersigned's overall commitment to investments that
are not readily marketable is not disproportionate to his/her net
worth, and his/her investment in the Company will not cause such
overall commitment to become excessive.
Accredited Investor Representation and Warranty
The Undersigned also represents that he/she meets at least one of the following
criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation
D of the Securities Act of 1933 (the "Act"); or --
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in
section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to
section 15 of the Securities Exchange Act of 1934; any insurance
company as defined in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in section 2(a)(48) of that Act; any
Small Business Investment Company licensed by the U.S. Small Business
<PAGE>
Administration under section 301(c) or (d) of the Small Business Investment
Act of 1958; any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in section
3(21) of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that
are accredited investors; or
_________ (iii) Is a private business development company as defined in
section 202(a)(22) of the Investment Advisors Act of 1940; or
_________ (iv) Is an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director,
executive officer, or general partner of a general partner of that
issuer; or --
_________ (vi) He/She is a natural person whose individual net worth or
joint net worth with his spouse, at the time of his purchase, exceeds
$1,000,000 (ONE MILLION DOLLARS); or --
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two
most recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who
reasonably expects to achieve at least the same income level in the
current year; or --
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered,
whose purpose is directed by a sophisticated person as described in
Rule 506(b)(2)(ii); or --
_________ (ix) Is an entity in which all of the equity owners are
accredited investors.
<PAGE>
G. The Undersigned understands and acknowledges the fact that recission
rights, dissenter's rights or other such legal rights may exist in the
Undersigned's state of residence, the State of Delaware or by Federal
law. The Undersigned hereby intends to and does hereby waive,
relinquish and extinguish such rights by consenting to the Share
Exchange and accepts shares in TBA as sole consideration and in full
and complete satisfaction of such rights.
H. The Undersigned, by execution of the signature page affixed hereto,
hereby irrevocably constitutes and appoints Daniel J. Hoyng or his/her
designee for a period of 90 (ninety) days from the date of execution
of this Agreement as true and lawful attorney for him/her and in
his/her name, place and stead for the purpose of taking any and all
actions deemed reasonably necessary by said attorney regarding the
Share Exchange Agreement as discussed herein and to execute any and
all acts or documents necessary to accomplish or effect that objective
including but not limited to: (a) the extension of any target date
described either herein or in the Share Exchange Agreement for a
period of 60 (sixty) days; (b) to execute any documents to effect the
bond conversion and to effect the exercise of any Warrants; (c) to
execute any documents to effect the Share Exchange Agreement; (e) to
execute, acknowledge, make, swear to, verify, deliver, record, file
and/or publish, for and on behalf of the Undersigned, any and all
instruments and documents required herein; and (f) to execute any and
all other instruments as may be deemed necessary or desirable by said
attorney to carry out the full provisions of this Agreement. The power
of attorney being hereby granted is a Special Power of Attorney
coupled with an interest, is irrevocable and shall survive the death
or legal incapacity of the granting Undersigned.
1. The Undersigned understands and acknowledges the significance of this
transaction and hereby acknowledges the Company's recommendation that
the Undersigned consult with an independent personal financial advisor
(as necessary) prior to executing this Agreement between himself and
the Company. The Undersigned understands and acknowledges that his/her
consent to the foregoing is irrevocable and final and that the Company
intends to rely on that consent immediately and irrevocably. In making
his/her decision, the Undersigned has relied solely upon independent
investigations made by him/her. He/She has received no representation
or warranty from the Company or from any affiliates, employees or
agents of the Company. In addition, he/she is not making a decision as
a result of or subsequent to (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or (ii) any seminar or
meeting whose attendees, including the Undersigned, had been invited
as a result of, subsequent to, or pursuant to any of the foregoing.
J. The Undersigned has been given a full opportunity to ask questions of
and to receive answers from the Company concerning the terms and
conditions of this
<PAGE>
Agreement and the business of the Company, and to obtain additional
information necessary to verify the accuracy of the information given
him/her or to obtain such other information as is desired in order to
evaluate an investment in the Company. All such questions have been
answered to the full satisfaction of the Undersigned.
K. This Agreement and the rights and obligations of the parties hereto
shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware.
THIS CONSENT SHOULD ONLY BE EXERCISED BY THE EXISTING STOCKHOLDERS OF
NATIONAL BOSTON MEDICAL, INC.; BONDHOLDERS WHO HAVE EXECUTED A CONVERSION
AGREEMENT AND WARRANT HOLDERS WHO HAVE EXECUTED AN EXERCISE AGREEMENT.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this
_____ day of July 1998.
By: _______________________________________________
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
EXHIBIT 4.6
SETTLEMENT AGREEMENT
This Settlement Agreement made as of February ____, 1999 by and between
NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with offices at 43 Taunton
Green, 3rd Floor, Taunton, Massachusetts 02780 ("NBM") and JAMES MCINERNEY AND
AUCKLAND TRUST CO. LIMITED AS TRUSTEE FOR FIRST PACIFIC MASTER SUPERANNUATION
FUND (collectively referred to herein as "MCINERNEY").
In exchange for the consideration described herein as well as other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
A. NBM shall pay MCINERNEY and MCINERNEY shall accept the following payments
from NBM as full and final payment of all sums due MCINERNEY by NBM with no
additional interest accruing thereon:
1. $50,000 March 1, 1999
2. $75,000 April 1, 1999
3. $75,000 May 1, 1999
4. $70,000 May 31, 1999
With no penalty for prepayment of any sum due herein.
B. MCINERNEY shall execute a General Release of all claims in favor of NBM
upon payment of all sums listed above.
C. Upon initial payment of $50,000 by NBM to MCINERNEY, and receipt of same by
MCINERNEY, MCINERNEY shall immediately cause any and all attachment of NBM
assets or accounts to be lifted.
D. Also upon receipt of initial payment of $50,000 by NBM to MCINERNEY,
MCINERNEY shall immediately cause the Ex Parte Motion for Injunction
Ordering that Monies Received by the Defendant be Placed in Escrow (the
"Motion") to be re- scheduled for April 2, 1999 or as soon thereafter as is
practical. Upon timely payment of the amount due April 1, 1999 ($75,000),
MCINERNEY shall immediately cause the Motion to be re-scheduled for May 3,
1999 or as soon thereafter as is practical. Upon timely payment of the
amount due May 1, 1999 ($75,000), MCINERNEY shall immediately cause the
Motion to be re-scheduled for June 1, 1999 or as soon thereafter as is
practical. Upon timely payment of the amount due May 31, 1999 ($70,000),
MCINERNEY shall immediately cause the Motion to be withdrawn in its
entirety, and the cause of action filed by MCINERNEY against NBM to be
dismissed with prejudice.
E. NBM to provide unaudited financial statements of NBM to MCINERNEY upon
execution by MCINERNEY of a confidentiality/non-disclosure statement
acceptable
<PAGE>
to NBM and contemporaneous to the execution of this Agreement. The
confidentiality/non-disclosure statement shall provide that NBM's financial
statements will not be disclosed by MCINERNEY to any 3rd party, but also
that MCINERNEY shall be able to rely upon them and utilize them only for
purposes of this litigation.
Should the foregoing terms meet with your approval, please acknowledge such
by affixing your name hereto.
NATIONAL BOSTON MEDICAL, INC. JAMES MCINERNEY
By: /s/ Daniel Hoyng By: /s/ James McInery
------------------------------- -----------------------------
Daniel Hoyng, co-CEO/Chairman James McInerney
AUCKLAND TRUST CO. LIMITED AS
TRUSTEE FOR FIRST PACIFIC MASTER
SUPERANNUATION FUND
By: /s/ KG Whitney
-------------------------
KG Whitney, Director
EXHIBIT 4.7
EXTENSION OF FEBRUARY SETTLEMENT AGREEMENT
This Extension of February Settlement Agreement made as of May 21, 1999 by
and between NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with offices at
43 Taunton Green, 3rd Floor, Taunton, Massachusetts 02780 ("NBM") and JAMES
MCINERNEY AND AUCKLAND TRUST CO. LIMITED AS TRUSTEE FOR FIRST PACIFIC MASTER
SUPERANNUATION FUND (collectively referred to herein as "MCINERNEY").
Currently NBM owes $145,000 to MCINERNEY. In exchange for an additional
$10,000 consideration to be paid by NBM to McInerney described herein and the
extension of time hereby granted by MCINERNEY to NBM, as well as other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
A. NBM shall pay MCINERNEY and MCINERNEY shall accept the following payments
from NBM as full and final payment of all sums due MCINERNEY by NBM with no
additional interest accruing thereon:
1. $55,000 May 31, 1999
2. $50,000 July 2, 1999
3. $50,000 August 6, 1999
With no penalty for prepayment of any sum due herein.
B. MCINERNEY shall execute a General Release of all claims in favor of NBM
upon payment of all sums listed above.
C. Also upon receipt of initial payment of $55,000 by NBM to MCINERNEY,
MCINERNEY shall immediately cause the Ex Parte Motion for Injunction
Ordering that Monies Received by the Defendant be Placed in Escrow (the
"Motion") currently scheduled for June 3, 1999 to be re-scheduled for July
5, 1999 or as soon thereafter as is practical. Upon timely payment of the
amount due July 2, 1999 ($50,000), MCINERNEY shall immediately cause the
Motion to be re-scheduled for August 9, 1999 or as soon thereafter as is
practical. Upon timely payment of the amount due August 6, 1999 ($50,000),
MCINERNEY shall immediately cause the Motion to be withdrawn in its
entirety, and the cause of action filed by MCINERNEY against NBM to be
dismissed with prejudice.
Should the foregoing terms meet with your approval, please acknowledge such
by affixing your name hereto.
NATIONAL BOSTON MEDICAL, INC. JAMES MCINERNEY
By: /s/ Daniel Hoyng By: /s/ James McInerney
------------------------- ---------------------------
Daniel Hoyng, co-CEO/Chairman James McInerney
AUCKLAND TRUST CO. LIMITED AS
TRUSTEE FOR FIRST PACIFIC MASTER
SUPERANNUATION FUND
By:/s/ KG Whitney
---------------------
KG Whitney, Director
EXHIBIT 4.8
Conversion of Securities and Share Exchange Agreement
National Boston Medical, Inc.
THE SECURITIES WHICH ARE THE SUBJECT OF EACH OF THESE AGREEMENTS HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), NOR HAVE THEY BEEN
REGISTERED UNDER ANY STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
Name: _______________________________________________
Address:________________________________________________
------------------------------------------------
Bondholder (Indenture)
The above-listed individual/entity (the "Bondholder") is the holder
of a bond (indenture) (the "Bond") dated the __________ day of ____________
19___ with a face value of $__________________ issued by National Boston
Medical, Inc., a Delaware Corporation, whose principal place of business is 43
Taunton Green, Taunton, Massachusetts (the "Company").
The term of the Bond is for three years (the "Term") and accrues
interest at a rate of 12% (twelve percent) payable semi-annually on the amount
outstanding during said term.
The Company, as principal obligor, has warranted to the Bondholder
that it will exchange said Bond at any time during the Term or (3) years from
the date of surrender, upon presentation to the Company at its principal place
of business for common stock of the Company a total of _________________ shares
(at $2.50 per share).
In consideration of the mutual promises, covenants, and
representations contained herein, and other good and valuable consideration, the
receipt and sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. The Bondholder agrees to convert the Bond and accrued and unpaid interest
to the date of execution of this Agreement to legended common stock in the
Company simultaneously with the execution of this agreement.
2. The conversion rate for this exchange shall be such that the Bondholder
shall receive one (1) legended share of the common stock of the Company for
every $2.20 as reflected on the face of the Bond. This conversion rate
represents an approximate 12% discount from the stated conversion rate.
<PAGE>
The targeted Record Date for the conversion, subject to other provisions
contained herein, is August 19, 1998.
3. Execution of this Agreement releases the Company from its obligation to
maintain the Bond Retirement Fund.
4. Bondholder represents to the Company that his/her sole consideration for
consenting to the Transaction is the receipt of shares of the Company's
common stock and that he/she is taking the shares with the intention of
investing in the Company and not with the intention to distribute such
shares. Bondholder understands and acknowledges that all shares are
Restricted as that term is defined by the Securities Act of 1933 (the
"Act"). Bondholder agrees that his/her shares may not be sold, offered for
sale, transferred, pledged, hypothecated, or otherwise disposed of except
in compliance with the Act and applicable state securities laws, which
restrictions require the approval of the Company for the transfer of any
shares. Bondholder has been advised that the Company has no obligation to
cause the shares to be registered under the Act or to comply with any
exemption under the Act, including but not limited to that set forth in
Rule 144 promulgated under the Act, which would permit the shares to be
sold by Bondholder. Bondholder understands that it is not anticipated that
there will be any market for resale of the shares, and that it may not be
possible for the Bondholder to liquidate an investment in the shares.
Bondholder understands the legal consequences of the foregoing to mean that
he/she must bear the economic risk of his investment in the shares. He/She
understands that any instruments representing the shares may bear
restrictive legends restricting the transfer thereof.
5. Bondholder has the financial ability to bear the economic risk of an
investment in the Company, has adequate means of providing for his/her
current needs and personal contingencies, has no need for liquidity in such
investment, and could afford a complete loss of such investment.
Bondholder's overall commitment to investments that are not readily
marketable is not disproportionate to his/her net worth, and his/her
investment in the Company will not cause such overall commitment to become
excessive.
Accredited Investor Representation and Warranty
Bondholder also represents that he/she meets at least one of the following
criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation D of
the Securities Act of 1933 (the "Act"); or
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the
<PAGE>
Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit
of its employees if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors; or
_________ (iii) Is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940; or
_________ (iv) Is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer; or --
_________ (vi) He/She is a natural person whose individual net worth or joint
net worth with his spouse, at the time of his purchase, exceeds $1,000,000
(ONE MILLION DOLLARS); or --
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two most
recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who reasonably
expects to achieve at least the same income level in the current year; or
--
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purpose is directed by a sophisticated person as described in Rule
506(b)(2)(ii); or --
_________ (ix) Is an entity in which all of the equity owners are accredited
investors.
6. Bondholder understands and acknowledges the fact that recission or other
such legal rights may exist in Bondholder's state of residence, the State
of Delaware or by Federal law. Bondholder hereby intends to and does
<PAGE>
hereby waive, relinquish and extinguish such rights by converting his
interest in the Company from debt to equity (from a Bond to Common Stock)
and accepts such consideration in full and complete satisfaction of such
rights.
7. Bondholder understands and has been informed that one of the Company's
underlying objectives behind the conversion of this Bond is to enable it to
enter into a Share Exchange Agreement with a corporation ("TBA") that is
then trading on the OTC Bulletin Board, but which has little or no
significant assets or liabilities. Bondholder understands and acknowledges
that the Company will achieve this Share Exchange by way of reverse merger,
whereby each Bond holder who converts his Bond into legended common shares
of the Company will receive a pro-rata share of the legended common shares
in the new company.
8. Bondholder, by execution of the signature page affixed hereto, hereby
irrevocably constitutes and appoints Daniel J. Hoyng or his/her designee
for a period of 90 (ninety) days from the date of execution of this
Agreement as true and lawful attorney for him/her and in his/her name,
place and stead for the purpose of taking any and all actions deemed
reasonably necessary by said attorney regarding the Share Exchange
Agreement as discussed herein and to execute any and all acts or documents
necessary to accomplish or effect that objective including but not limited
to: (a) the extension of any target date described either herein or in the
Share Exchange Agreement for a period of 60 (sixty) days; (b) to execute
any documents to effect the bond conversion; (c) to execute any documents
to effect the Share Exchange Agreement; (e) to execute, acknowledge, make,
swear to, verify, deliver, record, file and/or publish, for and on behalf
of such Bondholder, any and all instruments and documents required herein;
and (f) to execute any and all other instruments as may be deemed necessary
or desirable by said attorney to carry out the full provisions of this
Agreement. The power of attorney being hereby granted is a Special Power of
Attorney coupled with an interest, is irrevocable and shall survive the
death or legal incapacity of the granting Bondholder.
9. The Bondholder understands and acknowledges the significance of this
transaction and hereby acknowledges the Company's recommendation that
Bondholder consult with an independent personal financial advisor (as
necessary) prior to executing this Agreement between himself and the
Company. Bondholder understands and acknowledges that his/her consent to
the foregoing is irrevocable and final and that the Company intends to rely
on that consent immediately and irrevocably. In making his/her decision,
Bondholder has relied solely upon independent investigations made by
him/her. He/She has received no representation or warranty from the Company
or from any affiliates, employees or agents of the Company. In addition,
he/she is not making a decision as a result of or subsequent to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees, including Bondholder, had
<PAGE>
been invited as a result of, subsequent to, or pursuant to any of the
foregoing.
10. Bondholder has been given a full opportunity to ask questions of and to
receive answers from the Company concerning the terms and conditions of
this Agreement and the business of the Company, and to obtain additional
information necessary to verify the accuracy of the information given
him/her or to obtain such other information as is desired in order to
evaluate an investment in the Company. All such questions have been
answered to the full satisfaction of the Bondholder.
11. This Agreement and the rights and obligations of the parties hereto shall
be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this _____
day of July 1998.
By: _______________________________________________
Bondholder
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
Warrantholder
The above-listed individual/entity ("Warrantholder") is the holder of
____________ Common Stock Purchase Warrants ("Warrants") dated the __________
day of ____________ 19___ entitling the Warrantholder at an exercise price of
$2.50 per share to purchase ______________ shares of the legended common stock
of National Boston Medical, Inc., a Delaware Corporation, whose principal place
of business is 43 Taunton Green, Taunton, Massachusetts (the "Company").
The term for exercise of the Warrants is three years from the date of issuance
(the "Term").
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. The Warrantholder agrees to exercise the Warrant to purchase legended
common stock in the Company simultaneously with the execution of this
agreement.
<PAGE>
2. The conversion rate for the exchange shall be $2.50 per share.
3. The targeted Record Date for exercise of the Warrant, subject to other
provisions contained herein, is August 19, 1998. The Company fully intends
to exercise its right to buy-back any and all Warrants not executed
pursuant to this Agreement as soon as is practicable for the Company and as
provided for in Paragraph 1 of the Warrant document at a redemption price
of $.05 per share underlying the Warrants to be redeemed.
4. Warrantholder represents to the Company that his/her sole consideration for
consenting to the Transaction is the receipt of shares of the Company's
common stock and that he/she is taking the shares with the intention of
investing in the Company and not with the intention to distribute such
shares. Warrantholder understands and acknowledges that all shares are
Restricted as that term is defined by the Securities Act of 1933 (the
"Act"). Warrantholder agrees that his/her shares may not be sold, offered
for sale, transferred, pledged, hypothecated, or otherwise disposed of
except in compliance with the Act and applicable state securities laws,
which restrictions require the approval of the Company for the transfer of
any shares. Warrantholder has been advised that the Company has no
obligation to cause the shares to be registered under the Act or to comply
with any exemption under the Act, including but not limited to that set
forth in Rule 144 promulgated under the Act, which would permit the shares
to be sold by Warrantholder. Warrantholder understands that it is not
anticipated that there will be any market for resale of the shares, and
that it may not be possible for Warrantholder to liquidate an investment in
the shares. Warrantholder understands the legal consequences of the
foregoing to mean that he/she must bear the economic risk of his investment
in the shares. He/She understands that any instruments representing the
shares may bear restrictive legends restricting the transfer thereof.
5. Warrantholder has the financial ability to bear the economic risk of an
investment in the Company, has adequate means of providing for his/her
current needs and personal contingencies, has no need for liquidity in such
investment, and could afford a complete loss of such investment.
Warrantholder's overall commitment to investments that are not readily
marketable is not disproportionate to his/her net worth, and his/her
investment in the Company will not cause such overall commitment to become
excessive.
Accredited Investor Representation and Warranty
Warrantholder also represents that he/she meets at least one of the
following criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation D of
the Securities Act of 1933 (the "Act"); or
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
<PAGE>
Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit
of its employees if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors; or
_________ (iii) Is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940; or
_________ (iv) Is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer; or --
_________ (vi) He/She is a natural person whose individual net worth or joint
net worth with his spouse, at the time of his purchase, exceeds $1,000,000
(ONE MILLION DOLLARS); or --
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two most
recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who reasonably
expects to achieve at least the same income level in the current year; or
--
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purpose is directed by a sophisticated person as described in Rule
506(b)(2)(ii); or --
_________ (ix) Is an entity in which all of the equity owners are accredited
investors.
<PAGE>
6. Warrantholder understands and acknowledges the fact that recission or other
such legal rights may exist in Warrantholder's state of residence, the
State of Delaware or by Federal law. Warrantholder hereby intends to and
does hereby waive, relinquish and extinguish such rights by exercising his
Warrant and by purchasing shares of the Company's Common Stock in
accordance with the terms as set forth herein and accepts such
consideration in full and complete satisfaction of such rights.
7. Warrantholder understands and has been informed that one of the Company's
underlying objectives behind the incentive to exercise this Warrant is to
enable it to enter into a Share Exchange Agreement with a corporation
("TBA") that is then trading on the OTC Bulletin Board, but which has
little or no significant assets or liabilities. Warrantholder understands
and acknowledges that the Company will achieve this Share Exchange by way
of reverse merger, whereby each Warrantholder who exercises his Warrant
will receive a pro-rata share of the legended common shares in the new
company. Warrantholder also understands and acknowledges that should he
choose not to exercise the Warrant in accordance with the terms as set
forth herein, he would receive an equivalent Warrant in the newly acquired
Company. By converting the Warrant herein, Warrantholder expressly
relinquishes the right to retain a Warrant in the newly acquired company.
8. Warrantholder, by execution of the signature page affixed hereto, hereby
irrevocably constitutes and appoints Daniel J. Hoyng or his/her designee
for a period of 90 (ninety) days from the date of execution of this
Agreement as true and lawful attorney for him/her and in his/her name,
place and stead for the purpose of taking any and all actions deemed
reasonably necessary by said attorney regarding the Share Exchange
Agreement as discussed herein and to execute any and all acts or documents
necessary to accomplish or effect that objective including but not limited
to: (a) the extension of any target date described either herein or in the
Share Exchange Agreement for a period of 60 (sixty) days; (b) to execute
any documents to effect the exercise of any Warrants; (c) to execute any
documents to effect the Share Exchange Agreement; (e) to execute,
acknowledge, make, swear to, verify, deliver, record, file and/or publish,
for and on behalf of such Warrantholder, any and all instruments and
documents required herein; and (f) to execute any and all other instruments
as may be deemed necessary or desirable by said attorney to carry out the
full provisions of this Agreement. The power of attorney being hereby
granted is a Special Power of Attorney coupled with an interest, is
irrevocable and shall survive the death or legal incapacity of the granting
Warrantholder.
9. Warrantholder understands and acknowledges the significance of this
transaction and hereby acknowledges the Company's recommendation that
Warrantholder consult with an independent personal financial advisor (as
necessary) prior to executing this Agreement between himself and the
Company. Warrantholder understands and acknowledges that his/her consent to
the foregoing is irrevocable and final and that the Company intends to rely
on that consent immediately and irrevocably. In making his/her decision,
Warrantholder has relied solely upon independent investigations made by
him/her. He/She has received no representation or warranty from the Company
or from any affiliates, employees or agents of the Company. In addition,
he/she is not making a decision as a result of or subsequent to (i) any
advertisement, article, notice or other communication published in any
<PAGE>
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees, including Warrantholder,
had been invited as a result of, subsequent to, or pursuant to any of the
foregoing.
10. Warrantholder has been given a full opportunity to ask questions of and to
receive answers from the Company concerning the terms and conditions of
this Agreement and the business of the Company, and to obtain additional
information necessary to verify the accuracy of the information given
him/her or to obtain such other information as is desired in order to
evaluate an investment in the Company. All such questions have been
answered to the full satisfaction of the Warrantholder. K. This Agreement
and the rights and obligations of the parties hereto shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this _____
day of July 1998.
By: _______________________________________________
Warrantholder
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
<PAGE>
Share Exchange and Merger Agreement
THIS CONSENT SHOULD ONLY BE EXERCISED BY THE EXISTING STOCKHOLDERS OF NATIONAL
BOSTON MEDICAL, INC.; BONDHOLDERS WHO HAVE EXECUTED A CONVERSION AGREEMENT AND
WARRANT HOLDERS WHO HAVE EXECUTED AN EXERCISE AGREEMENT.
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
A. National Boston Medical, Inc. (the "Company") intends to enter into a Share
Exchange Agreement with a corporation ("TBA"), as a merger whereby the
common stockholders of the Company are to exchange 100% of its issued and
outstanding Common Stock for 90% (subject to a 5% variance) of the issued
and outstanding Common Stock in TBA, a company then listed for stock
quotations on the OTC Bulletin Board (the "Transaction").
B. The Undersigned understands and acknowledges that as a result of the
Transaction, also known as a reverse merger, National Boston Medical, Inc.
will become a wholly-owned subsidiary of TBA and merge into TBA. TBA will
change its name to National Boston Medical, Inc.
C. The Undersigned understands and acknowledges that as a result of the
Transaction, he/she will be asked to and will in fact surrender his/her
shares of Common Stock in National Boston Marketing, Inc., and as sole
consideration will receive a quantity of Restricted (as that term is
defined by the Securities Act of 1933 (the "Act")) shares of the Common
Stock of TBA which is equivalent to his/her pro-rata share in the Company.
D. As an incentive to consent to the Transaction, the Company will use its
best efforts to acquire an undetermined quantity of the unrestricted stock
of TBA, which the Company will then promptly distribute to its stockholders
pro-rata in the form of a Property Distribution (the "Distribution"). Only
stockholders as of the Record Date will be entitled to receive such shares.
The targeted Record Date, subject to other provisions contained herein, is
August 20, 1998. No Bondholder nor Warrantholder (not having converted
their Bond or not having exercised their Warrants as of the Record Date)
will be affected by such distribution, as none shall receive such
distributed shares.
<PAGE>
E. The Undersigned represents to the Company that his/her sole consideration
for consenting to the Transaction is the receipt of shares of TBA's common
stock and that he/she is taking the shares with the intention of investing
in TBA and not with the intention to distribute such shares. The
Undersigned understands and acknowledges that all shares are Restricted as
that term is defined by the Securities Act of 1933 (the "Act"). The
Undersigned agrees that his/her shares may not be sold, offered for sale,
transferred, pledged, hypothecated, or otherwise disposed of except in
compliance with the Act and applicable state securities laws, which
restrictions require the approval of the Company for the transfer of any
shares. The Undersigned has been advised that the Company has no obligation
to cause the shares to be registered under the Act or to comply with any
exemption under the Act, including but not limited to that set forth in
Rule 144 promulgated under the Act, which would permit the shares to be
sold by the Undersigned. The Undersigned understands that it is not
anticipated that there will be any market for resale of the shares, and
that it may not be possible for the Undersigned to liquidate an investment
in the shares. The Undersigned understands the legal consequences of the
foregoing to mean that he/she must bear the economic risk of his investment
in the shares. He/She understands that any instruments representing the
shares may bear restrictive legends restricting the transfer thereof.
F. The Undersigned has the financial ability to bear the economic risk of an
investment in the Company, has adequate means of providing for his/her
current needs and personal contingencies, has no need for liquidity in such
investment, and could afford a complete loss of such investment. The
Undersigned's overall commitment to investments that are not readily
marketable is not disproportionate to his/her net worth, and his/her
investment in the Company will not cause such overall commitment to become
excessive.
Accredited Investor Representation and Warranty
The Undersigned also represents that he/she meets at least one of the
following criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation D of
the Securities Act of 1933 (the "Act"); or
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit
<PAGE>
of its employees if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors; or
_________ (iii) Is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940; or
_________ (iv) Is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer; or --
_________ (vi) He/She is a natural person whose individual net worth or joint
net worth with his spouse, at the time of his purchase, exceeds $1,000,000
(ONE MILLION DOLLARS); or --
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two most
recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who reasonably
expects to achieve at least the same income level in the current year; or
--
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purpose is directed by a sophisticated person as described in Rule
506(b)(2)(ii); or --
_________ (ix) Is an entity in which all of the equity owners are accredited
investors.
G. The Undersigned understands and acknowledges the fact that recission
rights, dissenter's rights or other such legal rights may exist in the
Undersigned's state of residence, the State of Delaware or by Federal law.
The Undersigned hereby intends to and does hereby waive, relinquish and
extinguish such rights by consenting to the Share Exchange and accepts
shares in TBA as sole consideration and in full and complete satisfaction
of such rights.
H. The Undersigned, by execution of the signature page affixed hereto, hereby
<PAGE>
irrevocably constitutes and appoints Daniel J. Hoyng or his/her designee
for a period of 90 (ninety) days from the date of execution of this
Agreement as true and lawful attorney for him/her and in his/her name,
place and stead for the purpose of taking any and all actions deemed
reasonably necessary by said attorney regarding the Share Exchange
Agreement as discussed herein and to execute any and all acts or documents
necessary to accomplish or effect that objective including but not limited
to: (a) the extension of any target date described either herein or in the
Share Exchange Agreement for a period of 60 (sixty) days; (b) to execute
any documents to effect the bond conversion and to effect the exercise of
any Warrants; (c) to execute any documents to effect the Share Exchange
Agreement; (e) to execute, acknowledge, make, swear to, verify, deliver,
record, file and/or publish, for and on behalf of the Undersigned, any and
all instruments and documents required herein; and (f) to execute any and
all other instruments as may be deemed necessary or desirable by said
attorney to carry out the full provisions of this Agreement. The power of
attorney being hereby granted is a Special Power of Attorney coupled with
an interest, is irrevocable and shall survive the death or legal incapacity
of the granting Undersigned.
I. The Undersigned understands and acknowledges the significance of this
transaction and hereby acknowledges the Company's recommendation that the
Undersigned consult with an independent personal financial advisor (as
necessary) prior to executing this Agreement between himself and the
Company. The Undersigned understands and acknowledges that his/her consent
to the foregoing is irrevocable and final and that the Company intends to
rely on that consent immediately and irrevocably. In making his/her
decision, the Undersigned has relied solely upon independent investigations
made by him/her. He/She has received no representation or warranty from the
Company or from any affiliates, employees or agents of the Company. In
addition, he/she is not making a decision as a result of or subsequent to
(i) any advertisement, article, notice or other communication published in
any newspaper, magazine or similar media or broadcast over television or
radio, or (ii) any seminar or meeting whose attendees, including the
Undersigned, had been invited as a result of, subsequent to, or pursuant to
any of the foregoing.
J. The Undersigned has been given a full opportunity to ask questions of and
to receive answers from the Company concerning the terms and conditions of
this Agreement and the business of the Company, and to obtain additional
information necessary to verify the accuracy of the information given
him/her or to obtain such other information as is desired in order to
evaluate an investment in the Company. All such questions have been
answered to the full satisfaction of the Undersigned.
K. This Agreement and the rights and obligations of the parties hereto shall
be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
THIS CONSENT SHOULD ONLY BE EXERCISED BY THE EXISTING STOCKHOLDERS OF NATIONAL
BOSTON MEDICAL, INC.; BONDHOLDERS WHO HAVE EXECUTED A CONVERSION AGREEMENT AND
WARRANT HOLDERS WHO HAVE EXECUTED AN EXERCISE AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Agreement this _____
day of July 1998. By: _______________________________________________
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
EXHIBIT 4.9
Conversion of Securities and Share Exchange Agreement
National Boston Medical, Inc.
THE SECURITIES WHICH ARE THE SUBJECT OF EACH OF THESE AGREEMENTS HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), NOR HAVE THEY BEEN
REGISTERED UNDER ANY STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
Name: ___________________________________________________________________
Address:___________________________________________________________________
- --------------------------------------------------------------------
12% Convertible Redeemable Preferred Stock, Series A
The above-listed individuals (the "Stockholders") are the holders of a
Share of 12% Convertible Redeemable Preferred Stock evidenced by an Agreement
dated the ____ day of _____________ 1998 with a face value of $25,000 issued by
National Boston Medical, Inc., a Delaware Corporation, whose principal place of
business is 43 Taunton Green, Taunton, Massachusetts (the "Company").
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. The Stockholders agree to convert the Preferred Stock and any accrued and
unpaid dividends to which the Stockholders are entitled as of the date of
execution of this Agreement to legended common stock in the Company
simultaneously with the execution of this agreement.
2. The conversion rate for this exchange shall be such that the Stockholders
shall receive one (1) legended share of the common stock of the Company for
every $2.20 invested in the Preferred Stock of the Company. This conversion
rate represents an approximate 12% discount from the stated conversion
rate. The targeted Record Date for the conversion, subject to other
provisions contained herein, is August 19, 1998.
3. Stockholders represent to the Company that their sole consideration for
consenting to the Transaction is the receipt of shares of the Company's
common stock and that they are taking the shares with the intention of
investing in the Company and not with the intention to distribute such
shares. Stockholders understand and acknowledge that all
<PAGE>
shares are Restricted as that term is defined by the Securities Act of 1933
(the "Act"). Stockholders agree that their shares may not be sold, offered
for sale, transferred, pledged, hypothecated, or otherwise disposed of
except in compliance with the Act and applicable state securities laws,
which restrictions require the approval of the Company for the transfer of
any shares. Stockholders have been advised that the Company has no
obligation to cause the shares to be registered under the Act or to comply
with any exemption under the Act, including but not limited to that set
forth in Rule 144 promulgated under the Act, which would permit the shares
to be sold by Stockholders. Stockholders understand that it is not
anticipated that there will be any market for resale of the shares, and
that it may not be possible for the Stockholders to liquidate an investment
in the shares. Stockholders understand the legal consequences of the
foregoing to mean that they must bear the economic risk of his investment
in the shares. They understand that any instruments representing the shares
may bear restrictive legends restricting the transfer thereof.
4. Stockholders have the financial ability to bear the economic risk of an
investment in the Company, have adequate means of providing for their
current needs and personal contingencies, have no need for liquidity in
such investment, and could afford a complete loss of such investment.
Stockholders' overall commitment to investments that are not readily
marketable is not disproportionate to their net worth, and their investment
in the Company will not cause such overall commitment to become excessive.
Accredited Investor Representation and Warranty
Stockholders also represent that they meet at least one of the following
criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation D of
the Securities Act of 1933 (the "Act"); or
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit
of its employees if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess
<PAGE>
of $5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors; or
_________ (iii) Is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940; or --
_________ (iv) Is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer; or --
_________ (vi) He/She is a natural person whose individual net worth or joint
net worth with his spouse, at the time of his purchase, exceeds $1,000,000
(ONE MILLION DOLLARS); or
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two most
recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who reasonably
expects to achieve at least the same income level in the current year; or
--
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purpose is directed by a sophisticated person as described in Rule
506(b)(2)(ii); or --
_________ (ix) Is an entity in which all of the equity owners are accredited
investors.
5. Stockholders understand and acknowledge the fact that recission or other
such legal rights may exist in Stockholders' state of residence, the State
of Delaware or by Federal law. Stockholders hereby intend to and do hereby
waive, relinquish and extinguish such rights by converting their interest
in the Company from Preferred to Common Stock) and accept such
consideration in full and complete satisfaction of such rights.
6. Stockholders understand and have been informed that one of the Company's
underlying objectives behind the conversion of this Stock is to enable it
to enter into a Share Exchange Agreement with a corporation ("TBA") that is
then trading on the OTC Bulletin Board, but which has little or no
significant assets or liabilities. Stockholders understand and acknowledge
that the Company will achieve this Share Exchange by way of reverse merger,
whereby if Stockholders convert their Preferred Stock into legended common
shares of the Company they will receive a pro-rata share
<PAGE>
of the legended common shares in the new company.
7. Stockholders, by execution of the signature page affixed hereto, hereby
irrevocably constitute and appoint Daniel J. Hoyng or his/her designee for
a period of 90 (ninety) days from the date of execution of this Agreement
as true and lawful attorney for them and in their name, place and stead for
the purpose of taking any and all actions deemed reasonably necessary by
said attorney regarding the Share Exchange Agreement as discussed herein
and to execute any and all acts or documents necessary to accomplish or
effect that objective including but not limited to: (a) the extension of
any target date described either herein or in the Share Exchange Agreement
for a period of 60 (sixty) days; (b) to execute any documents to effect the
bond conversion; (c) to execute any documents to effect the Share Exchange
Agreement; (e) to execute, acknowledge, make, swear to, verify, deliver,
record, file and/or publish, for and on behalf of such Stockholders, any
and all instruments and documents required herein; and (f) to execute any
and all other instruments as may be deemed necessary or desirable by said
attorney to carry out the full provisions of this Agreement. The power of
attorney being hereby granted is a Special Power of Attorney coupled with
an interest, is irrevocable and shall survive the death or legal incapacity
of either granting Stockholder.
8. Stockholders understand and acknowledge the significance of this
transaction and hereby acknowledges the Company's recommendation that
Stockholders consult with an independent personal financial advisor (as
necessary) prior to executing this Agreement between themselves and the
Company. Stockholders understand and acknowledge that their consent to the
foregoing is irrevocable and final and that the Company intends to rely on
that consent immediately and irrevocably. In making their decision,
Stockholders have relied solely upon independent investigations made by
them. They have received no representation nor warranty from the Company
nor from any affiliates, employees or agents of the Company. In addition,
they are not making a decision as a result of or subsequent to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees, including Stockholders, had
been invited as a result of, subsequent to, or pursuant to any of the
foregoing.
9. Stockholders have been given a full opportunity to ask questions of and to
receive answers from the Company concerning the terms and conditions of
this Agreement and the business of the Company, and to obtain additional
information necessary to verify the accuracy of the information given them
or to obtain such other information as is desired in order to evaluate an
investment in the Company. All such questions have been answered to the
full satisfaction of the Stockholders.
10. This Agreement and the rights and obligations of the parties hereto shall
be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this _____
day of July 1998.
<PAGE>
By: _______________________________________________
By: _______________________________________________
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
<PAGE>
Warrantholders
The above-listed individuals ("Warrantholders") are the holders of 10,000 Common
Stock Purchase Warrants ("Warrants") dated the 20th day of February 1998
entitling the Warrantholders at an exercise price of $2.50 per share to purchase
10,000 shares of the legended common stock of National Boston Medical, Inc., a
Delaware Corporation, whose principal place of business is 43 Taunton Green,
Taunton, Massachusetts (the "Company").
The term for exercise of the Warrants is five years from the date of issuance
(the "Term").
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. The Warrantholders agree to exercise the Warrant to purchase legended
common stock in the Company simultaneously with the execution of this
agreement.
2. The conversion rate for the exchange shall be __________ per share.
3. The targeted Record Date for exercise of the Warrant, subject to other
provisions contained herein, is August 19, 1998.
4. Warrantholders represent to the Company that their sole consideration for
consenting to the Transaction is the receipt of shares of the Company's
common stock and that they are taking the shares with the intention of
investing in the Company and not with the intention to distribute such
shares. Warrantholders understand and acknowledge that all shares are
Restricted as that term is defined by the Securities Act of 1933 (the
"Act"). Warrantholders agree that their shares may not be sold, offered for
sale, transferred, pledged, hypothecated, or otherwise disposed of except
in compliance with the Act and applicable state securities laws, which
restrictions require the approval of the Company for the transfer of any
shares. Warrantholders have been advised that the Company has no obligation
to cause the shares to be registered under the Act or to comply with any
exemption under the Act, including but not limited to that set forth in
Rule 144 promulgated under the Act, which would permit the shares to be
sold by Warrantholders. Warrantholders understand that it is not
anticipated that there will be any market for resale of the shares, and
that it may not be possible for Warrantholders to liquidate an investment
in the shares. Warrantholders understand the legal consequences of the
foregoing to mean that they must bear the economic risk of their investment
in the shares. They understand that any instruments representing the shares
may bear restrictive legends restricting the transfer thereof.
5. Warrantholders have the financial ability to bear the economic risk of an
investment in the Company, have adequate means of providing for their
current needs and personal contingencies, have no need for liquidity in
such investment, and could afford a complete loss of such investment.
Warrantholders' overall commitment to investments that are not readily
marketable is not disproportionate to their net worth, and their investment
in the Company will not cause such overall commitment to become excessive.
<PAGE>
Accredited Investor Representation and Warranty
Warrantholders also represent that they meets at least one of the following
criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation D of
the Securities Act of 1933 (the "Act"); or
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit
of its employees if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors; or --
_________ (iii) Is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940; or --
_________ (iv) Is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer; or --
_________ (vi) He/She is a natural person whose individual net worth or joint
net worth with his spouse, at the time of his purchase, exceeds $1,000,000
(ONE MILLION DOLLARS); or --
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two most
<PAGE>
recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who reasonably
expects to achieve at least the same income level in the current year; or
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purpose is directed by a sophisticated person as described in Rule
506(b)(2)(ii); or --
_________ (ix) Is an entity in which all of the equity owners are accredited
investors.
6. Warrantholders understand and acknowledge the fact that recission or other
such legal rights may exist in Warrantholders' state of residence, the
State of Delaware or by Federal law. Warrantholders hereby intend to and do
hereby waive, relinquish and extinguish such rights by exercising their
Warrant and by purchasing shares of the Company's Common Stock in
accordance with the terms as set forth herein and accept such consideration
in full and complete satisfaction of such rights.
7. Warrantholders understand and have been informed that one of the Company's
underlying objectives behind the incentive to exercise this Warrant is to
enable it to enter into a Share Exchange Agreement with a corporation
("TBA") that is then trading on the OTC Bulletin Board, but which has
little or no significant assets or liabilities. Warrantholders understand
and acknowledge that the Company will achieve this Share Exchange by way of
reverse merger, whereby if Warrantholders exercise their Warrants they will
receive a pro-rata share of the legended common shares in the new company.
Warrantholders also understand and acknowledge that should they choose not
to exercise the Warrant in accordance with the terms as set forth herein,
they would receive an equivalent Warrant in the newly acquired Company. By
converting the Warrant herein, Warrantholders expressly relinquish the
right to retain a Warrant in the newly acquired company.
8. Warrantholders, by execution of the signature page affixed hereto, hereby
irrevocably constitute and appoint Daniel J. Hoyng or his/her designee for
a period of 90 (ninety) days from the date of execution of this Agreement
as true and lawful attorney for them and in their name, place and stead for
the purpose of taking any and all actions deemed reasonably necessary by
said attorney regarding the Share Exchange Agreement as discussed herein
and to execute any and all acts or documents necessary to accomplish or
effect that objective including but not limited to: (a) the extension of
any target date described either herein or in the Share Exchange Agreement
for a period of 60 (sixty) days; (b) to execute any documents to effect the
exercise of any Warrants; (c) to execute any documents to effect the Share
Exchange Agreement; (e) to execute, acknowledge, make, swear to, verify,
deliver, record, file and/or publish, for and on behalf of such
Warrantholders, any and all instruments and documents required herein; and
(f) to execute any and all other instruments as may be deemed necessary or
desirable by said attorney to carry out the full provisions of this
Agreement. The power of attorney being hereby granted is a Special Power of
Attorney coupled with an interest, is irrevocable and shall survive the
death or legal incapacity of either granting Warrantholder.
<PAGE>
9. Warrantholders understand and acknowledge the significance of this
transaction and hereby acknowledge the Company's recommendation that
Warrantholders consult with an independent personal financial advisor (as
necessary) prior to executing this Agreement between themselves and the
Company. Warrantholders understand and acknowledge that their consent to
the foregoing is irrevocable and final and that the Company intends to rely
on that consent immediately and irrevocably. In making their decision,
Warrantholders have relied solely upon independent investigations made by
them. They have received no representation nor warranty from the Company
nor from any affiliates, employees or agents of the Company. In addition,
they are not making a decision as a result of or subsequent to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees, including Warrantholders,
have been invited as a result of, subsequent to, or pursuant to any of the
foregoing.
10. Warrantholders have been given a full opportunity to ask questions of and
to receive answers from the Company concerning the terms and conditions of
this Agreement and the business of the Company, and to obtain additional
information necessary to verify the accuracy of the information given
him/her or to obtain such other information as is desired in order to
evaluate an investment in the Company. All such questions have been
answered to the full satisfaction of the Warrantholders.
11. This Agreement and the rights and obligations of the parties hereto shall
be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this _____
day of July 1998.
By: _______________________________________________
By: _______________________________________________
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
Share Exchange and Merger Agreement
THIS CONSENT SHOULD ONLY BE EXERCISED BY THE EXISTING STOCKHOLDERS OF NATIONAL
BOSTON MEDICAL, INC. AND WARRANT HOLDERS WHO HAVE EXECUTED AN EXERCISE
AGREEMENT.
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of such is hereby acknowledged,
THE PARTIES HERETO AGREE AS FOLLOWS:
<PAGE>
A. National Boston Medical, Inc. (the "Company") intends to enter into a Share
Exchange Agreement with a corporation ("TBA"), as a merger whereby the
common stockholders of the Company are to exchange 100% of its issued and
outstanding Common Stock for 90% (subject to a 5% variance) of the issued
and outstanding Common Stock in TBA, a company then listed for stock
quotations on the OTC Bulletin Board (the "Transaction").
B. The Undersigned understand and acknowledge that as a result of the
Transaction, also known as a reverse merger, National Boston Medical, Inc.
will become a wholly-owned subsidiary of TBA and merge into TBA. TBA will
change its name to National Boston Medical, Inc.
C. The Undersigned understand and acknowledge that as a result of the
Transaction, they will be asked to and will in fact surrender their shares
of Common Stock in National Boston Marketing, Inc., and as sole
consideration will receive a quantity of Restricted (as that term is
defined by the Securities Act of 1933 (the "Act")) shares of the Common
Stock of TBA which is equivalent to their pro-rata share in the Company.
D. As an incentive to consent to the Transaction, the Company will use its
best efforts to acquire an undetermined quantity of the unrestricted stock
of TBA, which the Company will then promptly distribute to its stockholders
pro-rata in the form of a Property Distribution (the "Distribution"). Only
stockholders as of the Record Date will be entitled to receive such shares.
The targeted Record Date, subject to other provisions contained herein, is
August 20, 1998. No Warrantholder (not having exercised their Warrants as
of the Record Date) will be affected by such distribution, as none shall
receive such distributed shares.
E. The Undersigned represent to the Company that their sole consideration for
consenting to the Transaction is the receipt of shares of TBA's common
stock and that they are taking the shares with the intention of investing
in TBA and not with the intention to distribute such shares. The
Undersigned understand and acknowledge that all shares are Restricted as
that term is defined by the Securities Act of 1933 (the "Act"). The
Undersigned agree that their shares may not be sold, offered for sale,
transferred, pledged, hypothecated, or otherwise disposed of except in
compliance with the Act and applicable state securities laws, which
restrictions require the approval of the Company for the transfer of any
shares. The Undersigned have been advised that the Company has no
obligation to cause the shares to be registered under the Act or to comply
with any exemption under the Act, including but not limited to that set
forth in Rule 144 promulgated under the Act, which would permit the shares
to be sold by the Undersigned. The Undersigned understand that it is not
anticipated that there will be any market for resale of the shares, and
that it may not be possible for the Undersigned to liquidate an investment
in the shares. The Undersigned understand the legal consequences of the
foregoing to mean that they must bear the economic risk of their investment
in the shares. They understand that any instruments representing the shares
may bear restrictive legends restricting the transfer thereof.
<PAGE>
F. The Undersigned have the financial ability to bear the economic risk of an
investment in the Company, have adequate means of providing for their
current needs and personal contingencies, have no need for liquidity in
such investment, and could afford a complete loss of such investment. The
Undersigned's overall commitment to investments that are not readily
marketable is not disproportionate to their net worth, and their investment
in the Company will not cause such overall commitment to become excessive.
Accredited Investor Representation and Warranty
The Undersigned also represent that they meet at least one of the following
criteria: (please check one or more lines, as applicable)
__________ (i) He/She qualifies as an accredited investor under Regulation D of
the Securities Act of 1933 (the "Act"); or
_________ (ii) Is a bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit
of its employees if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors; or --
_________ (iii) Is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940; or --
_________ (iv) Is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; or --
_________ (v) Is a director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer; or --
<PAGE>
_________ (vi) He/She is a natural person whose individual net worth or joint
net worth with his spouse, at the time of his purchase, exceeds $1,000,000
(ONE MILLION DOLLARS); or --
_________ (vii) He/She is a natural person and had an individual income in
excess of $200,000 (TWO-HUNDRED THOUSAND DOLLARS) in each of the two most
recent years, or jointly with his spouse in excess of $300,000
(THREE-HUNDRED THOUSAND DOLLARS) in each of those years, and who reasonably
expects to achieve at least the same income level in the current year; or
--
_________ (viii) Is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purpose is directed by a sophisticated person as described in Rule
506(b)(2)(ii); or --
_________ (ix) Is an entity in which all of the equity owners are accredited
investors.
G. The Undersigned understand and acknowledge the fact that recission rights,
dissenter's rights or other such legal rights may exist in the
Undersigned's state of residence, the State of Delaware or by Federal law.
The Undersigned hereby intend to and do hereby waive, relinquish and
extinguish such rights by consenting to the Share Exchange and accept
shares in TBA as sole consideration and in full and complete satisfaction
of such rights.
H. The Undersigned, by execution of the signature page affixed hereto, hereby
irrevocably constitute and appoint Daniel J. Hoyng or his/her designee for
a period of 90 (ninety) days from the date of execution of this Agreement
as true and lawful attorney for them and in their name, place and stead for
the purpose of taking any and all actions deemed reasonably necessary by
said attorney regarding the Share Exchange Agreement as discussed herein
and to execute any and all acts or documents necessary to accomplish or
effect that objective including but not limited to: (a) the extension of
any target date described either herein or in the Share Exchange Agreement
for a period of 60 (sixty) days; (b) to execute any documents to effect the
bond conversion and to effect the exercise of any Warrants; (c) to execute
any documents to effect the Share Exchange Agreement; (e) to execute,
acknowledge, make, swear to, verify, deliver, record, file and/or publish,
for and on behalf of the Undersigned, any and all instruments and documents
required herein; and (f) to execute any and all other instruments as may be
deemed necessary or desirable by said attorney to carry out the full
provisions of this Agreement. The power of attorney being hereby granted is
a Special Power of Attorney coupled with an interest, is irrevocable and
shall survive the death or legal incapacity of the granting Undersigned.
I. The Undersigned understand and acknowledge the significance of this
transaction and hereby acknowledge the Company's recommendation that the
Undersigned consult with an independent personal financial advisor (as
necessary) prior to executing this Agreement between himself and the
<PAGE>
Company. The Undersigned understand and acknowledge that their consent to
the foregoing is irrevocable and final and that the Company intends to rely
on that consent immediately and irrevocably. In making their decision, the
Undersigned have relied solely upon independent investigations made by
them. They have received no representation nor warranty from the Company
nor from any affiliates, employees or agents of the Company. In addition,
they are not making a decision as a result of or subsequent to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees, including the Undersigned,
have been invited as a result of, subsequent to, or pursuant to any of the
foregoing.
J. The Undersigned have been given a full opportunity to ask questions of and
to receive answers from the Company concerning the terms and conditions of
this Agreement and the business of the Company, and to obtain additional
information necessary to verify the accuracy of the information given them
or to obtain such other information as is desired in order to evaluate an
investment in the Company. All such questions have been answered to the
full satisfaction of the Undersigned.
K. This Agreement and the rights and obligations of the parties hereto shall
be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
THIS CONSENT SHOULD ONLY BE EXERCISED BY THE EXISTING STOCKHOLDERS OF NATIONAL
BOSTON MEDICAL, INC. AND WARRANT HOLDERS WHO HAVE EXECUTED AN EXERCISE
AGREEMENT.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this _____
day of July 1998.
By: _______________________________________________
By: ________________________________________________
Accepted By: _______________________________________
(An authorized representative of National Boston Medical, Inc.)
EXHIBIT 4.10
NATIONAL BOSTON MEDICAL, INC.
US $ 750,000
10% CONVERTIBLE DEBENTURE DUE DECEMBER 31, 2001
NOVEMBER 25, 1998
Issuer: National Boston Medical, Inc. (OTC BB Symbol; "NBMX")
Purchaser: Thomson Kernaghan & Co. Limited, as Placement Agent 365 Bay Street
Toronto, Ontario M5H 2V2 Canada
Aggregate Amount: US $ 750,000.00
Security: 10% Convertible Debentures Due December 31, 2001 (the "Debentures").
The Debentures shall bear interest at the rate of 10% per year calculated
on a 30/360 basis, payable upon conversion, redemption or maturity,
whichever occurs first. Interest shall be payable, at the holder's option,
in cash or in shares of the Issuer's common stock ("Common Stock").
Exemption from The Debentures shall be exempt from the registration requirements
of the Registration: US Securities Act of 1933 (the "33 Act").
Initial Funding: US $750,000.00
Initial Funding and
Closing Date: November 25, 1998 - $750,000.00
Special Requirements: Issuer shall set aside in an escrow account to be
maintained at the offices of Mintmire and Associates, Palm Beach, Florida,
a total of 5% of its gross revenues, (or commencing April 1, 1999, a
minimum amount of $10,000per month for nine (9) months and thereafter a
minimum of monthly installment of 25,000) which revenues shall be
specifically held for the purpose of repaying loans or advances made
pursuant to this agreement, such revenues to be retained until the toatl of
such revenues and accrued interest equal the total amount of any funding or
advances outstanding as indebtedness which have not been converted to
common stock or the indebtedness otherwise paid, the escrow shall be
released to Issuer.
In addition, Issuer shall set aside in such escrow account a total of
7,500,000 shares of its common stock to assure the filing by the Company of
its Form 10. NBM shall use its best efforts to file its Form 10SB with the
SEC by April 1, 1999.
Default:
1. Should NBM fail to file its Form 10SB with the SEC on or before June 1,
1999, Purchaser shall be entitled to withdraw 3,750,000 shares of NBM stock
from escrow as payment of $375,000 of the indebtness.
<PAGE>
2. Should NBM fail to file its Form 10SB with the SEC on or before July 1,
1999, Purchaser shall be entitled to withdraw 1,875,000 shares of NBM stock
from escrow as payment of $187,500 of the indebtness.
3. Should NBM fail to file its Form 10SB with the SEC on or before August1,
1999, Purchaser shall be entitled to withdraw the remaining 1,875,000
shares of NBM stock from escrow as payment of the remaining indebtness.
Conversion: The Debentures shall be convertible into shares of Common Stock from
time to time in such amounts as the Purchaser shall specify, upon approval
by the SEC of the Form 10SB.
Conversion Price: The lower of (i) US$ 0.625 or (ii) 75% of the lesser of the
average closing sales price of the Common Stock for the three (3) trading
days preceding November 25, 1998, or the Conversion Date.
Purchaser Warrants: On the initial Closing Date, the Issuer shall issue the
Purchaser one (1) year Warrants to purchase 200,00 shares of Common Stock
at a price of $0.625 per share.
Registration of: As soon as possible and in any event by June 1, 1999, the
Issuer shall file (i) a registration statement on Form SB-2 with the SEC
for the purpose of registering the issuance of not less that 150% of the
Common Stock underlying the Debentures and 100% of the Common Stock
underlying the Purchaser's Warrants and the Placement Agent's Warrants
under the 33 Act and the '34 Act. The issuer shall caus the registration
statement to remain effective until 30 days after the Debentures have been
converted or reduced and the Warrant exercised or exposed. The Issuer shall
cause the registration statement to be delcared effective by the SEC as
soon as possible; and , (ii) a registration statement with the SEC for the
purpose of registering the issuance of not less than 150% of the Common
Stock underlying the Debentures (based upon the Initial Closing Date as the
conversion date) and 100% of the Common Stock underlying the Purchasers
Warrants and Placement Agents Warrants under the 33 Act, which registration
shall include the unqualified opinion of the Issuer's auditors satifactory
to the Purchaser, with respect to the Issuer's financial statements
included in the registration statement.
Escrow Holder: Mintmire and Associates, Palm Beach, Florida, shall act as escrow
holder for funds and the Common Stock.
Placement Agent: Thomson Kernaghan & Co., Ltd., Toronto.
Placement Fee: 10% of the gross amount of the Debentures, payable ratably upon
funding.
Placement Agent's Warrants: On the Initial Closing Date, the Issuer shall issue
the Placement Agent Warrants to purchase $200,000 of Common Stock at a
price per share equal to the average closing id price of the Common
<PAGE>
Stock for the three trading days preceding the Closing Date.
Purchaser's Legal Fees and Expenses: The Issuer shall pay the Purchasers
reasonable legal fees and expenses not to exceed $10,000.
Definitive Agreement: The purchase and sale of the Debentures is subject to the
negotiation and execution of a definative agreement containing such
representations, warranties, terms and conditions as the parties and their
respective counsel may agree.
Purchasers: The Purchasers will represent and warrant to the Placement Agent
that (i) Representations to they have such knowledge and experience in
financial and business the Placement Agent: matters that they are capable
of evaluating the merits and risks of purchasing the Debentures, (ii) they
are capable of bearing the economic risk of such purchase, and (ii) they
have received all information requested by them in connection with their
decision to purchase the Debentures.
Indemnification: The Issuer shall indemnify the Placement Agent against certain
liability to and claims made by the Purchasers.
Currency: All dollar amounts are US currency.
National Boston Medical, Inc. Thomas Kernaghan & Co. Ltd., a
Placement Agent
By:/s/Daniel J. Hoyng By:/s/ Mark Valentine
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
(The "Company")
Preliminary Legal Due Diligence List
Please provide each of Thomson Kernaghan & Co. Ltd. and John M. Mann with a copy
of the following:
1. Articles (certificates) of incorporation of the Company and each of its
subsidiaries, certified as of a recent date by the secretary of state of
the state of their respective incorporation.
2. Certificates of good standing for the Company and each of its subsidiaries,
issued as of a recent date by:
A. The secretary of state of (1) the states of their respective
incorporation, and (2) each state in which the corporation has
qualified to do business.
B. The taxing authorities of (1) the states of their respective
incorporation, and (2) each state in which the corporation has
qualified to do business.
3. Bylaws of the Company and each of its subsidiaries, certified as of a
recent date by their respective secretaries.
4. UCC searches as of a recent date for the Company and each of its
subsidiaries for (1) the states of their respective incorporations, (2)
each state in which the corporation has qualified to do business or is
doing business, and (3) each other state in which financing statements have
been filed for the Company or any subsidiary.
5. The names, addresses and biographical information for the directors and
executive officers of the Company and each subsidiary.
6. For the Company and each subsidiary, please list the classes of shares of
outstanding, and the number of shares in each class outstanding.
7. The names and addresses of the (1) beneficial owners of 5% or more of each
class of the Company's voting securities, together with the number and
percentage of such shares; and (2) the holders of rights to acquire any
such securities which, when added to the securities beneficially owned by
the holder, will result in the holder beneficially owning 5% or more of any
class of the Company's voting securities, together with a description of
those rights.
8. Please describe all executor agreements, arrangements and understandings,
whether written or oral, and whether formal or informal, relating to (i)
the sale or issuance by the Company or any subsidiaries of any of their
respective securities, or (ii) the purchase or repurchase by the Company or
any subsidiary of any of their respective securities.
9. A copy of the Company's current business plan, and the Company's current
marketing plan if not a part of its business plan. Please describe in
<PAGE>
detail the Company's plan and critical path for becoming a reporting
company.
10. A copy of all business, financial, operating capital and other forecasts
prepared by or for the Company.
11. Copies of all offering materials, private placement memoranda,
subscriptions and agreements for the purchase or sale of securities of the
Company and each subsidiary for the current and past two years.
12. Copies of all meeting notices, proxy statements and other communications
with the shareholders of the Company and each subsidiary during the current
and past two years, and all material communications received from such
shareholders during that three year period.
13. Copies of all material agreements relating to or affecting the Company or
any of its subsidiaries, or any of their respective assets, operations or
business.
14. Please describe all agreements, arrangements and understandings, whether
written or oral, and whether formal or informal, relating to the voting of
any of the securities of the Company and each subsidiary. Please provide
copies of any such agreements, arrangements and understandings that are in
writing.
14. Copies of the CONSOLIDATING financial statements for the Company and each
subsidiary for (1) the most recent fiscal year, and (2) each subsequent
quarter.
15. Copies of all federal, state and local income and franchise tax returns
filed by the Company and each subsidiary for the past two tax years.
16. Copies of all letters, reports, opinions, and other communications from the
Corporation's auditors during the preceding and current fiscal years.
17. A list and description of all litigation, arbitration, and pending or
threatened claims against the Company or any subsidiary. This list should
include, but not be limited to, employee matters, ERISA matters,
environmental matters, intellectual property matters and regulatory
matters.
18. Copies of all opinions of legal counsel for the Company or any of its
subsidiaries furnished during the past two years to the Company's auditors,
or the Company's lenders, or the Company or any of its shareholders,
directors or officers in connection with any matter relating to the Company
or any of its subsidiaries, or to their respective assets, operations or
existing or potential liability.
19. Copies of all communications to or from any other federal, state or local
governmental or regulatory authority relating to the Company or any of its
subsidiaries.
<PAGE>
20. A list and description of all loans and other obligations and arrangements
for borrowed money, and any collateral therefor, of the Company and each
subsidiary. Please include copies of all loan agreements, notes, security
agreements, pledges, mortgages and other documents that relate to such
loans.
21. The names, addresses, telephone numbers, fax numbers and e-mail addresses
for the Company's legal counsel and auditors.
22. Authorizations for the Company's legal counsel and auditors to discuss the
operations and affairs of the Company and its subsidiaries with Thomson
Kernaghan & Co., Ltd. and John M. Mann, legal counsel for Thomson Kernaghan
& Co. Ltd.
EXHIBIT 4.11
This Note, and the securities issuable upon the conversion of this Note, have
not been registered under the Securities Act of 1933, as amended (the "Act") or
applicable state law and may not be sold, transferred or otherwise disposed of
unless registered under the Act and any applicable state act or unless the
Company receives an opinion from counsel for the holder and is satisfied that
this Note and the underlying securities may be transferred without registration
under the Act.
CONVERTIBLE NOTE
As of November 25, 1998
$750,000 Palm Beach, Florida
FOR VALUE RECEIVED, NATIONAL BOSTON MEDICAL, INC., a Nevada corporation (the
"Company"), hereby promises to pay to the order of THOMSON KERNAGHAN & CO.
LIMITED, as Agent, or any subsequent holder of this Note (the "Payee"), at 365
Bay Street, 10th Floor, Toronto, Ontario M5H 2V2, or at such other place as may
be designated by the Payee from time to time by notice to the Company, the
principal sum of Seven Hundred Fifty Thousand Dollars ($750,000), together with
simple interest from the date hereof (the "Issuance Date") on the unpaid
principal amount at an annual rate equal to ten percent (10.0%) per annum. Such
principal and interest shall be paid in accordance with the terms of Section 1
below, in cash, or by wire transfer to such account as the Payee shall direct,
in immediately available funds and in lawful currency of the United States of
America.
1. PAYMENTS.
(a) Unless previously fully converted into Common Stock of the Company as herein
provided, the unpaid principal amount of this Note shall be payable to the Payee
in cash or Common Stock at the election of the Payee as provided herein on or
before December 31, 2001 (collectively the "Maturity Date").
(b) Interest on the unpaid principal balance of this Note at the rate of ten
percent (10.0%) per annum shall accrue from the date hereof and shall be payable
to the Payee in cash annually and such interest may, at the election of the
Payee, be payable in shares of Common Stock of the Company, the number of which
shall be equal to the product of such interest payment divided by the Conversion
Price, as defined herein, with the overage, if any, payable in cash. Interest
shall be calculated on the basis of a 365 day year.
(c) In the event that any payment of principal and/or interest hereunder becomes
due and payable on a Saturday, Sunday or other day on which commercial banks in
the State of Florida are authorized or required by law to close, then the
maturity thereof shall be extended to the next succeeding "Business Day"
(defined as any days on which national banks in the United States are open for
business); and during any such extension, interest on principal amounts payable
shall accrue and be payable at the applicable rate.
<PAGE>
(d) Company shall set aside in an escrow account to be maintained at the offices
of Mintmire & Associates, Palm Beach, Florida, a total of 5% of the gross
revenues of the Company, (or commencing April 1, 1999), a minimum amount of
$10,000 per month for nine (9) months and thereafter a minimum monthly deposit
of $25,000) which revenues shall be specifically held for the purpose of
repaying loans or advances made pursuant to this agreement, such revenues to be
retained until the total of such revenues and accrued interest equals the total
amount of any funding or advances outstanding as indebtedness which have not
been converted to registered common stock. At such time as the indebtedness is
converted to common stock or the indebtedness otherwise paid, the escrow shall
be released to Issuer.
2. RANKING OF NOTE.
Subject at all times to the subordination provisions set forth in
Section 9 hereof, this Note shall constitute senior securities of the Company
and, except as provided below, shall rank pari passu with all other indebtedness
for money borrowed by the Company and senior to any other indebtedness for money
borrowed by the Company which, by its terms shall be made expressly subject and
subordinated to this Note.
3. PREPAYMENT OF NOTE.
(a) Prior to December 31, 2001, the Company shall provide the Payee with a
notice that a prepayment event has occurred (the "Prepayment Notice"). The Payee
shall have thirty (30) days from the date of the Prepayment Notice to elect (i)
to take prepayment of the principal amount of the Note and any accrued but
unpaid interest in whole without premium or penalty or (ii) to convert in
accordance with Section 4 hereof; provided, however, that the Company may not
prepay the Note without the Payee's consent unless a registration statement
described in paragraph 4(k)(ii)(B) is effective at the time of the Prepayment
Notice and remains effective for not less than thirty (30) days thereafter.
(b) Subject at all times to the Payee's right to convert all or any portion of
this Note into Common Stock pursuant to Section 4 hereof, the principal amount
of this Note and any accrued and unpaid interest may be prepaid, at the option
of the Company, in whole or in part, without premium or penalty, at any time or
from time to time from and after that date which shall be the earlier to occur
of (i) December 31, 2001 or (ii) the date on which the Company shall register
for resale pursuant to the Securities Act of 1933, as amended (the "Act") all
"Conversion Shares" (as herein defined) issuable upon conversion of the entire
principal amount of this Note, pursuant to a Registration Statement on the
appropriate registration for ____ declared effective by the Securities and
Exchange Commission (the "SEC"). If either event set forth in this Section 3(b)
shall occur, the Company shall provide the Payee with a Prepayment Notice.
(c) Each Prepayment Notice shall specify the principal amount of this Note to be
redeemed. Each prepayment of principal of this Note shall be accompanied by the
payment of all interest accrued and unpaid to the prepayment date on the amount
so prepaid. Each such prepayment shall be made by wire transfer of immediately
available funds or by bank cashier's check payable to the Payee. Any partial
prepayment of this Note, whether optional or mandatory, shall be applied first
<PAGE>
to accrued and unpaid interest hereon, and then to the outstanding principal
amount of this Note in the inverse order of maturity.
(d) Notwithstanding anything to the contrary set forth in this Section 3, in the
event and to the extent that the Company shall provide the Payee of this Note
with a Prepayment Notice, it shall simultaneously provide to the Payee of this
Note evidence of the availability of funds to effect such prepayment; which
evidence of availability of funds shall include, without limitation, (i)
confirmation of cash or cash equivalent bank balances, (ii) an irrevocable bank
letter of credit, or (iii) a written commitment from a recognized lending
institution to effect the financing of such prepayment.
4. CONVERSION.
Subject at all times to the Company's right to prepay this Note as provided in
Section 3 hereof, the Payees of this Note shall have the following conversion
rights (the "Conversion Rights"):
(a) Voluntary Conversion. At any time or from time to time following the
Issuance Date, the Payee of this Note may elect to convert up to one hundred
(100%) percent of the original principal amount of this Note and any accrued but
unpaid interest, into shares of Common Stock of the Company, by written notice
given to the Company in accordance with the provisions of Section 4(g) hereof
(the "Conversion Notice"). In no event may the Payee of this Note effect a
conversion of less than $10,000 principal amount of this Note. Such right of
Voluntary Conversion shall be effected by the surrender of this Note to the
Company for conversion at any time during normal business hours at the office of
the Company, accompanied (i) by the Conversion Notice, (ii) if so required by
the Company, by instruments of transfer, in a form satisfactory to the Company,
duly executed by the registered Payee or by his duly authorized attorney and
(iii) transfer tax stamps or funds therefore, if required pursuant to Section
4(f) herein.
(b) Automatic Conversion. Prior to the effectiveness of the Form 10SB to be
filed, the Company shall not have the right to compel the Payee of Note to
convert such Note into Common Stock or any other securities of the Company.
Effective as of December 31, 2001, and provided that a registration statement
described in paragraph 4(k)(ii)(B) is then effective, to the extent not
previously converted by the Payee, all remaining principal amount of this Note,
together with all accrued interest hereon, shall automatically and without
further action on the part of such Payee, at the election of Company, be paid in
cash or converted into Common Stock of the Company at the Conversion Price then
in effect.
(c) Conversion Price. Subject to adjustment from time to time as provided in
Section 4(d) below, the term "Conversion Price" shall mean the lower of (i)
$0.625 or (ii) 75% of the average closing bid price of the common stock for the
three (3) trading day preceding November 25, 1998.
(d) Adjustments of Conversion Price. The Conversion Price in effect from time to
time shall be, subject to adjustment in accordance with the provisions of this
Section 4(d).
<PAGE>
(i) Adjustments for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the Issuance Date, effect a stock split of
the outstanding Common Stock, the Conversion Price in effect immediately prior
to the stock split shall be proportionately decreased. If the Company shall at
any time or from time to time after the Issuance Date, combine the outstanding
shares of Common Stock, the Conversion Price in effect immediately prior to the
combination shall be proportionately increased. Any adjustments under this
Section 4(d)(i) shall be effective at the close of business on the date the
stock split or combination occurs.
(ii) Adjustments for Certain Dividends and Distributions. If the Company
shall at any time or from time after the Issuance Date, make or issue or set a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in shares of Common Stock, then, and in
each event, the Conversion Price in effect immediately prior to such event shall
be decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Conversion Price then in effect by a fraction;
(A) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date; and
(B) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or
distribution.
(iii) Adjustments for Other Dividends and Distributions. If the Company
shall at any time or from time to time after the Issuance Date, make or issue or
set a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in other than shares of Common
Stock, then, and in each event, an appropriate revision to the Conversion Price
shall be made and provision shall be made (by adjustments of the Conversion
Price or otherwise) so that the Payee of this Note shall receive upon
conversions thereof, in addition to the number of shares of Common Stock
receivable thereon, the number of securities of the Company which they would
have received had this Note been converted into Common Stock on the date of such
event and had thereafter, during the period from the date of such event to and
including the Conversion Date, retained such securities (together with any
distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 4(c)(iii) with
respect to the rights of the Payees of the Note.
(iv) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon conversion of this Note at any time or from time to
time after the Issuance Date shall be changed into the same or a different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Sections 4(d)(i), (ii)
and (iii), or a reorganization, merger, consolidation, or sale of assets
provided for in Section 4(d)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall by made and provisions shall be made (by
<PAGE>
adjustments of the Conversion Price of otherwise) so that the Payee of this Note
shall have the right thereafter to convert such Note into the kind and amount of
shares of stock and other securities receivable upon such reclassification,
exchange, substitution or other change, by holders of the number of shares of
Common Stock into which such Note might have been converted immediately prior to
such reclassification, exchange, substitution or other change, all subject to
further adjustment as provided herein.
(v) Adjustments for Reorganization, Merger, Consolidation or Sales of
Assets. If at any time or from time to time after the Issuance Date there shall
be a capital reorganization of the Company (other than by way of a stock split
or combination of shares or stock dividends or distributions provided for in
Section 4(d)(i), (ii) and (iii), or a reclassification, exchange or substitution
of shares provided for in Section 4(d)(iv)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties or assets to any other person, then as a part of
such reorganization, merger, consolidation, or sale, an appropriate revision to
the Conversion Price shall be made and provision shall be made (by adjustments
of the Conversion Price or otherwise) so that the Payee of this Note shall have
the right thereafter to convert this Note into the kind and amount of shares of
stock and other securities or property of the Company or any successor
corporation resulting from such reorganization, merger, consolidation, or sale,
to which a holder of Common Stock deliverable upon conversion of such shares
would have been entitled upon such reorganization, merger, consolidation, or
sale. In any such case, appropriate adjustment shall be made in the application
of the provisions of this Section 4(d)(v) with respect to the rights of the
Payees of this Note after the reorganization, merger, consolidation, or sale to
the end that the provisions of this Section 4(c)(v) (including any adjustment in
the Conversion Price then in effect and the number of shares of stock or other
securities deliverable upon conversion of this Note) shall be applied after that
event in as nearly an equivalent manner as may be practicable.
(d) No Impediment. The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith, assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the Payees of the Note set forth in this
Section 4 against impairment.
(e) Certificate as to Adjustments. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of the Note pursuant to this Section 4, the Company at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish notice to the Payee of this Note, a
certificate setting forth such adjustment and readjustment, showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon written request of the Payee of this Note, at any time, furnish or
cause to be furnished to such Payee a like certificate setting forth such
adjustments and readjustments, the applicable Conversion Price in effect at the
time and the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon the conversion
of such Note. Notwithstanding the foregoing, the Company shall not be obligated
to deliver a certificate unless such certificate would reflect an increase or
<PAGE>
decrease of at least one percent (1%) of such adjusted amount.
(f) Issue Taxes. The Company shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect
of any issue or delivery of shares of Common Stock on conversion of this Note
pursuant hereto; provided, however, that the Company shall not be obligated to
pay any transfer taxes resulting from any transfer requested by any Payee in
connection with any such conversion.
(g) Notices and Delivery of Shares. All notices and other communications
hereunder shall be in writing and shall be deemed given (i) on the same date, if
delivered personally or by facsimile by not later than 7:00 p.m. Florida time
(provided, that a copy of such facsimile shall be simultaneously sent to Donald
F. Mintmire, Esq. at (561)659-5371, or (ii) three business days following being
mailed by certified or registered mail, postage prepaid, return-receipt
requested, addressed to the party in accordance with Section 7 hereof. Not later
than seven (7) Business Days following receipt of notice of conversion as
provided herein (the Delivery Date@), the Company shall deliver to the Payees of
this Note, against delivery of this Note surrendered for conversion,
certificates evidencing all shares of Common Stock into which this Note shall be
converted.
(h) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of the Note. In lieu of any fractional shares to which the Payee
would otherwise be entitled, the Company shall pay cash equal to the product of
such fraction multiplied by the Conversion Price of one share of the Company's
Common Stock on the applicable Conversion Date.
(i) Reservation of Common Stock. The Company shall at all times reserve and keep
available, out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Note, the full number of shares
deliverable upon conversion of all the Note from time to time outstanding. The
Company shall, from time to time in accordance with the Nevada General
Corporations Law, as amended, increase the authorized number of shares of Common
Stock if at any time the unissued number of authorized shares shall not be
sufficient to permit the conversion of all of the Note at the time outstanding.
In such connection, the Company shall hold a special meeting of stockholders not
later than 120 days after any date in which the Company shall have insufficient
shares of Common Stock so reserved for the purpose of authorizing additional
shares of Common Stock.
(j) Retirement of Note. Conversion of this Note shall be deemed to have been
effected on the applicable Conversion Date. The converting holder shall be
deemed to have become a stockholder of record of the Common Stock on the
applicable Conversion Date. Upon conversion of only a portion of this Note, the
Company shall issue and deliver to such holder, at the expense of the Company,
against receipt of the original Note delivered for partial cancellation, a new
Note representing the unconverted portion of this Note so surrendered and Common
Stock equal to the portion converted.
(k) Regulatory Compliance.
(i) If any shares of Common Stock to be reserved for the purpose of
conversion of this Note require registration or listing with or approval of any
<PAGE>
government authority, stock exchange or other regulatory body under any federal
or state law or regulation or otherwise before such shares may be validly issued
or delivered upon conversion, the Company shall, at its sole cost and expense,
in good faith and as expeditiously as possible, endeavor to secure such
registration, listing or approval, as the case may be.
(ii) The shares of Common Stock issuable upon the election to convert shall
be Rule 144 restricted shares (the "Restricted Securities"). After issuance, the
Company agrees to use its best efforts to assist holder in registering the
Restricted Securities or to register the Restricted Securities under the Act
subject to the rules, regulations, and other provisions of said Act.
(iii) The holder of such shares shall have the following registration
rights:
(A) The Company shall use the best effort to file a Form 10SB with the
Securities and Exchange Commission on or before April 1,1999. To insure
performance hereunder, Company shall set aside in escrow with Thomson
Kernaghan & Co. Ltd. as the escrow holder, a total amount of 7,500,000
shares of its Common Stock. In the event Company fails to file its Form
10SB on or before June 1, 1999, Payee shall withdraw 3,750,000 shares of
the stock from escrow in full and final satisfaction of $ 375,000 of this
indebtedness. In the event Company fails to file its Form 10SB on or before
July 1, 1999, Payee shall withdraw an additional 1,875,000 shares of the
stock from escrow in full and final satisfaction of $ 187,500 of this
indebtedness. In the event Company fails to file its Form 10SB on or before
August 1, 1999, Payee shall withdraw the remaining shares of the stock from
escrow in full and final satisfaction of the balance of this indebtedness.
(B) The Company shall file a Registration Statement under the
Securities Act of 1933, as amended, as soon as possible following the
effective date of the Form 10SB to be filed, registering the shares of
Common Stock into which the Note is convertible. The Company shall cause
the registration statement to remain effective until thirty (30) days after
the Debentures nave been converted or repaid.
In the event the Company does not file such registration statement within ninety
(90) days after the effective date of the Form 10SB, the Company agrees to pay a
penalty of one percent (1%) of the outstanding amount of this note per month
until the Registration is filed. The Company shall not be responsible for delays
caused by reasons not under the control of the Company;
(C) The Company's obligation to include Restricted Securities in a
Company's Registration Statement pursuant to Section 4(k)(iii)(A) shall be
subject to the following limitations:
(1) The Company shall not be obligated to include any Restricted
Securities in a registration statement filed on Form S-4, Form S-8 or
such other similar successor forms then in effect under the Securities
Act.
(2) If a Company Registration Statement involves an underwritten
offering and the managing underwriter advises the Company in writing
that in its opinion, the number of securities requested to be included
in such Company Registration Statement exceeds the number which can be
sold in such offering without adversely affecting the offering, the
Company shall include in such Company Registraion Statement the number
<PAGE>
of such securities which the Company is so advised can be sold in such
offering without adversely affecting the offering, determined as
follows:
(i) first, the securities proposed by the Company to be
sold for it own account, and
(ii) second, any Restricted Securities requested to be
included in such registration and any other securities of
the Company in accordance with the priorities, if and then
existing among the holders of such securities pro rata among
the holders thereof requesting such registration on the
basis of the number of shares of such securities requested
to be included by such holders.
(4) The Company shall not be obligated to include Restricted
Securities in more than one (1) Company Registration Statement.
(D) To the extent holder's Restricted Securities are intended to be
included in a Company Registration Statement, holder may include any of its
Restricted Securities in such Company Registration Statement pursuant to
this Agreement only if holder furnishes to the Company in writing, within
ten (10) business days after receipt of a written request therefor, such
information specified in Item 507 of Regulation S-K under the Act or such
other information as the Company may reasonably request for use in
connection with the Company Registration Statement or Prospectus or
preliminary Prospectus included therein and in any application to the NASD.
Holder as to which the Company Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make all information previously furnished to the
Company by holder not materially misleading.
(l) Limitations on Amount of Conversion. Notwithstanding anything contained in
this Note to the contrary, in no event shall any Payee of Note be entitled or
required to convert this Note in excess of that number of shares of Common Stock
which, upon giving effect to such conversion, would cause the aggregate number
of shares of Common Stock beneficially owned by the Payee and its affiliates to
exceed 4.9% of the total outstanding shares of the Company's Common Stock
immediately following such conversion. For purposes of the foregoing proviso,
the aggregate number of shares of Common Stock beneficially owned by the Payee
and its affiliates shall include the number of shares of Common Stock issuable
upon conversion of this Note with respect to which the determination of such
proviso is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (i) conversion of the remaining, unconverted
portion of the Note beneficially owned by such Payee and its affiliates, and
(ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company (including without limitation any warrants)
which are beneficially owned by the Payee and its affiliates and which are
subject to a limitation on conversion or exercise analogous to the limitation
contained herein. Except as set forth in the preceding sentence, for purposes of
this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. Any Payee of
Note may waive the foregoing limitations set forth in this paragraph by
providing the Company upon not less than 30 days with prior written notice (with
such waiver taking effect only upon the expiration of such 30-day notice
period).
5. EVENTS OF DEFAULT.
<PAGE>
The occurrence and continuance of any one or more of the following events is
herein referred to as an Event of Default:
(a) If the Company shall default in converting the applicable principal amount
of this Note into Common Stock and delivering stock certificates in respect of
such conversion within ten (10) Business Days from the Company's receipt of the
applicable notice of conversion pursuant to the provisions hereof, whether on
the Maturity Date or otherwise; or
(b) If the Company shall default in the payment of any installment of interest
on this Note when payable in accordance with the terms thereof for more than ten
(10) calendar days after the same shall become due if the Payee has not elected
to take such interest in Common Stock; and if the Payee has elected to take such
interest in Common Stock, if the Company shall default in delivering stock
certificates in respect of such election within ten (10) Business Days from the
Company's receipt of the notice of such election; or
(c) If the Company shall not, at the time of receipt of a Conversion Notice
hereunder, have a sufficient number of authorized and unissued shares of its
Common Stock available for issuance to the Payee of this Note upon conversion of
all or any portion of this Note in accordance with the terms hereof, and such
default shall not have been remedied within sixty (60) calendar days from the
date of such Conversion Notice; or
(d) If the Company shall default in the performance of or compliance with any of
its material covenants or agreements contained herein and such default shall not
have been remedied within thirty (30) calendar days after written notice thereof
shall have been delivered to the Company by the Payee of this Note in accordance
with the notice provisions herein; or
(e) If any representation or warranty made in writing by or on behalf of the
Company in connection with the transactions contemplated hereby shall prove to
have been false or incorrect in any material respect on the date as of which
made; or
(f) If the Company or any of its "Significant Subsidiaries" (as defined herein)
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts as they become due, or shall file a voluntary
petition in bankruptcy or shall have an order for relief under the Bankruptcy
Act granted against it or them, or shall be adjudicated a bankrupt or insolvent,
or shall file any petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or shall file any
answer admitting or not contesting the material allegations of a petition filed
against the Company or any of its Significant Subsidiaries in any such
proceeding, or shall seek or consent to or acquiesce in the appointment of any
trustee, custodian, receiver or liquidator of the Company or of all or any
substantial part of the properties of the Company or any of its Significant
Subsidiaries, or the Company or its directors shall take any action looking to
the dissolution or liquidation of the Company or any of its Significant
Subsidiaries. For purposes of this Section 5(f), the term Significant Subsidiary
shall mean and include any other person, firm or corporation (i) more than 50%
of the common stock or equity interests of which are owned of record by the
Company or any Subsidiary of the Company, and (ii) the net income before taxes
or total assets of which represent more than 15% of the consolidated net income
<PAGE>
before taxes or consolidated assets of the Company and all of its Subsidiaries;
or
(g) If, within sixty (60) days after the commencement of any proceeding against
the Company or any Significant Subsidiary seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such proceeding
shall not have been dismissed, or if, within sixty (60) days after the
appointment, without the consent or acquiescence of the Company or any
Significant Subsidiary, of any trustee, receiver or liquidator of the Company or
any Significant Subsidiary or of all or any substantial part of the properties
of the Company or any Significant Subsidiary, such appointment shall not have
been vacated.
6. REMEDIES ON DEFAULT; ACCELERATION.
Upon the occurrence and during the continuance of an Event of Default, the
entire unpaid balance of principal and accrued interest on this Note may be
accelerated and declared to be immediately due and payable by the Payee. Unless
waived by the written consent of the Payee, such Payee may proceed to protect
and enforce its rights by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein, or for an injunction against a violation of any of the terms hereof, or
in aid of the exercise of any power granted hereby or by law. Upon the
occurrence of an Event of Default, the Company agrees to pay to the Payee of
this Note such further amount as shall be sufficient to cover the cost and
expense of collection, including, without limitation, reasonable attorneys' fees
and expenses. No course of dealing and no delay on the part of the Payee of this
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such Payee's rights, powers and remedies. No right, power
or remedy conferred hereby upon the Payee hereof shall be exclusive of any other
right, power or remedy referred to herein nor now or hereafter available at law,
in equity, by statute or otherwise.
7. NOTICES.
All notices, requests, demands or other communications hereunder shall be in
writing and personally addressed or sent by telecopier or by registered or
certified mail, return receipt requested, postage pre-paid, addressed or
telecopied as follows or to such other address or telecopier number of which
notice has been given pursuant hereto:
If to the Company: National Boston Medical, Inc.
43 Taunton Green, 3rd Floor
Taunton, MA 02780
Attn: Dan Hoyng
Telephone: (800) 807-2259
Fax:: (508) 880-5208
with copy to: Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
<PAGE>
Attn: Donald F. Mintmire, Esq.
Telephone (561) 832-5696
Fax (561) 659-5371
If to the Payee: Thomson Kernaghan & Co. Ltd., as Agent
365 Bay Street, Tenth Floor
Toronto, Ontario M5H 2V2, Canada
Attention: Mark E. Valentine
Telephone (416) 860-6130
Fax (416) 860-6140, or
to such Payee at the address set forth on the records
of the Company.
In addition, copies of all such notices or other communications shall be
concurrently delivered by the person giving the same to each person who has been
identified to the Company by such Payee as a person who is to receive copies of
such notices.
8. GOVERNING LAW.
This Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Florida, without giving effect to conflict of law
principles; provided, however that if any provision of this Note is
unenforceable under Florida law but is enforceable under the laws of the state
of Delaware, then that provision shall be governed by, and construed and
interpreted in accordance with, the laws of the state of Delaware.
9. SUBORDINATION TO SENIOR DEBT.
(a) Payment of the principal of and interest on this Note is subordinated, to
the extent and in the manner provided herein, to the prior payment of all
indebtedness of the Company and/or all Subsidiaries of the Company, for money
borrowed or other obligations which is now or may hereafter be owed
(collectively, "A Senior Debt") to any bank, commercial finance company, factor,
insurance company or other institution the lending activities of which are
regulated by law (individually, a "Senior Lender" and collectively, "Senior
Lenders"), which may, hereafter on any one or more occasions provide financing
to the Company or any of its Subsidiaries, secured by liens on any of the assets
and properties of the Company and/or any of its Subsidiaries (individually and
collectively, an "Institutional Borrower").
(b) Upon any payment or distribution of assets or securities of the
Institutional Borrower, as the case may be, of any kind or character, whether in
cash, property or securities, upon any dissolution or winding up or total or
partial liquidation or reorganization of the Institutional Borrower, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts payable under Senior Debt shall first be paid in full
in cash, or payment provided for in cash or cash equivalents, before the Payee
hereof shall be entitled to receive any payment on account of principal of or
interest on this Note. Before any payment may be made by the Institutional
Borrower of the principal of or interest on this Note upon any such dissolution
or winding up or liquidation or reorganization, any payment or distribution of
assets or securities of the Institutional Borrower of any kind of character,
<PAGE>
whether in cash, property or securities, to which the Payee hereof would be
entitled, except for the provisions of this Section 9, shall be made by the
Institutional Borrower or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, directly to
the holders of Senior Debt or their representatives to the extent necessary to
pay all such Senior Debt in full after giving effect to any concurrent payment
or distribution to the holders of such Senior Debt.
(c) Upon the happening of any default in payment of the principal of or interest
on any Senior Debt, then, unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment in cash,
property or securities, by set-off or otherwise, shall be made or agreed to be
made by the Institutional Borrower on account of the principal of or interest on
this Note.
(d) Upon the happening of an event of default (other than under circumstances
when the terms of Section 9(c) above are applicable) with respect to any Senior
Debt pursuant to which the Payee thereof is entitled under the terms of such
Senior Debt to accelerate the maturity thereof, and upon written notice thereof
given to each of the Institutional Borrower and the Payee of this Note by such
holder of Senior Debt (A Payment Notice@), then, unless and until such event of
default shall have been cured or waived or shall have ceased to exist, no action
shall or may be taken for collection of any amounts under this Note, and no
direct or indirect payment in cash, property or securities, by set-off or
otherwise, shall be made or agreed to be made by the Institutional Borrower an
account of the principal of or interest on this Note until such Senior Debt has
been paid in full accordance with its terms.
(e) In the event that, notwithstanding the provisions of this Section 9, any
payment shall be made on account of the principal of or interest on this Note in
contravention of such provisions, then such payment shall be held for the
benefit of, and shall be paid over and delivered to, the holders of such Senior
Debt remaining unpaid to the extent necessary to pay in full in cash or cash
equivalents the principal of and interest on such Senior Debt in accordance with
its terms after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
(f) Nothing contained in this Section 9 shall
(i) impair the conversion rights of the Payee hereof referred to in
Section 4 above,
(ii) impair, as between the Company and the Payee of this Note, the
obligation of the Company, which is absolute and unconditional, to pay to
the Payee hereof principal and interest as the same shall become due and
payable, or
(iii) prevent the Payee hereof from exercising all rights, powers and
remedies otherwise provided herein or by applicable law, all subject to the
express limitations provided herein.
(g) Upon the occurrence of an Event of Default, if any Senior Debt shall then be
outstanding, no acceleration of the maturity of this Note shall be effective
until the earlier of (i) ten (10) days shall have passed following the date of
delivery to the Institutional Borrower by a Senior Lender(s) of written notice
<PAGE>
written notice of acceleration of any Senior Debt, or (ii) the maturity of any
then outstanding Senior Debt shall have been accelerated by reason of a default
hereon. The Company may pay the Payee hereof any defaulted payment and all other
amounts due following any such acceleration of the maturity of this Note if this
Section 9 would not prohibit such payment to be made at that time.
(h) Upon payment in full of all Senior Debt, the Payee of this Note shall be
subrogated to the rights of the holder or holders of Senior Debt to receive all
payments or distributions applicable on such Senior Debt to the extent of the
prior application thereto of moneys or other assets which would have been
received in respect of this Note, but for these subordination provisions, until
the principal of, and interest on, this Note shall have been paid in full.
(i) The Payee, by accepting this Note
(i) shall be bound by all of the foregoing subordination provisions;
(ii) agrees expressly for the benefit of the present and future
holders of Senior Debt that this Note is subject to the foregoing
subordination provisions;
(iii) authorizes such persons as shall be designated by all holders of
Senior Debt at any given time, on his or its benefit to execute and deliver
such agreements, assignments, proofs of claim and other documents
appropriate to effectuate the foregoing subordination provisions; and
(iv) hereby appoints the person so designated his or its
attorney-in-fact for such purpose.
(j) The foregoing subordination provisions shall be for the benefit of all
holders of Senior Debt from time to time outstanding, and each of such holders
may proceed to enforce such provisions either directly against the Payee hereof
or in any other manner provided by law.
10. PERMITTED PAYMENTS.
Notwithstanding the provisions of Section 9 of this Note, and provided that no
default or event of default (or event which, with the passage of time or giving
of notice or both) has occurred, will occur as a result of the "Permitted
Payment" (herein defined), or will occur with the passage of time or giving of
notice or both, under any document or instrument evidencing such Senior Debt,
the Company may pay to the Payee, and the Payee may accept from the Company, the
principal payments of, and/or interest payments on, the outstanding principal
amount of this Note when due on an unaccelerated basis (herein, "Permitted
Payments"); it being understood and agreed by the Payee by accepting this Note
that neither:
(a) the payment terms set forth in Section l of this Note;
(b) the subordination provisions contained in Section 9 of this Note, nor
(c) the provisions of this Section 10 of this Note, may be modified or amended
without the prior written consent of each and every holder of Senior Debt.
<PAGE>
11. SUCCESSORS AND ASSIGNS.
This Note shall be binding upon and inure to the benefit of the Company and the
Payee hereof and their respective successors and permitted assigns; provided,
however, that the Company may not transfer or assign any of its rights or
obligations hereunder without the prior written consent of the Payee hereof; and
provided, further, that transfer or assignment by the Payee is in accordance
with the rules governing Restricted Securities.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its duly
authorized officers as of the date first set forth above.
NATIONAL BOSTON MEDICAL, INC.
By: /s/ Dan Hoyng
-----------------------
Dan Hoyng
Attest: /s/ Amy L. Christianson
-----------------------------
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of November 25, 1998, between National Boston
Medical, Inc., a Nevada corporation (the "Company"), and THOMSON KERNAGHAN &
COMPANY LIMITED, ("THOMSON")
W I T N E S S E T H:
WHEREAS, THOMSON wishes to acquire certain warrants of the Company more
particularly described below; and
WHEREAS, the Company wishes to issue such warrants to Thomson pursuant to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises, the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant.
The Company hereby grants THOMSON, (the "Holder") the following:
a. The right to purchase, at any time from the date of the issuance until
the later of 5:00 PM Eastern Standard Time on November 25, 1999, or the
thirtieth day following the effective date of a registration statement under the
Securities Act of 1933 registering the shares of Common Stock underlying this
Warrant (the "Warrant Exercise Term"), 200,000 shares (the "Shares") of Common
Stock, $0.0001 par value per share (the "Common Stock"), of the Company (subject
to adjustment as provided in Section 11 hereof) upon payment of $0.625 per Share
(the "Warrant") in lawful funds of the United States of America.
2. Warrant Certificates.
The warrant certificates for the Warrant (the "Warrant Certificate) to be
delivered pursuant to this Agreement shall be in the forms set forth as Exhibit
A, attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions and other variations as required or permitted by this
Agreement.
3. Exercise of Warrants.
In case the Holder of the warrants granted herein shall desire to exercise
the Warrant in whole or in part, the Holder shall surrender the appropriate
warrant, with the form of exercise notice on the last pages hereof (the "Form of
Exercise") duly executed by the Holder, to the Company, accompanied by payment
of the applicable Exercise Price.
(a) The warrant granted herein may be exercised in whole or in part
but not for fractional Shares. In case of the exercise in part only, the
Company will deliver to the Holder a new warrant of like tenor in the name
of the Holder evidencing the right to purchase the number of Shares as to
<PAGE>
which the applicable warrant has not been exercised.
(b) As used herein "Date of Exercise" shall mean the date that the
advance copy of the Form of Exercise set forth herein is sent by facsimile
to the Company, provided that the original warrant and original Form of
Exercise are received by the Company within three (3) business days. If the
Holder has not sent advance notice by facsimile, the Date of Exercise shall
be the date the original Form of Exercise is received by the Company.
4. Covenants of the Company.
The Company hereby covenants and agrees that prior to the expiration of the
Warrant by exercise or by their respective terms:
(a) The Company shall at all times reserve and keep available, out of
its authorized and unissued share capital, solely for the purpose of
providing for the exercise, forthwith upon the request of the Holder of the
warrants then outstanding and in effect, such number of shares of Common
Stock, as shall, from time to time, be sufficient for the exercise of the
warrants granted by this Agreement. The Company shall, from time to time,
in accordance with the laws of the State of Florida, increase the
authorized amount of its share capital if at any time the number of shares
of Common Stock remaining unissued and unreserved for other purposes shall
not be sufficient to permit the exercise of the warrants then outstanding
and in effect.
(b) The Company covenants and agrees that all shares that may be
issued upon the exercise of the rights represented by the Warrant will,
upon issuance, be validly issued, fully paid and non-assessable, and free
from all taxes, liens and charges with respect to the issue thereof.
5. Loss, Theft, Destruction or Mutilation.
In case the Warrant shall become mutilated or defaced or be destroyed, lost
or stolen, the Company shall execute and deliver a new warrant (i) in exchange
for and upon surrender and cancellation of such mutilated or defaced warrant or
(ii) in lieu of and in substitution for such warrant so destroyed, lost, or
stolen, upon the Holder of such warrant filing with the Company such evidence
satisfactory to it that such warrant has been so lost or stolen and of the
ownership thereof by the Holder; provided, however, that, in either case, the
Company shall be entitled, as a condition to the execution and delivery of such
new warrant, to demand indemnity satisfactory to it and payment of expenses and
charges incurred in connection with the delivery of such new warrant, and may
demand a bond from the Holder. Any warrant so surrendered to the Company shall
be canceled.
6. Record Owner.
At the time of the surrender of the Warrant, together with the Form of
Exercise properly executed and payment of the applicable Exercise Price, the
person exercising such warrant shall be deemed to be the Holder of record of the
Common Stock deliverable upon such exercise, in whole or in part,
notwithstanding that the stock transfer books of the Company shall then be
<PAGE>
closed or that certificates representing such securities shall not then be
actually delivered to such person.
7. Mailing of Notices, etc.
All notices and other communications from the Company to the Holder of the
Warrant shall be mailed by first-class registered or certified mail, return
receipt requested, postage prepaid, to the Holder at the address set forth in
the records of the Company, or to such other address furnished to the Company in
writing from time to time by the Holder of such warrants in accordance with this
Section 7.
8. Registration Under the Securities Act of 1933, as amended, and Transfers.
a. Neither the Warrant nor the Shares underlying each of them have been
registered under the Securities Act of 1933, as amended (the "Act"). Unless and
until registered under the Act, such warrants and all replacement warrants shall
bear the following legend:
This Warrant, and the securities issuable upon the exercise of this
Warrant, have not been registered under the Securities Act of 1933, as
amended (the "Act") or applicable state law and may not be sold,
transferred or otherwise disposed of unless registered under the Act
and any applicable state act or unless the Company receives an opinion
of counsel for the holder and is satisfied that this Warrant and the
underling securities may be transferred without registration under the
Act.
The Shares issuable upon exercise of such warrants shall be Rule 144
restricted shares (the "Restricted Securities"). After issuance of the Shares,
Company agrees to use its best efforts to assist Holder in registering the
Shares or to register the Shares under the Act subject to the rules,
regulations, and other provisions of said Act.
The Company shall use the best effort to file a Form 10SB with the
Securities and Exchange Commission on or before April 1,1999. The Company shall
file a Registration Statement under the Securities Act of 1933, as amended, as
soon as possible following the effective date of the Form 10SB to be filed,
registering the shares of Common Stock underlying this Warrant. The Company
shall cause the registration statement to remain effective until the this
Warrant has expired, or until thirty (30) days after this .Warrant has been
fully exercised.
b. No sale, transfer, assignment or other disposition of the warrants
granted herein shall be effective unless the Payee or any subsequent permitted
assignee shall provide the Company with (i) an original form of assignment (the
"Form of Assignment") set forth on the last pages hereof, (ii) the original
warrant and (iii) an opinion of counsel for the Payee or such subsequent
permitted assignee, in a form reasonably satisfactory to the Company, stating
that the warrant and the underlying securities may be transferred without
registration under the Act. Upon acceptance of same for transfer, the Company
shall execute and deliver a new warrant in exchange for the one surrendered or
like tenor in the name of the permitted assignee and enter such permitted
assignee on the books of the Company as the registered holder.
<PAGE>
9. Piggyback Registration.
a. At any time that the Company proposes to file a Company registration
statement on Form S-1, or other appropriate registration form, the Company shall
cause to be included in such registration statement any securities issued or
subject to issuance in this transaction; provided, however, that if, at any time
after giving written notice of its intention to register any securities, the
Company shall determine for any reason not to register or to delay registration
of holder's Restricted Securities, the Company may, at its election, give
written notice of such determination to Holder and, thereupon:
(i) in the case of a determination not to register such other
securities, shall be relieved of its obligation to register Holder's
Restricted Securities in connection with such registration (but not from
its obligation to pay the registration expenses in connection therewith),
and
(ii) in the case of a delay in registering, shall be permitted to
delay registering Holder's Restricted Securities for the same period as the
delay in registering such other securities.
b. The Company's obligation to include Restricted Securities in a Company's
Registration Statement pursuant to Section 10(a) shall be subject to the
following limitations:
(i) The Company may elect, at its sole option and for any reason, not
to register Holder's Restricted Shares, provided however, that this right
is limited to one (1) time and relative to one (1) particular Company
Registration Statement.
(ii) The Company shall not be obligated to include any Restricted
Securities in a registration statement filed on Form S-4, Form S-8 or such
other similar successor forms then in effect under the Securities Act.
(iii) If a Company Registration Statement involves an underwritten
offering and the managing underwriter advises the Company in writing that
in its opinion, the number of securities requested to be included in such
Company Registration Statement exceeds the number which can be sold in such
offering without adversely affecting the offering, the Company shall
include in such Company Registration Statement the number of such
securities which the Company is so advised can be sold in such offering
without adversely affecting the offering, determined as follows:
(A) first, the securities proposed by the Company to be sold for
it own account, and
(B) second, any Restricted Securities requested to be included in
such registration and any other securities of the Company in
accordance with the priorities, if and then existing among the holders
of such securities pro rata among the holders thereof requesting such
registration on the basis of the number of shares of such securities
requested to be included by such holders.
<PAGE>
(iv) The Company shall not be obligated to include Restricted
Securities in more than one (1) Company Registration Statement.
(c) To the extent Holder's Restricted Securities are intended to be
included in a Company Registration Statement, Holder may include any of its
Restricted Securities in such Company Registration Statement pursuant to this
Agreement only if Holder furnishes to the Company in writing, within ten (10)
business days after receipt of a written request therefor, such information
specified in Item 507 of Regulation S-K under the Act or such other information
as the Company may reasonably request for use in connection with the Company
Registration Statement or Prospectus or preliminary Prospectus included therein
and in any application to the NASD. Holder as to which the Company Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make all information previously
furnished to the Company by Holder not materially misleading.
11. Antidilution Provision.
The applicable Exercise Price in effect from time to time shall be, subject
to adjustment in accordance with the provisions of this Section 11.
(a) Adjustments for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the date hereof, effect a stock split of the
outstanding Common Stock, the applicable Exercise Price in effect immediately
prior to the stock split shall be proportionately decreased. If the Company
shall at any time or from time to time after the date hereof, combine the
outstanding shares of Common Stock, the applicable Exercise Price in effect
immediately prior to the combination shall be proportionately increased. Any
adjustments under this Section 11(a) shall be effective at the close of business
on the date the stock split or combination occurs.
(b) Adjustments for Certain Dividends and Distributions. If the Company
shall at any time or from time after the date hereof, make or issue or set a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in shares of Common Stock, then, and in
each event, the applicable Exercise Price in effect immediately prior to such
event shall be decreased as of the time of such issuance or, in the event such a
record date shall have been fixed, as of the close of business on such record
date, by multiplying the applicable Exercise Price then in effect by a fraction;
(i) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date; and
(ii) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or
distribution.
(c) Adjustments for Other Dividends and Distributions. If the Company shall
at any time or from time to time after the date hereof, make or issue or set a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in other than shares of Common Stock,
then, and in each event, an appropriate revision to the applicable Exercise
<PAGE>
Price shall be made and provision shall be made (by adjustments of the Exercise
Price or otherwise) so that the Holder of the warrants shall receive upon
exercise thereof, in addition to the number of shares of Common Stock receivable
thereon, the number of securities of the Company which they would have received
had the warrant been exercised into Common Stock on the date of such event and
had thereafter, during the period from the date of such event to and including
the date hereof, retained such securities (together with any distributions
payable thereon during such period), giving application to all adjustments
called for during such period under this Section 11(c) with respect to the
rights of the holders of the Warrant.
(d) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon exercise of Warrant at any time or from time to time
after the date hereof shall be changed into the same or a different number of
shares of any class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than by way of a stock split or combination of
shares or stock dividends provided for in Sections 11(a), (b) and (c), or a
reorganization, merger, consolidation, or sale of assets provided for in Section
11(e)), then, and in each event, an appropriate revision to the applicable
Exercise Price shall by made and provisions shall be made (by adjustments of the
Exercise Price of otherwise) so that the Holder of the Warrant shall have the
right thereafter to exercise such warrants into the kind and amount of shares of
stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common Stock
into which such warrant might have been exercised immediately prior to such
reclassification, exchange, substitution or other change, all subject to further
adjustment as provided herein.
(e) Adjustments for Reorganization, Merger, Consolidation or Sales of
Assets. If at any time or from time to time after the date hereof there shall be
a capital reorganization of the Company (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in
Section 11(a), (b), and (c), or a reclassification, exchange or substitution of
shares provided for in Section 11(d)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties or assets to any other person, then as a part of
such reorganization, merger, consolidation, or sale, an appropriate revision to
the applicable Exercise Price shall be made and provision shall be made (by
adjustments of the Exercise Price or otherwise) so that the holder of The
Warrant shall have the right thereafter to exercise such warrants into the kind
and amount of shares of stock and other securities or property of the Company or
any successor corporation resulting from such reorganization, merger,
consolidation, or sale, to which a holder of Common Stock deliverable upon
exercise of such shares would have been entitled upon such reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Section 11(e) with respect
to the rights of the holders of The Warrant after the reorganization, merger,
consolidation, or sale to the end that the provisions of this Section 11(e)
(including any adjustment in the applicable Exercise Price then in effect and
the number of shares of stock or other securities deliverable upon exercise of
such warrant) shall be applied after that event in as nearly an equivalent
manner as may be practicable.
11. Laws of the State of Florida.
<PAGE>
The Warrant shall be governed by, interpreted under and construed in all
respects in accordance with, the laws of the State of Florida, irrespective of
the place of domicile or residence of any party; provided, however that if any
provision of this Warrant is unenforceable under the laws of the state of
Florida but is enforceable under the laws of the state of Delaware, then that
provision shall be governed by, interpreted under and construed in all respect
in accordance with, the laws of the state of Delaware.
12. Entire Agreement and Modification.
The Company and the Holder hereby represent and warrant that this Warrant
Agreement and the Warrant issued hereunder are intended to and do contain and
embody all of the understandings and agreements, both written and oral, of the
parties hereto with respect to the subject matter of the warrants granted
herein, and that there exists no oral agreement or understanding, express or
implied, whereby the absolute, final and unconditional character and nature of
this Warrant Agreement or the Warrant shall be in any way invalidated, empowered
or affected. A modification or waiver of any of the terms, conditions or
provisions of this Warrant Agreement and the Warrant shall be effective only if
made in writing and executed with the same formality as these documents.
13. Controlling Document.
Notwithstanding anything contained herein, in the event of conflict between
any provision contained herein and those contained in the Warrant, the
provisions contained in this Agreement shall control.
The Warrant will become wholly void and of no effect and the rights
evidenced hereby will terminate unless exercised in accordance with the terms
and provisions hereof at or before 5:00 p.m., Eastern Time, on the Expiration
Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
NATIONAL BOSTON MEDICAL, INC.
By:/s/ Daniel J. Hoyng
---------------------------
Name: Daniel J. Hoyng
Title: CEO
Attest:/s/ Amy L. Christianson
Name: Amy L. Christianson
Title: Staff Accountant
THOMSON KERNAGHAN & COMPANY LIMITED
By:______________________________________
Name:
Title: Attest: ___________________________
Name: ___________________________
Title:____________________________
<PAGE>
EXHIBIT A
This Warrant, and the securities issuable upon the exercise of this Warrant,
have not been registered under the Securities Act of 1933, as amended (the
"Act") or applicable state law and may not be sold, transferred or otherwise
disposed of unless registered under the Act and any applicable state act or
unless the Company receives an opinion of counsel for the holder and is
satisfied that this Warrant and the underling securities may be transferred
without registration under the Act.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREE MENT REFERRED TO HEREIN.
200,000 WARRANTS
WARRANT CERTIFICATE
This Warrant Certificate certifies that THOMSON KERNAGHAN & COMPANY LIMITED
("THOMSON") or registered assigns, is the registered holder of 200,000 Warrants
to purchase, at any time from the ___ of _____, 1999, until 5:00 P.M. Eastern
Standard Time on the later of November 25, 1999, or the thirtieth day following
the effective date of a registration statement under the Securities Act of 1933
registering the shares of Common Stock underlying this Warrant ("Expiration
Date"), up to 200,000 shares ("Shares") of fully-paid and non-assessable common
stock, par value $.0001 ("Common Stock"), of National Boston Medical, Inc., a
Nevada corporation (the "Company"), at the Initial Exercise Price, subject to
adjustment in certain events, of $0.625 per Share (the "Exercise Price") upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Warrant Agreement dated as of November 25, 1998, between the Company
and Thomson (the "Warrant Agreement"). Payment of the Exercise Price may be made
in cash, or by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., Eastern Standard Time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events,
the Exercise Price and/or number of the Company's securities issuable
<PAGE>
thereupon may, subject to certain conditions, be adjusted. In such event, the
Company will, at the, request of the holder, issue a new Warrant Certificate
evidencing the adjustment in the Exercise Price and the number and/or type of
securities issuable upon the exercise of the Warrants; provided, however, that
the failure of the Company to issue such new Warrant Certificates shall not in
any way change, alter, or otherwise impair, the rights of the holder as set
forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of warrants shall be issued to the transferees) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement and in compliance with the rules governing restricted securities,
without any charge except for any tax, or other governmental charge imposed in
connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: _______________, 1999 NATIONAL BOSTON MEDICAL, INC.
By:/s/ Daniel Hoyng
------------------------
Name:Daniel Hoyng
Title: CEO
Attest:/s/ Amy L. Christianson
- ----------------------------------
Name:Amy L. Christianson
Title:Staff Accountant
<PAGE>
[FORM OF EXERCISE]
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase ____________ Shares and herewith tenders
in payment for such Shares cash or a certified or official bank check payable in
New York Clearing House Funds to the order of NATIONAL BOSTON MEDICAL, INC., in
the amount of $_______________, all in accordance with the terms hereof. The
undersigned requests that a certificate for such Shares be registered in the
name of ________________________whose address is _____________________________,
and that such Certificate be delivered to
___________________________________________, whose address is
- ---------------------------------------------------------------.
Dated: Signature:_________________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
- ------------------------------------
- ------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED ___________________________________________ hereby
sells, assigns and transfers unto
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
___________________________________, Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: Signature:_________________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate)
- -------------------------------------
- -------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
EXHIBIT 10.1
ACQUISITION AGREEMENT
Agreement dated as of 2/14/98 between Frozen Assets, Inc., a Nevada corporation
("Buyer") on behalf of its shareholders, and Growth Industries, Inc., a Nevada
corporation ("Seller") on behalf of its shareholders.
The parties wish to provide for Seller's sale of the Shares to buyer and Buyer's
purchase of the Shares from Seller on the terms and conditions of this
Agreement.
The parties agree as follows:
1. The Acquisition.
1.1 Purchase and Sale subject to the terms and conditions of this Agreement, at
the Closing to be held as provided in Section 2, Seller shall sell the
Shares to Buyer, and Buyer shall purchase the Shares from Seller, free and
clear of all Encumbrances.
1.2 Purchase Price. Buyer will cancel 2,500,000 shares of its restricted common
stock and exchange 1,200,000 shares of 10 to 1 convertible preferred stock
with 10 to 1 voting rights for all of the outstanding capital stock of
Growth. The authorized common stock of the corporation consists of
50,000,000 shares of common and 10,000,000 shares of preferred.
2. The Closing.
2.1 Place and Time. The closing of the sale and purchase of the Shares (the
"Closing") shall take place at the office of Shawn Hackman, Esq. 1600 E.
Desert Inn Rd. #102, Las Vegas, NV 89109 no later than the close of
business (Las Vegas time) on 2/14/98, or at such other place, date and time
as the parties may agree in writing.
2.2 Deliveries by Seller. Seller shall deliver the following to Buyer:
(A) Within 3 months following the closing Seller shall deliver
Certificates representing the Shares, duly endorsed for transfer to
Buyer and accompanied by any applicable stock transfer tax stamps.
(B) At closing, the Seller shall deliver, the documents contemplated
by Section 3.
(C) At Closing, the Seller shall deliver, all other documents,
instruments and writings required by this Agreement to be delivered by
Seller at the Closing and any other documents or records relating to
growth's business reasonably requested by Buyer in connection with
this Agreement.
2.3 Deliveries by Buyer. At the Closing, Buyer shall deliver the following to
Seller:
<PAGE>
(A) The shares as contemplated by section 11.
(B) The documents contemplated by Section 4.
(C) All other documents, instruments and writings required by this
Agreement to be delivered by Buyer at Closing.
3. Conditions to Buyer's Obligations.
The obligations of Buyer to effect the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any
one or more of which may be waived by Buyer:
3.1 Representations, Warranties and Agreements.
(a) The representations and warranties of Seller set forth in this
Agreement shall be true and complete in all material respects as of
the Closing Date as though made at such time, (b) Seller shall have
performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied with
by it at or prior to the Closing and (c) Seller shall have received a
certificate to that effect signed by an officer of Buyer.
3.2 Resignations of Director. Resignations have hereby been requested of all
directors of Frozen Assetts, Inc. and its Subsidiaries and such directors
shall have submitted their resignations or been removed effective as of the
Closing Date.
3.3 The new board will be appointed on closing, and shall consist of such Board
members as are appointed by Seller.
4. Conditions to Seller's Obligations.
The obligations of Seller to effect the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any
one or more of which may be waived by Seller:
4.1 Representations, Warranties and Agreements.
(a) The representations and warranties of buyer set forth in this
Agreement shall be true and complete in all material respects as of
the Closing Date as though made at such time, (b) Buyer shall have
performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied with
but it prior to or at the Closing and (c) Seller shall have received a
certificate to that effective signed by an officer of Buyer
5. Representations and Warranties of Seller.
Seller represents and warrants to Buyer that, to the Knowledge of Seller
(which limitation shall not apply to Section 5.3), and except as set forth
in the Disclosure Letter:
<PAGE>
5.1 Organization of Seller; Authorization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Nevada
with full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement have been duly authorized by all
necessary corporate action of Seller and this Agreement constitutes a valid
and binding obligation of Seller, enforceable against it in accordance with
its terms.
5.2 No Conflict as to Seller. Neither the execution and delivery of this
Agreement nor the consummation of the sale of the Shares to buyer will (a)
violate any provision of the certificate of incorporation or by-laws of
Seller or (b) violate, be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under any agreement to which Seller is a party or (c) violate any
statute or law or any judgment, decree, order, regulation or rule of any
court or other Governmental Body applicable to Seller.
5.3 Ownership of Shares. The delivery of certificates to buyer and the payment
to Seller will result in Buyer's immediate acquisition of record and
beneficial ownership of the Shares, free and clear of all Encumbrances.
There are no outstanding options, rights, conversion rights, agreements or
commitments of any kind relating to the issuance, sale or transfer of any
Equity Securities or other securities of Growth Industries, Inc.
5.4 Financial Statements. Seller will deliver to buyer: (a) consolidated
balance sheets of Growth and its Subsidiaries as of 12/31/97 and statements
of profit and loss ended 12/31/97. Such financial statements and notes
fairly present the consolidated financial condition and results of
operations of Growth, Inc., and its Subsidiaries as at the respective dates
thereof and for the periods therein referred to, all in accordance with
generally accepted United States accounting principals consistently applied
throughout the periods involved, except as set forth in the notes thereto,
except, in the case of the Balance Sheet and the accompanying statements,
for audit adjustments and the absence of footnotes. Audited statements
shall be provided f to purchase within 45 days of the signing of this
agreement.
5.5 Title to Properties. Either Growth Industries, Inc., or on of its
Subsidiaries owns all the material properties and assets that they purport
to own (real, personal and mixed, tangible and intangible), including,
without limitation, all the material properties and assets reflected in the
Balance Sheet (except for property sold since the date of the Balance Sheet
in the ordinary course of business or leased under capitalized leases), and
all the material properties and assets purchased or otherwise acquired by
Growth, Inc., or any of its Subsidiaries since the date of the Balance
Sheet.
5.6 Buildings, Plants and Equipment. The buildings, plants, structures and
material items of equipment and other personal property owned or leased by
Growth, Inc., or its Subsidiaries are, in all respects material to the
business or financial condition of Growth Industries, Inc., and its
Subsidiaries, taken as a whole, in good operating condition and repair
<PAGE>
(ordinary wear and tear excepted) and are adequate in all such respects for
the purposes for which they are being used.
5.7 Litigation. There is no action, suit, inquiry, proceeding or investigation
by or before any court or Governmental Body pending or threatened in
writing against or involving Growth Industries, Inc., or any of its
Subsidiaries which is likely to have a material adverse effect on the
business or financial condition of Frozen Assets, Inc., and its
Subsidiaries, taken as whole, or which would require a payment by Frozen
Assetts, Inc., or its subsidiaries in excess of $2000 in the aggregate or
which questions or challenges the validity of this Agreement. Neither
Growth Industries, Inc., nor any or its Subsidiaries is subject to any
judgment, order or decree that is likely to have a material adverse effect
on the business or financial condition of Frozen Assetts, Inc., and its
Subsidiaries, taken as a whole, or which would require a payment by Frozen
Assetts, Inc. or its subsidiaries in excess of $2000 in the aggregate.
5.8 Absence of Certain Changes. Since the date of the Balance Sheet, neither
Growth Industries, Inc., nor any of its Subsidiaries has:
A. suffered the damage or destruction of any of its properties or assets
(whether or not covered by insurance) which is materially adverse to
the business or financial condition of Growth Industries, Inc., and
its Subsidiaries, taken as a whole, or made any disposition of any of
its material properties or assets other than in the ordinary course of
business;
B. made any change or amendment in its certificate of incorporation or
by- laws, or other governing instruments;
C. issued or sold any Equity Securities or other securities, acquired,
directly or indirectly, by redemption or otherwise, any such Equity
Securities, reclassified, split-up or otherwise changed any such
Equity Security, or granted or entered into any options, warrants,
calls or commitments of any kind with respect thereto;
D. borrowed any funds (other than from Seller or Frozen Assetts, Inc., or
one of its Subsidiaries) or incurred, or assumed or become subject to,
whether directly or by way of guarantee or otherwise, any obligation
or liability with respect to any such indebtedness for borrowed money;
E. paid, discharged or satisfied any material claim, liability or
obligation (absolute, accrued, contingent or otherwise), other than in
the ordinary course of business;
F. prepaid any material obligation having a maturity of more than 90 days
from the date such obligation was issued or incurred;
G. cancelled any material debts or waived any material claims or rights,
except in the ordinary course of business;
<PAGE>
H. made any capital expenditures or additions to property, plant or
equipment or acquired any other property or assets (other than raw
materials and supplies) at a cost in excess of $2000 in the aggregate;
I. written off or been required to write off any notes or accounts
receivable in an aggregate amount in excess of $2000;
J. other than the ordinary course of business, incurred any liability
required by generally accepted accounting principles to be reflected
on a balance sheet and material to the business or financial condition
of Grown Industries, Inc., and its subsidiaries taken as a whole.
5.9 No Material Adverse Change. Since the date of the Balance Sheet, there has
not been any material adverse change in the business or financial condition
of Growth Industries, Inc., and its Subsidiaries taken as a whole, other
than changes resulting from economic conditions prevailing in the United
States.
5.10 Brokers or Finders. Seller has not employed any broker or finder or
incurred 5 any liability for any brokerage or finder's fees or commissions
or similar payments in connection with the sale of the Shares to Buyer.
5.11 Transactions with Directors and Officers. Growth Industries, Inc., and its
Subsidiaries do not engage in business with any Person (other than Seller)
in which any of Growth's directors or officer has a material equity
interest. No director or officer of Growth owns any property, asset or
right which is material to the business of Growth and its Subsidiaries,
taken as a whole.
5.12 Borrowing and Guarantees. Except for advances from Buyer, Growth
Industries, Inc., and its Subsidiaries (a) do not have any indebtedness for
borrowed money, (b) are not lending or committed to lend any money (except
for advances to employees in the ordinary course of business), and (c) are
not guarantors or sureties with respect to the obligations of any Person.
6. Representations and Warranties of Buyer.
Buyer represents and warrants to Seller as follows:
6.1 Organization of Buyer; Authorization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Nevada,
with full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement have been duly authorized by all
necessary corporate action of Buyer and this Agreement constitutes a valid
and binding obligation of Buyer, enforceable against it in accordance with
its terms.
6.2 Conflict as to Buyer. Neither the execution and delivery of this Agreement
nor the performance of Buyer's obligations hereunder will (a) violate any
provision of the certificate of incorporation or by-laws of Buyer, (b)
<PAGE>
violate, be in conflict with, or constitute a default (or an event which,
with notice of lapse of time or both, would constitute a default) under any
agreement or commitment to which Buyer is party or (c) violate any statute
or law or any judgment, decree, order, regulation or rule of any court or
other Governmental Body applicable to Buyer.
6.3 Brokers or Finders. Buyer has not employed any broker or finder or incurred
any liability for any brokerage or finder's fees or commissions or similar
payments in connection with any of the transactions contemplated hereby.
6.4 Purchase for Investment. Buyer is purchasing the shares solely for its own
account for the purpose of investment and not with a view to, or for sale
in connection with, any distribution of any portion thereof in violation of
any applicable securities law.
6.5 Assets and Liabilities. Buyer hereby represents that is has no assets nor
any liabilities.
7. Access and Reporting; Filings With Governmental Authorities.
7.1 Access. Between the date of this Agreement and the Closing Date, Seller
shall, and shall cause Growth Industries, Inc., to, (a) give Buyer and its
authorized representatives reasonable access to all plants, offices,
warehouse and other facilities and properties of Growth Industries, Inc.,
and its Subsidiaries and to the books and records of Growth Industries,
Inc., and its Subsidiaries, (b) permit Buyer to make inspections thereof,
and(c) cause its officers and its advisors to furnish Buyer with such
financial and operating data and other information with respect to the
business and properties of Growth Industries, Inc., and its Subsidiaries
and to discuss with Buyer and its authorized representatives the affairs of
Growth Industries, Inc., and its Subsidiaries, all as Buyer may from time
to time reasonably request.
7.2 Exclusivity. From the date hereof until the earlier of the Closing or the
termination of this Agreement, Seller shall not solicit or negotiate or
enter into any agreement with any other Person with respect to or in
furtherance of any proposal for a merger or business combination involving,
or acquisition of any interest in, or (except in the ordinary course of
business) sale of assets by,. Phoenix, except for the acquisition of the
Shares by Buyer.
7.3 Publicity. Between the date of this Agreement and the Closing Date, Seller
and Buyer shall, and Seller and Buyer shall cause Frozen Assetts, Inc., to,
discuss and coordinate with respect to any public filing or announcement or
any internal or private announcement (including any general announcement to
employees) concerning the contemplated transaction.
7.4 Confidentiality. Prior to the Closing Date (or at any time if the Closing
does not occur) Buyer shall keep confidential and not disclose to any
Person (other than its employees, attorneys, accountants and advisors) or
use (except in connection with the transactions contemplated hereby)
<PAGE>
all non-public information obtained by Buyer pursuant to Section 7.1.
Following the Closing, Seller shall keep confidential and not disclose to
any Person (other than its employees, attorneys, accountants and advisors)
or use (except in connection with preparing Tax Returns and conducting
proceeds relating to Taxes) any nonpublic information relating to Frozen
Assetts, Inc., and its Subsidiaries. This Section 7.7 shall not be violated
by disclosure pursuant to court order or as otherwise required by law, on
condition that notice of the requirement for such disclosure is given the
other party prior to making any disclosure and the party subject to such
requirement cooperates as the other may reasonably request in resisting it.
If the Closing does not occur, Buyer shall return to Seller, or destroy,
all information it shall have received from Seller or Growth Industries,
Inc., in connection with this Agreement and the transactions contemplated
hereby, together with any copies or summari3es thereof or extracts
therefrom. Seller and Buyer shall use their best efforts to cause their
respective representatives, employees, attorneys, accountants and advisors
to whom information is disclosed pursuant to Sections 7.1 and 7.6 to comply
with the provisions of this Section 7.7
8. Conduct of Growth's Business Prior to Closing.
8.1 Operation in Ordinary Course. Between the date of this Agreement and the
Closing Date, Seller shall cause Growth Industries, Inc., and its
Subsidiaries to conduct their businesses in all material respects in the
ordinary course.
8.2 Business Organization. Between the date of this Agreement and the Closing
Date, Seller shall use its reasonable efforts, and shall cause Growth
Industries, Inc., and each of its Subsidiaries to use its respective
reasonable efforts, to (a) preserve substantially intact the business
organizations of Growth Industries, Inc., and each of its Subsidiaries and
keep available the services of the present officers and employees of Growth
Industries, Inc., and each of its Subsidiaries, and (b) preserve in all
material respects the present business relationships and good will of
Growth Industries, Inc., and each of its Subsidiaries.
8.3 Corporate Organization. Between the date of this Agreement and the Closing
Date, Seller shall not cause or permit any amendment of the certificate of
incorporation or by-laws (or other governing instrument) of Growth
Industries, Inc., or any of its Subsidiaries, and shall cause Growth
Industries, Inc., and each of its Subsidiaries not to:
A. issue, sell or otherwise dispose of any of its Equity Securities, or
create, sell or otherwise dispose of any options, rights, conversion
rights or other agreements or commitments of any kind relating to the
issuance, sale or disposition of any of its Equity Securities.;
B. sell or otherwise dispose of any Equity Securities of Growth
Industries, Inc., or any of its Subsidiaries, or create or suffer to
be created any Encumbrance thereon, or create, sell or otherwise
dispose of any options, rights, conversion rights or other agreements
or commitments of any kind relating to the sale or disposition of any
<PAGE>
Equity Securities of Growth Industries, Inc., or any of its
Subsidiaries;
C. reclassify, split up or otherwise change any of its Equity Securities;
D. be party to any merger, consolidation or other business combination;
E. sell, lease, license or otherwise dispose of any of its properties or
assets (including, but not limited to rights with respect to patents
and registered trademarks and copyrights or other proprietary rights),
in an amount which is material to the business or financial condition
of Growth Industries, Inc., and its Subsidiaries, taken as a whole,
except in the ordinary course of business.
8.4 Other Restrictions. Between the date of this Agreement and the Closing
Date, Seller shall cause Growth Industries, Inc., and each of its
Subsidiaries not to:
A. borrow any funds or otherwise become subject to, whether directly or
by way of guarantee or otherwise, any indebtedness for borrowed money
other than borrowings from Seller, Frozen Assetts, Inc., or another of
its Subsidiaries;
B. create any material Encumbrance on any of its material properties or
assets;
C. except in the ordinary course of business, increase in any manner the
compensation of any director or officer or increase in any manner the
compensation of any class or employees;
D. make any capital expenditure or acquire any property or assets (other
than raw materials and supplies) for a cost in excess of $2000 in any
one case or $5000 in the aggregate;
E. enter into any agreement that materially restricts Growth Industries,
Inc., or any of its Subsidiaries form carrying on its business;
F. pay, discharge or satisfy any material claim, liability or obligation,
absolute, accrued, contingent or otherwise, other than the payment,
discharge or satisfaction in the ordinary course of business of
liabilities or obligations reflected in the Balance Sheet or incurred
in the ordinary course of business and consistent with past practice
since the date of the Balance Sheet; or
G. cancel any material debts or waive any material claims or rights.
9. Survival of Representations and Warranties; Indemnification.
9.1 Survival. No representation or warranty contained in this Agreement or in
any certificate or document delivered pursuant hereto shall survive the
<PAGE>
Closing, except for those contained in Sections 5.1, 5.2, 5.3(only as to
Seller), 5.10, 6.1, 6.2, 6.3, 6.4, 6.5 (the "Surviving Representations and
Warranties").
9.2 Indemnification by Seller. Seller shall indemnify and hold harmless Buyer
and Frozen Assetts, Inc., and shall reimburse Buyer and Frozen Assetts,
Inc., for, any loss, liability, damage or expense (including reasonable
attorneys fees) (collectively, "Damages") arising from or in connection
with (a) any inaccuracy in any of the Surviving Representations and
Warranties of Seller in this Agreement or (b) any failure by Seller to
perform or comply with any agreement in this Agreement.
9.3 Indemnification by Buyer. Buyer shall indemnify and hold harmless Seller,
and shall reimburse Seller for, any Damages arising from or in connection
with (a) any inaccuracy in any of the Surviving Representations and
Warranties of Buyer in this Agreement, (b) any failure by Buyer to perform
or comply with any agreement in this Agreement, except that after the
Closing no claim shall be made with respect to the failure to perform or
comply with any agreement required to have been performed or complied with
prior to the Closing Date, (c) any claims arising from the conduct of the
business of Growth Industries, Inc., and the Subsidiaries after the Closing
and (d) any payments made by Seller after the Closing pursuant to any
guaranty by Seller or any obligation of Frozen Assetts, Inc., or any of its
Subsidiaries (other than as contemplated by Section 2.4). Buyer shall use
its best efforts to obtain Seller's release from any such guaranties.
10. Termination.
10.1 Termination. This Agreement may be terminated before the Closing occurs
only as follows:
A. By written agreement of Seller and Buyer at any time.
B. By Seller, by notice to Buyer at any time, if one or more of the
conditions specified in Section 4 is not satisfied at the time at
which the Closing (as it may be deferred pursuant to Section 2.1)
would otherwise occur or if satisfaction of such a condition is or
becomes impossible.
C. By Buyer, by notice to Seller at any time, if one or more of the
conditions specified in Section 3 is not satisfied at the time at
which the Closing (as it may be deferred pursuant to Section 2.1),
would otherwise occur of if satisfaction of such a condition is or
becomes impossible.
D. By Buyer or Seller, by notice to the other at any time after 4/30/98.
10.2 Effect of Termination. If this Agreement is terminated pursuant to Section
12.2, this Agreement shall terminate without any liability or further
obligation of any party to another.,
<PAGE>
11. Notices.
All notices, consents, assignments and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telex or telecopies (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) received by the delivery service (receipt requested), in each case to the
appropriate addresses, telex numbers and telecopier numbers set forth below (or
to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties).
(a)If to Buyer (b)If to Seller:
c/o Shawn F. Hackman, Esq. Ronald G. Williams
1600 E. Desert Inn Rd. #102 1221 Brickell Avenue, Suite 1010
Las Vegas, NV 89109 Miami, FL 33131
Telephone: 702-732-2253 Telephone: 305-536-2400
Attention: Shawn F. Hackman Attention: Ronald G. Williams
12. Miscellaneous.
12.1 Expenses. Each party shall bear its own expenses incident to the
preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder.
12.2 Captions. The captions in this Agreement are for convenience of reference
only and shall not be given any effect in the interpretation of this
agreement.
12.3 No Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considere3d a waiver or
deprive that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement. Any waiver must be in
writing.
12.4 Exclusive Agreement; Amendment. This Agreement supersedes all prior
agreements among the parties with respect to its subject matter, and is
intended (with the documents referred to herein) as a complete and
exclusive statement of the terms of the agreement among the parties with
respect thereto and cannot be changed or terminated orally.
12.5 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be considered an original, but all of which together
shall constitute the same instrument.
12.6 Governing Law. This Agreement and (unless otherwise provided) all
amendments hereof and waiver and consents hereunder shall be governed by
the internal law of the State of Nevada, without regard to the conflicts of
law principles thereof.
12.7 Binding Effect. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns,
provided that neither party may assign its rights hereunder without the
<PAGE>
consent of the other except that Buyer may assign its rights (but not its
obligations) under this Agreement to its wholly-owned Subsidiary without
the consent of Seller, provided that, after the Closing, no consent of
Seller shall be needed in connection with any merger or consolidation of
Buyer with or into another entity.
Frozen Assets, Inc.
/s/Douglas Ansell
-----------------------
By Douglas Ansell-Secretary
Growth Industries, Inc.
-----------------------
/s/George Macropulos
By George Macropulos-President
EXHIBIT 10.2
ACQUISITION AGREEMENT
Agreement dated as of 3/24/98 between Growth Industries, Inc., a Nevada
corporation ("Buyer") on behalf of its shareholders, and Fragrance Express,
Inc., a Florida corporation ("Seller") on behalf of its shareholders.
The parties wish to provide for Seller's sale of the Shares to buyer and Buyer's
purchase of the Shares from Seller on the terms and conditions of this
Agreement.
The parties agree as follows:
1. The Acquisition.
1.2 Purchase and Sale subject to the terms and conditions of this Agreement, at
the Closing to be held as provided in Section 2, Seller shall sell the
Shares to Buyer, and Buyer shall purchase the Shares from Seller, free and
clear of all Encumbrances.
1.3 Purchase Price. Buyer will cancel 1,200 shares of 10 to 1 convertible
preferred stock with 10 to 1 voting rights for all of the outstanding
capital stock of Growth. The authorized common stock of the corporation
consists of 50,000,000 shares of common and 10,000,000 shares of preferred.
2. The Closing.
2.1 Place and Time. The closing of the sale and purchase of the Shares (the
"Closing") shall take place at the office of Shawn Hackman, Esq. 1600 E.
Desert Inn Rd. #102, Las Vegas, NV 89109 no later than the close of
business (Las Vegas time) on 2/14/98, or at such other place, date and time
as the parties may agree in writing.
2.2 Deliveries by Seller. Seller shall deliver the following to Buyer:
(A) Within 3 months following the closing Seller shall deliver Certificates
representing the Shares, duly endorsed for transfer to Buyer and
accompanied by any applicable stock transfer tax stamps.
(B) At closing, the Seller shall deliver, the documents contemplated by
Section 3.
(C) At Closing, the Seller shall deliver, all other documents, instruments
and writings required by this Agreement to be delivered by Seller at the
Closing and any other documents or records relating to growth's business
reasonably requested by Buyer in connection with this Agreement.
2.3 Deliveries by Buyer. At the Closing, Buyer shall deliver the following to
Seller:
(A) The shares as contemplated by section 11.
<PAGE>
(B) The documents contemplated by Section 4.
(C) All other documents, instruments and writings required by this
Agreement to be delivered by Buyer at Closing.
3. Conditions to Buyer's Obligations.
The obligations of Buyer to effect the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived by Buyer:
3.1 Representations, Warranties and Agreements.
(A) The representations and warranties of Seller set forth in this
Agreement shall be true and complete in all material respects as of
the Closing Date as though made at such time, (b) Seller shall have
performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied with
by it at or prior to the Closing and (c) Seller shall have received a
certificate to that effect signed by an officer of Buyer.
3.2 Resignations of Director. Resignations have hereby been requested of
all directors of Frozen Assetts, Inc. and its Subsidiaries and such
directors shall have submitted their resignations or been removed
effective as of the Closing Date.
3.3 The new board will be appointed on closing, and shall consist of such
Board members as are appointed by Seller.
4. Conditions to Seller's Obligations.
The obligations of Seller to effect the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived by Seller:
4.1 Representations, Warranties and Agreements.
(a) The representations and warranties of buyer set forth in this
Agreement shall be true and complete in all material respects as of
the Closing Date as though made at such time, (b) Buyer shall have
performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied with
but it prior to or at the Closing and (c) Seller shall have received a
certificate to that effective signed by an officer of Buyer
5. Representations and Warranties of Seller.
Seller represents and warrants to Buyer that, to the Knowledge of Seller (which
limitation shall not apply to Section 5.3), and except as set forth in the
Disclosure Letter:
5.1 Organization of Seller; Authorization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Florida
<PAGE>
with full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement have been duly authorized by all
necessary corporate action of Seller and this Agreement constitutes a valid
and binding obligation of Seller, enforceable against it in accordance with
its terms.
5.2 No Conflict as to Seller. Neither the execution and delivery of this
Agreement nor the consummation of the sale of the Shares to buyer will (a)
violate any provision of the certificate of incorporation or by-laws of
Seller or (b) violate, be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under any agreement to which Seller is a party or (c) violate any
statute or law or any judgment, decree, order, regulation or rule of any
court or other Governmental Body applicable to Seller.
5.3 Ownership of Shares. The delivery of certificates to buyer and the payment
to Seller will result in Buyer's immediate acquisition of record and
beneficial ownership of the Shares, free and clear of all Encumbrances.
There are no outstanding options, rights, conversion rights, agreements or
commitments of any kind relating to the issuance, sale or transfer of any
Equity Securities or other securities of Growth Industries, Inc.
5.4 Financial Statements. Seller will deliver to buyer: (a) consolidated
balance sheets of Growth and its Subsidiaries as of 10/31/97 and statements
of profit and loss ended 10/31/97. Such financial statements and notes
fairly present the consolidated financial condition and results of
operations of Growth, Inc., and its Subsidiaries as at the respective dates
thereof and for the periods therein referred to, all in accordance with
generally accepted United States accounting principals consistently applied
throughout the periods involved, except as set forth in the notes thereto,
except, in the case of the Balance Sheet and the accompanying statements,
for audit adjustments and the absence of footnotes. Audited statements
shall be provided f to purchase within 45 days of the signing of this
agreement.
5.5 Title to Properties. Either Growth Industries, Inc., or on of its
Subsidiaries owns all the material properties and assets that they purport
to own (real, personal and mixed, tangible and intangible), including,
without limitation, all the material properties and assets reflected in the
Balance Sheet (except for property sold since the date of the Balance Sheet
in the ordinary course of business or leased under capitalized leases), and
all the material properties and assets purchased or otherwise acquired by
Growth, Inc., or any of its Subsidiaries since the date of the Balance
Sheet.
5.6 Buildings, Plants and Equipment. The buildings, plants, structures and
material items of equipment and other personal property owned or leased by
Growth, Inc., or its Subsidiaries are, in all respects material to the
business or financial condition of Growth Industries, Inc., and its
Subsidiaries, taken as a whole, in good operating condition and repair
(ordinary wear and tear excepted) and are adequate in all such respects for
the purposes for which they are being used.
<PAGE>
5.7 Litigation. There is no action, suit, inquiry, proceeding or investigation
by or before any court or Governmental Body pending or threatened in
writing against or involving Growth Industries, Inc., or any of its
Subsidiaries which is likely to have a material adverse effect on the
business or financial condition of Frozen Assets, Inc., and its
Subsidiaries, taken as whole, or which would require a payment by Frozen
Assetts, Inc., or its subsidiaries in excess of $2000 in the aggregate or
which questions or challenges the validity of this Agreement. Neither
Growth Industries, Inc., nor any or its Subsidiaries is subject to any
judgment, order or decree that is likely to have a material adverse effect
on the business or financial condition of Frozen Assetts, Inc., and its
Subsidiaries, taken as a whole, or which would require a payment by Frozen
Assetts, Inc. or its subsidiaries in excess of $2000 in the aggregate.
5.8 Absence of Certain Changes. Since the date of the Balance Sheet, neither
Growth Industries, Inc., nor any of its Subsidiaries has:
(a) suffered the damage or destruction of any of its properties or assets
(whether or not covered by insurance) which is materially adverse to
the business or financial condition of Growth Industries, Inc., and
its Subsidiaries, taken as a whole, or made any disposition of any of
its material properties or assets other than in the ordinary course of
business;
(b) made any change or amendment in its certificate of incorporation or
by-laws, or other governing instruments;
(c) issued or sold any Equity Securities or other securities, acquired,
directly or indirectly, by redemption or otherwise, any such Equity
Securities, reclassified, split-up or otherwise changed any such
Equity Security, or granted or entered into any options, warrants,
calls or commitments of any kind with respect thereto;
(d) borrowed any funds (other than from Seller or Frozen Assetts, Inc., or
one of its Subsidiaries) or incurred, or assumed or become subject to,
whether directly or by way of guarantee or otherwise, any obligation
or liability with respect to any such indebtedness for borrowed money;
(e) paid, discharged or satisfied any material claim, liability or
obligation (absolute, accrued, contingent or otherwise), other than in
the ordinary course of business;
(f) prepaid any material obligation having a maturity of more than 90 days
from the date such obligation was issued or incurred;
(g) cancelled any material debts or waived any material claims or rights,
except in the ordinary course of business;
(h) made any capital expenditures or additions to property, plant or
equipment or acquired any other property or assets (other than raw
materials and supplies) at a cost in excess of $2000 in the aggregate;
<PAGE>
(i) written off or been required to write off any notes or accounts
receivable in an aggregate amount in excess of $2000;
(j) other than the ordinary course of business, incurred any liability
required by generally accepted accounting principles to be reflected
on a balance sheet and material to the business or financial condition
of Grown Industries, Inc., and its subsidiaries taken as a whole.
5.9 No Material Adverse Change. Since the date of the Balance Sheet, there has
not been any material adverse change in the business or financial condition
of Growth Industries, Inc., and its Subsidiaries taken as a whole, other
than changes resulting from economic conditions prevailing in the United
States.
5.10 Brokers or Finders. Seller has not employed any broker or finder or
incurred any liability for any brokerage or finder's fees or commissions or
similar payments in connection with the sale of the Shares to Buyer.
5.11 Transactions with Directors and Officers. Growth Industries, Inc., and its
Subsidiaries do not engage in business with any Person (other than Seller)
in which any of Growth's directors or officer has a material equity
interest. No director or officer of Growth owns any property, asset or
right which is material to the business of Growth and its Subsidiaries,
taken as a whole.
5.12 Borrowing and Guarantees. Except for advances from Buyer, Growth
Industries, Inc., and its Subsidiaries (a) do not have any indebtedness for
borrowed money, (b) are not lending or committed to lend any money (except
for advances to employees in the ordinary course of business), and (c) are
not guarantors or sureties with respect to the obligations of any Person.
6. Representations and Warranties of Buyer.
Buyer represents and warrants to Seller as follows:
6.1 Organization of Buyer; Authorization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Nevada,
with full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement have been duly authorized by all
necessary corporate action of Buyer and this Agreement constitutes a valid
and binding obligation of Buyer, enforceable against it in accordance with
its terms.
6.2 Conflict as to Buyer. Neither the execution and delivery of this Agreement
nor the performance of Buyer's obligations hereunder will (a) violate any
provision of the certificate of incorporation or by-laws of Buyer, (b)
violate, be in conflict with, or constitute a default (or an event which,
with notice of lapse of time or both, would constitute a default) under any
agreement or commitment to which Buyer is party or (c) violate any statute
or law or any judgment, decree, order, regulation or rule of any court or
other Governmental Body applicable to Buyer.
<PAGE>
6.3 Brokers or Finders. Buyer has not employed any broker or finder or incurred
any liability for any brokerage or finder's fees or commissions or similar
payments in connection with any of the transactions contemplated hereby.
6.4 Purchase for Investment. Buyer is purchasing the shares solely for its own
account for the purpose of investment and not with a view to, or for sale
in connection with, any distribution of any portion thereof in violation of
any applicable securities law.
6.5 Assets and Liabilities. Buyer hereby represents that is has no assets nor
any liabilities.
7. Access and Reporting; Filings With Governmental Authorities.
7.1 Access. Between the date of this Agreement and the Closing Date, Seller
shall, and shall cause Growth Industries, Inc., to, (a) give Buyer and its
authorized representatives reasonable access to all plants, offices,
warehouse and other facilities and properties of Growth Industries, Inc.,
and its Subsidiaries and to the books and records of Growth Industries,
Inc., and its Subsidiaries, (b) permit Buyer to make inspections thereof,
and(c) cause its officers and its advisors to furnish Buyer with such
financial and operating data and other information with respect to the
business and properties of Growth Industries, Inc., and its Subsidiaries
and to discuss with Buyer and its authorized representatives the affairs of
Growth Industries, Inc., and its Subsidiaries, all as Buyer may from time
to time reasonably request.
7.2 Exclusivity. From the date hereof until the earlier of the Closing or the
termination of this Agreement, Seller shall not solicit or negotiate or
enter into any agreement with any other Person with respect to or in
furtherance of any proposal for a merger or business combination involving,
or acquisition of any interest in, or (except in the ordinary course of
business) sale of assets by,. Phoenix, except for the acquisition of the
Shares by Buyer.
7.3 Publicity. Between the date of this Agreement and the Closing Date, Seller
and Buyer shall, and Seller and Buyer shall cause Frozen Assetts, Inc., to,
discuss and coordinate with respect to any public filing or announcement or
any internal or private announcement (including any general announcement to
employees) concerning the contemplated transaction.
7.4 Confidentiality. Prior to the Closing Date (or at any time if the Closing
does not occur) Buyer shall keep confidential and not disclose to any
Person (other than its employees, attorneys, accountants and advisors) or
use (except in connection with the transactions contemplated hereby) all
non-public information obtained by Buyer pursuant to Section 7.1. Following
the Closing, Seller shall keep confidential and not disclose to any Person
(other than its employees, attorneys, accountants and advisors) or use
(except in connection with preparing Tax Returns and conducting proceeds
relating to Taxes) any nonpublic information relating to Frozen Assetts,
Inc., and its Subsidiaries. This Section 7.7 shall not be violated by
disclosure pursuant to court order or as otherwise required by law, on
condition that notice of the requirement for such disclosure is given the
other party prior to making any disclosure and the party subject to
<PAGE>
such requirement cooperates as the other may reasonably request in
resisting it. If the Closing does not occur, Buyer shall return to Seller,
or destroy, all information it shall have received from Seller or Growth
Industries, Inc., in connection with this Agreement and the transactions
contemplated hereby, together with any copies or summari3es thereof or
extracts therefrom. Seller and Buyer shall use their best efforts to cause
their respective representatives, employees, attorneys, accountants and
advisors to whom information is disclosed pursuant to Sections 7.1 and 7.6
to comply with the provisions of this Section 7.7
8. Conduct of Fragrance Express, Inc. Prior to Closing.
8.1 Operation in Ordinary Course. Between the date of this Agreement and the
Closing Date, Seller shall cause Growth Industries, Inc., and its
Subsidiaries to conduct their businesses in all material respects in the
ordinary course.
8.2 Business Organization. Between the date of this Agreement and the Closing
Date, Seller shall use its reasonable efforts, and shall cause Growth
Industries, Inc., and each of its Subsidiaries to use its respective
reasonable efforts, to (a) preserve substantially intact the business
organizations of Growth Industries, Inc., and each of its Subsidiaries and
keep available the services of the present officers and employees of Growth
Industries, Inc., and each of its Subsidiaries, and (b) preserve in all
material respects the present business relationships and good will of
Growth Industries, Inc., and each of its Subsidiaries.
8.3 Corporate Organization. Between the date of this Agreement and the Closing
Date, Seller shall not cause or permit any amendment of the certificate of
incorporation or by-laws (or other governing instrument) of Growth
Industries, Inc., or any of its Subsidiaries, and shall cause Growth
Industries, Inc., and each of its Subsidiaries not to:
(a) issue, sell or otherwise dispose of any of its Equity Securities, or
create, sell or otherwise dispose of any options, rights, conversion
rights or other agreements or commitments of any kind relating to the
issuance, sale or disposition of any of its Equity Securities.;
(b) sell or otherwise dispose of any Equity Securities of Growth
Industries, Inc., or any of its Subsidiaries, or create or suffer to
be created any Encumbrance thereon, or create, sell or otherwise
dispose of any options, rights, conversion rights or other agreements
or commitments of any kind relating to the sale or disposition of any
Equity Securities of Growth Industries, Inc., or any of its
Subsidiaries;
(c) reclassify, split up or otherwise change any of its Equity Securities;
(d) be party to any merger, consolidation or other business combination;
(e) sell, lease, license or otherwise dispose of any of its properties or
assets (including, but not limited to rights with respect to patents
and registered trademarks and copyrights or other proprietary
<PAGE>
rights), in an amount which is material to the business or financial
condition of Growth Industries, Inc., and its Subsidiaries, taken as a
whole, except in the ordinary course of business.
8.4 Other Restrictions. Between the date of this Agreement and the Closing
Date, Seller shall cause Growth Industries, Inc., and each of its
Subsidiaries not to:
(a) borrow any funds or otherwise become subject to, whether directly or
by way of guarantee or otherwise, any indebtedness for borrowed money
other than borrowings from Seller, Frozen Assetts, Inc., or another of
its Subsidiaries;
(b) create any material Encumbrance on any of its material properties or
assets;
(c) except in the ordinary course of business, increase in any manner the
compensation of any director or officer or increase in any manner the
compensation of any class or employees;
(d) make any capital expenditure or acquire any property or assets (other
than raw materials and supplies) for a cost in excess of $2000 in any
one case or $5000 in the aggregate;
(e) enter into any agreement that materially restricts Growth Industries,
Inc., or any of its Subsidiaries form carrying on its business;
(f) pay, discharge or satisfy any material claim, liability or obligation,
absolute, accrued, contingent or otherwise, other than the payment,
discharge or satisfaction in the ordinary course of business of
liabilities or obligations reflected in the Balance Sheet or incurred
in the ordinary course of business and consistent with past practice
since the date of the Balance Sheet; or
(g) cancel any material debts or waive any material claims or rights.
9. Survival of Representations and Warranties; Indemnification.
9.1 Survival. No representation or warranty contained in this Agreement or in
any certificate or document delivered pursuant hereto shall survive the
Closing, except for those contained in Sections 5.1, 5.2, 5.3(only as to
Seller), 5.10, 6.1, 6.2, 6.3, 6.4, 6.5 (the "Surviving Representations and
Warranties").
9.2 Indemnification by Seller. Seller shall indemnify and hold harmless Buyer
and Frozen Assetts, Inc., and shall reimburse Buyer and Frozen Assetts,
Inc., for, any loss, liability, damage or expense (including reasonable
attorneys fees) (collectively, "Damages") arising from or in connection
with (a) any inaccuracy in any of the Surviving Representations and
Warranties of Seller in this Agreement or (b) any failure by Seller to
perform or comply with any agreement in this Agreement.
9.3 Indemnification by Buyer. Buyer shall indemnify and hold harmless Seller,
and shall reimburse Seller for, any Damages arising from or in connection
with (a) any inaccuracy in any of the Surviving Representations and
<PAGE>
Warranties of Buyer in this Agreement, (b) any failure by Buyer to perform
or comply with any agreement in this Agreement, except that after the
Closing no claim shall be made with respect to the failure to perform or
comply with any agreement required to have been performed or complied with
prior to the Closing Date, (c) any claims arising from the conduct of the
business of Growth Industries, Inc., and the Subsidiaries after the Closing
and (d) any payments made by Seller after the Closing pursuant to any
guaranty by Seller or any obligation of Frozen Assetts, Inc., or any of its
Subsidiaries (other than as contemplated by Section 2.4). Buyer shall use
its best efforts to obtain Seller's release from any such guaranties.
10. Termination.
10.1 Termination. This Agreement may be terminated before the Closing occurs
only as follows:
(a) By written agreement of Seller and Buyer at any time.
(b) By Seller, by notice to Buyer at any time, if one or more of the
conditions specified in Section 4 is not satisfied at the time at
which the Closing (as it may be deferred pursuant to Section 2.1)
would otherwise occur or if satisfaction of such a condition is or
becomes impossible.
(c) By Buyer, by notice to Seller at any time, if one or more of the
conditions specified in Section 3 is not satisfied at the time at
which the Closing (as it may be deferred pursuant to Section 2.1),
would otherwise occur of if satisfaction of such a condition is or
becomes impossible.
(d) By Buyer or Seller, by notice to the other at any time after 4/30/98.
10.2 Effect of Termination. If this Agreement is terminated pursuant to Section
12.2, this Agreement shall terminate without any liability or further
obligation of any party to another.,
11. Notices.
All notices, consents, assignments and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by telex or telecopies (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) received by the delivery service (receipt requested), in each case to the
appropriate addresses, telex numbers and telecopier numbers set forth below (or
to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties).
(a) If to Buyer (b) If to Seller:
c/o Shawn F. Hackman, Esq. Fragrance Express, Inc.
1600 E. Desert Inn Rd. #102 3350 Gateway Blvd.
Las Vegas, NV 89109 Pompano Beach, FL 330
Telephone: 702-732-2253 Telephone: 954-974-8540
Attention: Shawn F. Hackman Attention: Robert A. Bartell
<PAGE>
12. Miscellaneous.
12.1 Expenses. Each party shall bear its own expenses incident to the
preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder.
12.2 Captions. The captions in this Agreement are for convenience of reference
only and shall not be given any effect in the interpretation of this
agreement.
12.3 No Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considere3d a waiver or
deprive that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement. Any waiver must be in
writing.
12.4 Exclusive Agreement; Amendment. This Agreement supersedes all prior
agreements among the parties with respect to its subject matter, and is
intended (with the documents referred to herein) as a complete and
exclusive statement of the terms of the agreement among the parties with
respect thereto and cannot be changed or terminated orally.
12.5 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be considered an original, but all of which together
shall constitute the same instrument.
12.6 Governing Law. This Agreement and (unless otherwise provided) all
amendments hereof and waiver and consents hereunder shall be governed by
the internal law of the State of Nevada, without regard to the conflicts of
law principles thereof.
12.7 Binding Effect. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns,
provided that neither party may assign its rights hereunder without the
consent of the other except that Buyer may assign its rights (but not its
obligations) under this Agreement to its wholly-owned Subsidiary without
the consent of Seller, provided that, after the Closing, no consent of
Seller shall be needed in connection with any merger or consolidation of
Buyer with or into another entity.
Growth Industries, Inc.
/s/ Douglas Ansell
-------------------------------
By Douglas Ansell-Secretary
Fragrance Express, Inc.
/s/ Robert M. Barttell
-------------------------------
EXHIBIT 10.3
AGREEMENT FOR THE EXCHANGE OF STOCK
AGREEMENT made this 8th day of October, 1998, by and between Fragrance
Express, Inc., a Nevada corporation, including its wholly owned subsidiary,
Fragrance Express, inc., a Florida corporation (hereinafter collectively
referred to as the "ISSUER") and the individuals listed in Exhibit A attached
hereto, (the "SHAREHOLDERS"), which SHAREHOLDERS own all of the issued and
outstanding shares of National Boston Medical, Inc. a Delaware corporation.
("NBM")
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. EXCHANGE OF SECURITIES. Subject to the terms and conditions of this
Agreement, the ISSUER agrees to issued to SHAREHOLDERS, 14,988,614 shares of
RESTRICTED common stock of ISSUER (calculated as post-split shares or 59,954,456
pre-split shares), $0.001 par value, in exchange for 100% of the issued and
outstanding shares of NBM, such that NBM shall become a wholly owned subsidiary
of the ISSUER. The shares to be issued to NBM will not be Registered, but will
be issued pursuant to an exemption from Registration.
2. REPRESENTATIONS AND WARRANTIES. ISSUER represents and warrants to
SHAREHOLDERS and NBM the following:
i. Organization. ISSUER is a corporation duly organized, validly
existing, and in good standing under the laws of Nevada, and has all necessary
corporate powers to own properties and carry on a business, and is duly
qualified to do business and is in good standing in Nevada. All actions taken by
the Incorporators, directors and shareholders of ISSUER have been valid and in
accordance with the laws of the State of Nevada. Additionally, ISSUER is
authorized to do business in the State of Florida. ISSUER has a wholly owned
subsidiary, Fragrance Express, Inc., a Florida corporation ("FEF"), which has
2,000,000 shares of common stock outstanding, 100% of which is owned by ISSUER
and no other class of shares are outstanding.
ii. Capital The authorized capital stock of ISSUER consists of
50,000,000 shares of common stock, $0.001 part value, 9,965,432 shares of which
were issued and outstanding as of close of business October 8, 1998, and
20,000,000 shares of preferred stock, 1,047,500 shares of which were issued and
outstanding as of the same date. This calculation is prior to a 1 for 4 reverse
split of all common shares by the board of Directors on October 8, 1998, and
prior to a 1 for 20 reverse split of all preferred shares approved by the Board
of Directors the same date. All outstanding shares are fully paid and
nonassessable, free of liens, encumbrances, options, restrictions and legal or
equitable rights of others not a party to this Agreement. All of the
shareholders of ISSUER have a valid title to such shares and acquired their
shares in a lawful transaction and in accordance with the state and federal
securities laws.
iii. Financial Statements. Exhibit B to this Agreement includes the
1997 Audited Financial Statements of ISSUER. The financial statements have been
prepared in accordance with generally accepted accounting principles
<PAGE>
consistently followed by ISSUER throughout the periods indicated, and fairly
present the financial position of ISSUER as of the date of the financial
statements, and the results of its operations for the periods indicated.
iv. Liabilities. ISSUER has no liabilities other than as listed on
Exhibit C. ISSUER is not aware of any pending, threatened or asserted claims,
lawsuits or contingencies involving ISSUER and any third party, and no other
such dispute will exist at the time of closing.
v. Ability to Carry Out Obligations. ISSUER has the right, power, and
authority to enter into and perform its obligations under this Agreement. The
execution and delivery of this Agreement by Issuer and the performance by ISSUER
of its obligations hereunder will not cause, constitute, or conflict with or
result in (a) any breach or violation or any of the provisions of or constitute
a default under any license, indenture, mortgage, charter, instrument, articles
of incorporation, bylaw, or other agreement or instrument to which ISSUER or its
shareholders are a party, or by which they may be bound, nor will any consents
or authorizations of any party other than those hereto be required, (b) an event
that would cause ISSUER to be liable to any party, or (c) an event that would
result in the creation or imposition or any lien, charge or encumbrance on any
asset of ISSUER or upon the securities of ISSUER to be acquired by SHAREHOLDERS.
vi. Full Disclosure. None of the representations and warranties made
by the ISSUER, or in any certificate or memorandum furnished or to be furnished
by the ISSUER, contains or will contain any untrue statement of a material fact,
or omit any material fact the omission of which would be misleading.
vii. Compliance with Laws. ISSUER has complied with, and is not in
violation of any federal, state, or local statute, law, and/or regulation
pertaining to ISSUER. ISSUER has complied with all federal and state securities
laws in connection with the issuance, sale and distribution of its securities.
viii. Conduct of Business. Prior to the closing, ISSUER shall conduct
its business in the normal course.
ix. Corporate Documents. Copies of each of the following documents,
which are true, complete and correct in all material respects, will be attached
to and made a part of this Agreement: 12. Articles of Incorporation; 13. Bylaws;
14. List of Officers and Directors; 15. 1997 Audited Financial Statements as
described in Section 2(iii); 16. List of Liabilities.
x. Documents. All minutes, consents or other documents pertaining to
ISSUER to be delivered at closing shall be valid and in accordance with both the
laws of Nevada and of Florida.
xi. Title. The Shares to be issued to SHAREHOLDERS will be, at
closing, free and clear of all liens, security interests, pledges, charges,
claims and encumbrances of any kind. They will, however, be RESTRICTED
SECURITIES, as that term is defined by the Securities Act of 1933. The Shares to
<PAGE>
be issued to SHAREHOLDERS will not be Registered, but will be issued pursuant to
an exemption from Registration. They will be subject to certain resale
restrictions imposed by Rule 144, or other applicable provisions of state and/or
Fed3eral law. However, none of such Shares are or will be subject to any voting
trust or agreement. No person holds or has the right to receive any proxy or
similar instrument with respect to such shares, except as provided in this
Agreement. The ISSUER is not a party to any agreement which offers or grants to
any person the right to purchase or acquire any of the securities to be issued
to SHAREHOLDERS. There is no applicable local, state or federal law, rule,
regulation, or decree which would, as a result of the issuance of the Shares to
SHAREHOLDERS, impair, restrict or delay SHAREHOLDERS' voting rights with respect
to the Shares.
The Availability of Federal and state exemptions and the legality of the
issuance of the Shares are conditioned upon, among other things, the fact that
the issuance of Shares to SHAREHOLDERS is for investment purposes only and not
with a view toward resale or distribution. Accordingly, SHAREHOLDERS represent
and do hereby represent that they are taking the Shares for their own account
and for the purpose of investment only, not with a view to, or in accordance
with, the distribution or sale of the Shares and that they will not sell,
pledge, assign or transfer or offer to sell, pledge, assign or transfer any of
their Shares without an effective registration statement under the Securities
Act, or an exemption therefrom and an opinion of counsel acceptable to the
Company that registration under the Securities Act is not required and that the
transaction complies with all applicable Federal and state securities or Blue
Sky laws.
3. SHAREHOLDERS and NBM represent and warrant to ISSUER the following:
i. Organization. NBM is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware, and has all necessary
corporate powers to own properties and carry on a business, and is duly
qualified to do business and is in good standing in Delaware. All actions taken
by the Incorporators, directors and shareholders of NBM have been valid and in
accordance with the laws of the State of Delaware.
ii. Capital. The authorized capital stock of NBM consists of
15,000,000 shares of common stock, $.01 par value, of which 14,988,614 shares
are issued and outstanding, and 590 shares of preferred stock, none of which are
issued and outstanding. All outstanding shares are fully paid and nonassessable,
free of liens, encumbrances, options, restrictions and legal or equitable rights
of others not a party to this Agreement. A total of 1,577,333 Warrants are
outstanding exercisable into 1,577,333 shares of Common Stock. At closing, there
will be no outstanding subscriptions, options, rights, warrants, convertible
securities, or other agreements or commitments obligating NBM to issue or to
transfer from treasury and additional shares of its capital stock except as set
forth herein. None of the outstanding shares of NBM are subject to any stock
restriction agreements. All of the shareholders of NBM have valid title to such
shares and acquired their shares in a lawful transaction and in accordance with
the laws of the State of Delaware.
iii. Liabilities. NBM is not aware of any pending, threatened or
asserted claims, lawsuits or contingencies involving NBM or its common stock.
There is no dispute of any kind between NBM and any third party, and no such
dispute will exist at the closing of this Agreement.
iv. Ability to Carry Out Obligations. NBM has the right, power, and
authority to enter into and perform its obligations under this Agreement. The
execution and delivery of this Agreement by NBM and the performance by NBM of
<PAGE>
of its obligations hereunder will not cause, constitute, or conflict with or
result in (a) any breach or violation or any of the provisions of or constitute
a default under any license, indenture, mortgage, charter, instrument, articles
of incorporation, bylaw, or other agreement or instrument to which NBM or its
shareholders are a party, or by which they may be bound, no will any consents or
authorizations of any party other than those hereto be required, (b) an event
that would cause NBM to be liable to any party, or (c) an event that would
result in the creation or imposition or any lien, charge or encumbrance on any
asset of NBM or upon the securities of NBM to be acquired by ISSUER>
v. Full Disclosure. None of the representations and warranties made by
NBM, or in any certificate or memorandum furnished or to be furnished by NBM,
contains or will contain any untrue statement of a material fact, or omit any
material fact the omission of which would be misleading.
vi. Compliance with Laws. NBM has complied with, and is not in
violation of any federal, state, or local statute, law, and/or regulation
pertaining to NBM. NBM has complied with all federal and state securities laws
in connection with the issuance, sale and distribution of its securities.
vii. Corporate Documents. Copies of each of the following documents,
which are true complete and correct in all material respects, will be attached
to and made a part of this Agreement:
1. Articles of Incorporation;
2. Bylaws;
3. List of Officers and Directors;
viii. Documents. All minutes, consents or other documents pertaining
to NBM to be delivered at closing shall be valid and in accordance with the laws
of Florida.
4. BUY-BACK PROVISION.
ISSUER and NBM agree that immediately following the closing of this
Agreement, FEF shall cause to be issued, two (2) classes of Preferred Stock as
follows:
i. To existing management of FEF one (1) million shares designated as
Class A Preferred (preference being non-voting and each share convertible into
six (6) shares of Common Stock of FEF except as otherwise provided herein); and
ii. To the existing shareholders of ISSUER immediately prior to
closing, one (1) million shares of Class B Preferred (preference being
non-voting and each share convertible into tow (2) shares of FEF except as
otherwise provided herein).
Both classes of Preferred Stock shall be convertible into Common Stock
of FEF only upon the occurrence of the earlier of the following:
(a) Three years from and after the closing of this Agreement; or
(b) At any time more than one (1) year from and after the date of
this Agreement, the FEF Board of Directors approves a spin-off of the
corporation as a separate independent, operating entity.
<PAGE>
In the event more than three (3) years from and after the date of this
Agreement passes and (A) a spin-off of FEF has not occurred or been initiated;
or (B) ISSUER has not been accepted for listing on the NASDAQ Small Cap Market,
NASDAQ National Market, American Stock Exchange, or other equivalent exchange,
and the Common Stock has not reached a minimum ten dollars ($10.00) per share
bid price on any such exchange for a minium of sixty (60) consecutive calendar
days at any time from and after the second anniversary date of the execution of
this Agreement, the Board of Directors of ISSUER and FEF shall jointly meet (a
simple majority of the combined Boards is sufficient for this action) and shall
make a final decision. In the event a spin-off of FEF in initiated and
completed, Preferred shares shall be converted into Common Stock as previously
stated. In the event the combined Board of Directors elect not to spin-off FEF,
the holders of the Class A and Class B Preferred shares shall have such shares
converted into Common Stock as follows:
(i) Each one (1) share of Class A Preferred into one (1) shares
of ISSUER; and
(ii) Each one (1) shares of Class B Preferred into three-fourths
(3/4) share of the Common Stock of ISSUER.
Notwithstanding any of the foregoing, one hundred percent (100%) of the
holders of Class A and Class B Preferred shares may elect at any time to convert
the Class A and Class B Preferred shares into the Common Stock of ISSUER at the
rate stated in the preceding sentence, and thereafter any conversion rights and
any other provisions with respect to a spin-off shall be forthwith null and
void.
In any and all such events, NBM shall retain a minimum of twenty percent
(20%) of the issued and outstanding common stock of FEF, and other equity
interests in the event tow (2) or more classes of stock are issued and
outstanding.
5. NAME CHANGE. Promptly after closing ISSUER shall change its name to National
Boston Medical, Inc.
6. CLOSING. The closing of this transaction shall take place at the law offices
of Mintmire & Associates @ 265 Sunrise Avenue, Suite 204, Palm Beach, Florida.
7. INDEMNIFICATION OF ISSUER AND ITS OFFICERS AND DIRECTORS. ISSUER shall
indemnify NBM, its Officers, Directors, Employees and Agents in accordance with
the following: (i) ISSUER shall indemnify and hold harmless NBM, its Officers,
Directors, Employees and Agents who is or will be 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, from any
action brought by or on behalf of any creditor of ISSUER or party injured by
ISSUER, its Officers, Directors, Employees or Agents or by reason of the fact
that he is or was a director, officer, employee or agent of ISSUER, or is or was
otherwise serving at the request of ISSUER as a 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 NBM, its
Officers, Directors, Employees and Agents in connection with such action, suit
<PAGE>
proceeding with regard to any debt or liability not communicated to and accepted
in writing by NBM; and, (ii) The indemnification provided by this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under this Agreement.
8. EXPENSE PROVISION. ISSUER and NBM agree to and shall reimburse the other for
any and all expenses, debts, claims or similar charges not disclosed to the
other herein and further agree that such items, if any, may be offset by either
party against any amounts owed or due the other.
9. REMEDIES.
i. Arbitration. Any controversy or claim arising out of, or relating
to, this Agreement, or the making, performance, or interpretation thereof, shall
be settled by arbitration in Palm Beach County, Florida in accordance with the
Rules of the American Arbitration Association under its Commercial Arbitration
Rules then existing, and judgment on the arbitration award may be entered in any
court having jurisdiction over the subject mater of the controversy.
10. MISCELLANEOUS.
i. Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
now way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
ii. No oral change. This Agreement and any provision herein, may not
be waived, changed, modified, or discharged orally, but only by a written
agreement signed by both parties to this Agreement.
iii. No Waiver. Except as otherwise provided herein, no waiver of any
covenant, condition, or provision of this Agreement shall be deemed to have been
made unless expressly in writing and signed by the party against whom such
waiver is charged; and (a) the failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants, or conditions of
this Agreement or to exercise any option herein contained shall not be construed
as a waiver or relinquishment for the future of any such provisions, covenants,
or conditions, (b) the acceptance of performance of anything required by this
Agreement to be performed with knowledge of the breach or failure of a covenant,
condition, or provision hereof shall not be deemed a waiver of such breach or
failure, and (c) no waiver by any party of one breach by another party shall be
construed as a waiver with respect to any other or subsequent breach.
iv. Ability to Ask Questions. SHAREHOLDERS have been given a full
opportunity to ask questions of and to receive answers from the ISSUER
concerning the terms and conditions of this Agreement and the business of the
ISSUER, and to obtain additional information necessary to verify the accuracy of
the information given him/her or to obtain such other information as is desired
in order to evaluate the ISSUER and this transaction. All such questions have
been answered to the full satisfaction of the SHAREHOLDER.
v. Advice of Counsel. NBM and SHAREHOLDERS have been represented by
independent counsel by Donald F. Mintmire, Esq. And Bradley F. Rothenberg, Esq.
Of Mintmire & Associates and has also sought the advice of an independent tax
<PAGE>
advisor with regard to the tax consequences of this Agreement. ISSUER has
proceeded without legal representation.
vi. Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
vii. Entire Agreement. This Agreement contains the entire Agreement
and understanding between the parties hereto, and supersedes all prior
agreements and understandings.
viii. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
ix. Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed, and by fax, as follows:
ISSUER: Fragrance Express, Inc.
3550 Gateway Drive
Pompano Beach, FL 33069
NBM: National Boston Medical, Inc.
P.O. Box 1161
43 Taunton Green, 3rd Floor
Taunton, MA 02780
With a copy to: Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
x. Agreement to Carry Out Purpose. The parties agree to execute any
and all additional documents reasonably required to effect and carry out the
terms of this Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this 8th
day of October, 1998.
ISSUER NBM
Fragrance Express, Inc. National Boston Medical, Inc.
a Nevada Corporation And SHAREHOLDERS
By: /s/ Robert M. B[illegible] By:/s/ Daniel J. Hoyng
<PAGE>
EXHIBIT A
SHAREHOLDERS LIST
=============================================================================
- -----------------------------------------------------------------------------
<PAGE>
EXHIBIT B
FINANCIAL STATEMENTS
=============================================================================
- -----------------------------------------------------------------------------
<PAGE>
EXHIBIT C
LIABILITIES
============================================================================
- ----------------------------------------------------------------------------
EXHIBIT 10.4
AGREEMENT TO PURCHASE
PARTIES: National Boston Medical, Inc.
43 Taunton Green 3rd Floor
P.O. Box 1161
Taunton, MA 02780
Medical Marketing Group LLC
43 Taunton Green
Taunton, MA 02780
FACTS:
1. On March 13, 1997 DJH Holdings LLC was filed with the State of Nevada.
2. The original charter for DJH Holdings LLC was issued on March 13, 1997 by
the state of Nevada.
3. The office address for the Medical Marketing Group LLC was filed as 43
Taunton Green, Taunton, MA 02780
4. The Resident Agent for DJH Holdings LLC, later known as the Medical
Marketing Group LLC, is John Gallager, Esquire, 100 West Liberty Street,
Suite 800, P.O. Box 2838, Reno, Nevada 89505.
5. On July 14, 1998, an amendment to the Articles of Organization of DJH
Holdings LLC was filed, changing DJH Holdings LLC to the Medical Marketing
Group LLC, file #LLC841-97.
6. The parties listed below are all shareholders and/or officers of the above
Medical Marketing Group LLC841-97.
<TABLE>
<CAPTION>
Name # of Shares % of Ownership
<S> <C> <C>
Daniel & Cecilia Hoyng 2,750,000 79%
Louis & Dorothy 20,000 1%
Kurt Meinel 20,000 1%
Barbara Randall 250,000 7.25%
Ray Volpe 250,000 7.25%
Ralph Kristiansen 125,000 3.5%
Shirley Hainse 20,000 1%
-------------
3,435,000
</TABLE>
PURPOSE AND TERMS:
7. National Boston Medical, Inc. is a Nevada Corporation formed on August 22,
1997. National Boston Medical Inc. has it's corporate offices located at 43
Taunton Green 3rd
<PAGE>
Floor, Taunton, MA 02780. The president of National Boston Medical, Inc. is
Daniel Hoyng.
8. The purpose of this agreement is the acquisition of Medical Marketing Group
LLC (former known as DJH Holdings LLC) shares of the corporation by
National Boston Medical, Inc. by method of a share exchange or "stock
wrap."
9. National Boston Medical, Inc. desires to purchase all of the outstanding
shares of Medical Marketing Group LLC by a "stock swap" exchanging shares
of National Boston Medical, Inc. for all of the shares of outstanding and
all unissued but authorized shares of Medical Marketing Group LLC.
10. Medical Marketing Group LLC herewith agrees and asserts that it has
disclosed all of it's assets and liabilities to National Boston Medical,
Inc..
11. Medical Marketing Group LLC has herewith delivered to National Boston
Medical, Inc. the books and records of the corporation from the corpora
attorney John K. Gallagher.
12. The corporate records of Medical Marketing Group LLC are attached herewith
as Exhibit A.
13. National Boston Medical Inc. herewith agrees to exchange National Boston
Medical, Inc. shares in the following amounts for proportionate shares held
by shareholders of Medical Marketing Group LLC and the following
shareholders of the Medical Marketing Group LLC state that they as sole
shareholders of the Medical Marketing Group LLC state that they as sole
shareholders and officers of the corporation, will transfer all stock
authorized and unauthorized to National Boston Medical, Inc.
<TABLE>
<CAPTION>
Existing Medical Marketing Shareholders National Boston Medical, Inc.
shares to be Exchanged
<S> <C> <C>
Daniel & Cecilia Hoyng 2,750,000 394,375
Louis & Dorothy 20,000 5,000
Kurt Meinel 20,000 5,000
Barbara Randall 250,000 36,250
Ray Volpe 250,000 35,250
Ralph Kristiansen 125,000 18,125
Shirley Hainse 20,000 5,000
</TABLE>
14. That the stock exchange includes an assignment of any and all rights that
Medical Marketing Group LLC may have in the corporation to certain
products, names, investors, etc... to National Boston Medical, Inc.
15. That as part of the "stock exchange" the parties agree that this exchange
agreement may be altered to comply with requirements of lawyers and
accounts to minimize any tax exposures or corpora rules so long as such
changes do not materially alter the terms of this contract.
16. That the following Daniel and Cecilia Hoyng certify that they hold 79% or
more than 3/4's of all the stock outstanding of Medical Marketing Group LLC
and that as such substantial majority shareholders, they have the right
<PAGE>
and authorization to execute such share exchange agreement on behalf of
Medical Marketing Group LLC.
17. That Daniel J. Hoyng and Cecilia Hoyng as the Board of Managers of
the company have the further authorization to execute this "stock
swap" agreement, Sec. Sections 7.9 to 7.13 of the "operating
agreement for DJH Holdings LLC.
18. Both parties to the agreement have agreed that the initial capital
contribution to the Medical Marketing Group LLC was .0001 per share.
All matters regarding "transfer of shares" shall be governed by
Article 8 of the operating agreement of Medical Marketing Group LLC.
19. That the Stock Certificates of Medical Marketing Group LLC bear the
following legends: See Exhibit B.
20. That the parties agree to cooperate and execute all agreements to
complete this "stock swap" so long as such agreements do not
"materially alter" the original intention of the parties.
Dated: November 3, 1997
Medical Marketing Group LLC
By:/s/ Daniel Hoyng
----------------------
Daniel Hoyng
/s/ Cecilia Hoyng
----------------------
Cecilia Hoyng
National Boston Medical, Inc.
By:______________________________
<PAGE>
FILED ARTICLES OF ORGANIZATION
IN THE OFFICE OF THE OF
SECRETARY OF STATE OF THE DJH HOLDINGS, LLC
STATE OF NEVADA A Limited-Liability Company
Mar 13 1997
We, the undersigned, pursuant to the Nevada Revised Statutes governing
limited-liability companies, hereby adopt the following Articles of Organization
for a limited-liability company:
ARTICLE I
NAME
The name of the limited-liability company is DJH HOLDINGS, a
Limited-Liability Company (the "Company").
ARTICLE II
DURATION
This company shall dissolve, and its period of duration shall end, 30 years
form the date these Articles of Organization are filed with the Nevada Secretary
of State.
ARTICLE III
RESIDENT AGENT
The name and business address of the resident agent of this Limited
Liability Company is:
John K. Gallagher, Esquire
Guild, Russell, Gallagher & Fuller, Ltd.
100 W. Liberty Street, Suite 800
Reno, NV 89501
ARTICLE IV
CONTINUATION
Upon the death, retirement, resignation, expulsion, bankruptcy or
dissolution of a member or the occurrence of any other event which terminates
the continued membership of a member in his Company, the remaining members may
unanimously agree to continue the business of this Company as provided in the
Operating Agreement.
ARTICLE V
ORGANIZERS
The name and street address of the Organizers are as follows:
<PAGE>
Name Address
Janice Maddux 100 W. Liberty Street
Suite 800
Reno, Nevada 89505
Debbie Brown 100 W. Liberty Street
Suite 800
Reno, Nevada 89505
Sheron Schwary 100 W. Liberty Street
Suite 800
Reno, Nevada 89505
ARTICLE VI
MANAGEMENT
This Company shall be managed by a Management Committee composed of at
least one voting member. The following managers shall serve until the first
annual meeting of members or until their successors are elected and qualified:
Name Address
Daniel J. Hoyng P.O. Box 584
North Dighton, MA 02764
Cecelia Hoyng P.O. Box 584
North Dighton, MA 02764
ARTICLE VII
INDEMNITY
Section 7.01 Right to Indemnity. Every person who was or is a party, or is
threatened to be made party to or is involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or a person of whom he is the legal representative is or was a manager,
member, employee or agent of this Company, or is or was serving at the request
of this Company as a manager, member, employee or agent of another
limited-liability company, or as a director, officer or representative in a
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless to the fullest extent legally permissible under
the laws of the State of Nevada from time to time against all expenses,
liability and loss (including attorneys' fees, judgments, fines and amounts paid
or to be paid in settlement) reasonably incurred or suffered by him in
connection therewith. Such right of indemnification shall be a contract right
which may be enforced in any manner desire4d by such person. Such right of
indemnification shall not be exclusive of any other right which such managers,
members or representatives may have or hereafter acquire, and, without limiting
the generally of such statement, they shall be entitled to their respective
rights of indemnification under any operating agreement or other agreement, vote
or members, provision or law, or otherwise, as well as their rights under this
Article.
<PAGE>
Section 7.02 Expenses Advanced. Expenses of managers and members incurred
in defending a civil or criminal action, suit or proceeding by reason of any act
or omission of such managers of members acting as a manager or member shall be
paid by the Company as they are incurred and in advance of the final disposition
of the action, suit or proceeding, upon receipt of any undertaking by or on
behalf of the manager or member to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the Company.
Section 7.03 Operating Agreement; Insurance. Without limiting the
application of the foregoing, the members may adopt a provision in the operating
agreement from time to time with respect to indemnification, to provide at all
times the fullest indemnification permitted by the laws of the State of Nevada,
and may cause this Company to purchase and maintain insurance or other financial
arrangements on behalf of any person who is or was a manager or member of this
Company as a member or manager of another limited-liability company, or as its
representative in a corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred in
any such capacity or arising out of such status, to the fullest extent permitted
by the laws of the State of Nevada, whether or not this Company would have the
power to indemnify such person.
The indemnification and advancement of expenses provided in this Article
shall continue for a person who has ceased to be a member, manager, employee or
agent, and inures to the benefit of their heirs, executors and administrators of
such a person.
ARTICLE VIII
RETURN OF CONTRIBUTIONS
A member may only demand cash in return for his or its contribution to
capital, but the Company may require a member to accept cash, property,
promissory notes or any combination thereof in return for the member's
contribution to capital.
IN WITNESS WHEREOF, we have hereunto set our hands this 12th day of March,
1997.
/s/ Janice Maddux /s/ Debbie Brown /s/ Sheron Schwary
- ---------------- ------------------ -------------------
Janice Maddux Debbie Brown Sheron Schwary
STATE OF NEVADA )
) SS.
COUNTY OF WASHOE )
On this 12th day of March, 1997, before me, a notary public, personally
appeared Janice Maddux, Debbie Brown and Sheron Schwary who acknowledged to me
that they executed the foregoing instrument.
/s/ Jillene A. Zarker
-----------------------
Notary Public
[seal]
<PAGE>
OPERATING AGREEMENT
FOR
DJH HOLDINGS,
a limited liability company
ARTICLE 1.
DEFINITIONS
The following capitalized terms are used in this Operating Agreement with
the meanings thereafter ascribed:
"Affiliate" means (a) in the case in an individual, any relative of such
Person, (b) any officer, director, trustee, partner, manager, employee or holder
of ten percent (10%) or more of any class of the voting securities of or equity
interest in such Person; (c) any corporation, partnership, limited liability
company, trust or other entity controlling, controlled by or under common
control with such Person; or (d) any officer, director, trustee, partner,
manager, employee or holder of ten percent (10%) or more of the outstanding
voting securities of any corporation, partnership, limited liability company,
trust or other entity controlling, controlled by or under common control with
such Person.
"Articles of Organization" means the Articles of Organization of DJH
Holdings as filed with the Secretary of State of Nevada as the same may be
amended from time to time.
"Capital Account" means a capital account maintained in accordance with the
rules contained in Treas. Reg. Section 1.701-1(b)(2) as maintained in accordance
with applicable rules under the Code and as set forth in Treas. Reg. Section
1.704-1(b)(2)(4) as amended form time to time.
"Capital Contribution" means any contribution to the capital of the Company
in cash or property by a Shareholder whenever made.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company" means DJH Holdings, a Limited Liability Company.
"Deceased Holder" has the meaning ascribed to such term in Section 6.5
hereof.
"Disposition" means any transfer or attempted transfer of all or any part
of the rights and incidents of ownership of the Shares, including, in the case
of a Shareholder, the right to vote, and the right to possession of shares as
collateral for indebtedness, whether such transfer is outright or conditional,
inter vivos or testamentary, voluntary or involuntary, or for or without
consideration.
"Distributable Cash" means all cash, revenues, and funds received by the
Company from Company operations, less the sum of the following to the extent
paid or set aside by the Company: (a) all principal and interest payments on
indebtedness of the Company and all other sums paid to lenders; (b) all cash
expenditures incurred incident to the normal operation of the Company's
business; (c) such Reserves as the Board of Managers deems reasonably necessary
to the proper operation of the Company's business.
<PAGE>
"Economic Interest" means a Shareholder's share of the Company's Net
Profits, Net Losses and distributions of the Company's assets pursuant to this
Operating Agreement with share shall be equal to the quotient of the number of
Shares held of record by such Shareholder divided by the total number of Shares
then outstanding.
"Economic Interest Holder" means a holder of Shares which only represent an
Economic Interest and not any right to vote or otherwise participate in the
affairs or management of the Company.
"Entity" means any general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust,
cooperative, or association or any foreign trust or foreign business
organization.
"Event of Dissolution" means an event so defined in NRS 86.491.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" at any time and from time to time means the quotient of
(a) the fair market value of the Company as of the date immediately prior to the
relevant meaning, as determined in good faith by the Board of Managers of the
Company, divided by (b) the total number of Shares outstanding on the applicable
date. In making the determination of the Fair Market Value pursuant to this
subsection, the Board of Managers shall assume that fair market value of the
Company is equal to the amount which would be paid in cash for the Company, as a
going concern, by an unaffiliated third party financial buyer, and may take into
account such additional factors as may be relevant to such valuation, including
without limitation, the absence of a trading market for the Shares, the minority
status of the Shares, and such other facts and circumstances as may be material.
The Board of Managers may, but shall not be obligated to, engage in the services
of a reputable, experience investment banking firm to assist it in the
determination of Fair Market Value. The cost of determining Fair Market Value
shall be borne by the Company.
"Fiscal Year" means the Company's fiscal year, which shall be the calendar
year.
"Initial Capital Contribution" means the initial contribution to the
capital of the Company made by a Shareholder pursuant to this Operating
Agreement, which shall be $.0001 per Share.
"Manager" means one or more Persons designated or elected to the Board of
Managers pursuant to this Agreement.
"Net Capital Contribution" as to a Shareholder means the aggregate Capital
Contribution by such Shareholder reduced by the amounts distributed to such
Shareholder as returns of capital.
"Net Losses" means the Company's taxable loss as computed under the Code.
"Net Profits" means the Company's taxable income and gain as computed under
the Code.
"Nevada Act" means Chapter 86 of the Nevada Revised Statutes ("NRS").
<PAGE>
"New Securities" has the meaning ascribed to such term in Section 6.10
hereof.
"Officer" means one or more persons appointed by the Board of Managers
pursuant to Article 6 hereof.
"Operating Agreement" means this Operating Agreement as originally executed
and as amended from time to time.
"Permitted Disposition" means a Disposition by an assignment of an Economic
Interest in the Company (evidenced by the Shares to be assigned):
(a) to which each Shareholder consents in writing;
(b) effected pursuant to the provisions of Section 12.1 hereof; or
(c) to a member o such Shareholder's immediate family, as defined in the
regulations promulgated under Section 15 of the Exchange Act, or to
any trust for his or their benefit.
The foregoing notwithstanding, no Permitted Disposition shall entitle the
transferee to the rights and benefits of a Shareholder, unless and until such
transferee is admitted to the Company as a Shareholder in the manner described
in Article 14 hereof. In addition, no Disposition shall be a Permitted
Disposition unless the Transferring Shareholder shall have obtained in written
agreement of the transferee, that such transferee will be bound by, and the
Shares proposed to be transferred will be subject to, the restrictions on
transfer in Article 13 of this Operating Agreement.
"Person" means any individual or entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such "Person"
where the context so permits.
"Preferred Return" means an amount computed as if it were interest to each
Shareholder's Net Capital Contribution, from time to time, as determined by the
Board of Managers from time to time.
"Prime Rate" means the "prime rate" as announced from time to time.
"Reserve" means with respect to any fiscal period, funds set aside or
amounts allocated during such period to reserves which shall be maintained in
amounts deemed sufficient by the Board of Managers for working capital and to
pay taxes, insurance, debt service, or other costs or expenses incident to the
ownership or operation of the Company's business.
"Shareholder" means each of the parties who executes a counterpart of this
Operating Agreement as a Shareholder and each of the parties who may hereafter
become Shareholders pursuant to this Agreement. If a Manager has purchased or
received a Shareholder Interest in the Company, such Manager will have all the
rights of a Shareholder with respect to such Shareholder Interest, and the term
"shareholder" as used herein shall include a Manager to the extent such Manager
has purchased a Shareholder Interest in the Company. If a Person is an
Shareholder immediately prior to the purchase or other acquisition by such
Person or an Economic Interest, such Person shall have all the rights of a
Shareholder with respect to such purchased or otherwise acquired Shareholder
<PAGE>
Interest or Economic Interest, as the case may be.
"Shareholder Interest" means a Shareholder's entire interest in the Company
consisting of such Shareholder's Economic Interest together with the right to
vote on, consent to, or otherwise participate in any decision or action of or by
the Shareholders granted pursuant to this Operating Agreement or the Nevada Act.
A Shareholder is entitled to one vote for each Share held by such Shareholder on
all matters that require or are submitted by the Board of Managers to a vote or
other action by the Shareholders.
"Shares" are the basis for determining a Shareholder's share of the Net
Profits and Net Losses, distributions of the Company's assets pursuant to this
Operating Agreement, and the voting rights of Shareholders. Shares shall be
evidenced by certificates in the form approved by the Board of Managers. Shares
shall be designated as either Class A Common Stock or Class B Common Stock,
pursuant to Article 8.
"Transaction" means the Company shall consummate (a) a sale of all or
substantially all of the assets of the Company, (b) the merger of the Company
into another person or any consolidation, share exchange, combination,
reorganization, or like transaction in which the Company is not the survivor or
in which Persons holding a majority of the Shares of the Company issued and
outstanding immediately prior to the consummation of such transaction and any
related transaction hold less than a majority of the issued and outstanding
equity interests of the resulting or surviving person immediately after the
consummation of such transaction or transactions, or (c) a sale or transfer of
85% or more of the issued and outstanding Shares of the Company held by
Shareholder.
"Transferring Shareholder" means Shareholder who sells, assigns, pledges,
hypothecates, or otherwise transfers for consideration or gratuitously all or
any portion of the Shares held of record by such Shareholder.
"Treasury Regulations" or "Regulations" means the Federal Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Withdrawing Shareholder" means a Shareholder who counts or incurs in Event
of Dissociation within the meaning of NRS 86.491.
ARTICLE 2
BUSINESS OF COMPANY
The Company may engage in any lawful business whatsoever, or which shall at
any time appear conducive to or expedient for the protection or benefit of the
Company and its assets. The Company shall have all powers necessary to or
reasonably connected with the Company's business which may be legally exercised
by a limited liability company under the Nevada Act or which are necessary,
customary, convenient, or incident to the realization of its business purpose.
ARTICLE 3
NAMES AND ADDRESSES OF SHAREHOLDERS
The names and addresses of the Shareholders are set out on Schedule 1
hereto under the caption Shareholder's Name and Address.
<PAGE>
ARTICLE 4
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management. The full and entire management of the business and
affairs of the Company shall be vested in the Board of Managers which shall have
and may exercise all of the powers that may be exercised or performed by the
Company. Except for situations in which the approval of the Shareholders is
expressly required by this Operating Agreement or by non-waivable provisions of
applicable law, the Board of Managers shall have full and complete authority,
power and discretion to manage and control the business, affairs, and properties
of the Company, to make all decisions regarding those matters, and to perform
any and all other acts or activities customary or incident to the management of
the Company's business.
Section 4.2 Number, Tenure, and Qualifications. The Board of Managers shall
initially consist of two (2) persons. The Shareholders shall, from time to time,
fix by resolution the precise number of the Board of Managers, provided that
there shall be not less than two (2) nor more than nine (9) Managers. Managers
shall be elected at each annual meeting of Shareholders and shall hold office
until the first to occur of the death (or dissolution as the case may be),
resignation, or removal of such Manager, or until a successor to such Manager
shall been elected and qualified.
Section 4.3 Manner of Action,. Quorum. At any time when there is more than
one Manager, the Board of Managers may not take any action permitted to be taken
by the Board of Managers, unless the Board of Managers act at any regular or
special meeting held in accordance with Section 4.5 hereof or by unanimous
written consent in accordance with Section 4.6 of this Operating Agreement. A
majority of the Board of Managers shall constitute a quorum for the transaction
of business at any meeting. All resolutions adopted and all business transacted
by the Board of Managers shall require the affirmative vote of a majority of the
Managers present at the meeting. Managers need not be residents of the State of
Nevada or Shareholders of the Company.
Section 4.4 Vacancies. The Managers may fill the place of any Manager which
may become vacant prior to the expiration of his term, such appointment by the
Managers to continue until the expiration of the term of the Manager whose place
has become vacant, or may fill any vacancy created by reason of an increase in
the number of Managers, such appointment by the Managers to continue for a term
of office until the next election of Managers by the Shareholders and until the
election of the successor.
Section 4.5 Meetings. The Managers shall meet annually, without notice,
following the annual meeting of the Shareholders. The Board of Managers may set
any number of regular meetings by resolution. No notice need be given for any
annual or regular meeting of the Board of Managers. Special meetings of the
Managers may be called at any time by any two Managers, on two days written
notice to each manager, which notice shall specify the time and place of the
meeting. Notice of any such meeting may be waived by an instrument in writing
executed before or after the meeting. Managers may attend and participate in
meetings either in person or by means of conference telephones or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such
communication equipment shall constitute presence in person at any meeting.
Attendance in person at such meeting shall constitute a waiver of notice
thereof.
<PAGE>
Section 4.6 Action in Lieu of Meeting. Any action to be taken at a meeting
of the Managers, or any action that may be taken, shall be signed by all of the
Managers and any further requirement of law pertaining to such consents have
been complied with.
Section 4.7 Removal. Any Manager may be removed from office with cause,
upon the majority vote of the Shareholders, at a meeting with respect to which
notice of such purpose is given. For purposes of this provision, cause shall be
defined as conduct which is fraudulent or otherwise detrimental to the business
and/or reputation of the Company.
Section 4.8 Certain Powers of the Board of Managers. The Board of Managers
shall have plenary power and authority to conduct the business of the Company.
Without limiting the generality of the preceding sentence or the powers
described in Section 4.1 hereof, the Board of Managers shall have full power and
authority to authorize the Company.
(a) To acquire property from any Person as the Board of Managers may
determine. The fact that a Manager or a Shareholder is directly or indirectly
affiliated or connected with any such person shall not prohibit the Board of
Managers from dealing with that Person.
(b) To borrow money for the Company from banks, other lending
institutions, one or more Manager, Shareholder, or affiliates of a Manager or
Shareholders on such terms as the Managers deem appropriate, and in connection
therewith, to hypothecate, encumber and grant security interest in the assets of
the Company to secure repayment of the borrowed sums. NO debt shall be
contracted or liability incurred by or on behalf of the Company except by the
Board of Managers, or to the extent permitted under the Nevada Act, by agents or
employees of the Company expressly authorized to contract such debt or incur
such liability by the Board of Managers.
(c) To purchase liability and other insurance to protect the
Company's property and business.
(d) To invest any Company funds temporarily (by way of example but
not limitation) in time deposits, short-term governmental obligations,
commercial paper or other investments.\
(e) Upon the affirmative vote of the Shareholders holding at least a
majority of the Shares held by the Shareholders, to sell or otherwise dispose of
all or substantially all of the assets of the Company as part of a single
transaction or plan so long as such disposition is not in violation of or a
cause of a default under any other agreement to which the Company may be bound.
The affirmative vote of the Shareholders shall not be required with respect to
any sale or disposition of the Company's assets in the ordinary course of the
Company's business.
(f) To execute on behalf of the Company all instruments and
documents, including, without limitation, checks; drafts; notes and other
negotiable instruments; mortgages or deeds of trust; security agreements;
financing statements; documents providing for the acquisition, mortgage or
disposition of the Company's property; assignments; bills of sale; leases;
partnership agreements, operating agreement of other limited liability
companies; and any other instruments or documents necessary, in the opinion of
the Board of Managers, to the business of the Company.
(g) To employ accountants, legal counsel, managing agents, or other
experts to perform services for the Company and to compensate them from Company
funds.
<PAGE>
(h) To enter into any and all other agreements on behalf of the
Company, with any other Person for any purpose, in such forms as the Board of
Managers may approve.
(i) To create offices and to delegate executive responsibility to
them, and to appoint individuals, who need not be Managers, to serve as such
officers at the pleasure of the Board of Managers.
(j) To do and perform all other acts as may be necessary or
appropriate to the conduct of the Company's business.
(k) To issue authorized but unissued Shares.
(l) To fix, without Shareholder action, the relative rights,
privileges, preferences as to (i) allocations of taxable income, gain, and loss
and (ii) distributions.
Unless authorized by the Board of Managers, no attorney-in-fact, employee,
or other agent of the Company shall have any power or authority to bind the
Company in any way, to pledge it credit, or to render it liable pecuniary for
any purpose. NO Shareholder shall have any power or authority to bind the
Company unless the Shareholder has been authorized by the Board of Managers to
act as an agent of the Company in accordance with the previous sentence.
Section 4.9 Liability for Certain Acts. No Manager shall be liable to the
Company or to any Shareholder for any loss or damage sustained by the Company or
any Shareholder except loss or damage resulting from (a) intentional misconduct,
(b) knowing violation of law, or (c) a transaction from which such Manager
received an improper personal benefit in violation or breach of the provisions
of this Operating Agreement or the Nevada Act. The Managers shall be entitled to
rely on information, opinions, reports, or statements, including but not limited
to financial statements or other financial data, prepared or presented by any
Officer or by third persons employed by an Officer.
Section 4.10 Indemnity of the Managers, Officers, Employees, and Other
Agents. To the fullest extent permitted by the Nevada Act, the Company shall
indemnify the Managers and its Officers, if any, from and against all costs of
defense (including reasonable attorneys' fees), judgments, fines, and amounts
paid in settlement suffered by a Manager because a Manager was made a party to
an action because the Manager is or was a Manager or an Officer of the Company
or an Officer, director, partner, or manager of another Person at the request of
the Company, and make advances for expenses to such Managers and officers with
respect to such matters to the maximum extent permitted under applicable law.
Section 4.11 Resignation. Any Manager of the Company may resign at any time
by giving written notice to the Shareholders of the Company. The resignation of
any Manager as a Manager shall take effect upon receipt of notice thereof or at
such later time as shall be specified in such notice, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. The resignation of a Manager who is also a Shareholder shall
not affect the Manager's rights as a Shareholder and shall not constitute an
Event of Dissolution as to such Manager.
Section 4.12 Officers' and Managers' Compensation. Any salaries or other
<PAGE>
compensation of the Officers shall be fixed by the Board of Managers, and no
Officer shall be prevented from receiving such salary by reason of the fact that
he is also a Shareholder of the Company. Managers who are employees of the
Company shall not receive special or separate compensation for serving as the
Board of Managers, but may receive compensation as Officers or employees.
ARTICLE 5
OFFICERS
Section 5.1 General Provisions. The Officers of the Company shall consist
of a President, and a Secretary/Treasurer who shall be elected by the Board of
Managers, and such other officers as may be elected by the Board of Managers or
appointed as provided in this Operating Agreement. Each Officer shall be elected
or appointed for a term of office running until the meeting of the Board of
Managers following the next annual meeting of the Shareholders, or such other
term as provided by resolution of the Board of Managers or the appointment to
office. Each Officer shall serve for the term of office for which he or she is
elected or appointed and until his or her successor has been elected or
appointed and has qualified or his or her earlier resignation, removal from
office, or death. Any two or more offices may be held by the same person, except
that the President and the Secretary/Treasurer shall not be the same person.
Section 5.2 President. The President shall be the chief executive officer
of the Company and shall have general and active management of the operation of
the Company subject to the authority of the Board of Managers. The President
shall be responsible for the administration of the Company, including general
supervision of the policies of the Company and general active management of the
financial affairs of the Company, and shall execute bonds, mortgages, or other
contracts in the name and on behalf of the Company.
Section 5.3 Vice President. The Company may have one or more Vice
Presidents, elected by the Board of Managers or appointed by the President, who
shall perform such duties and have such powers as may be delegated by the
President or the Board of Managers.
Section 5.4 Secretary/Treasurer. The Secretary shall keep minutes of all
meetings of the Shareholders and the Board of Managers and have charge of the
minute books and shall perform such other duties and have such other powers as
may from time to time be delegated to him or her by the President or the Board
of Managers. The Secretary/Treasurer shall be charged with the management of the
financial affairs of the Company, shall have the power to recommend action
concerning the Company's affairs to the President, and shall perform such other
duties and have such other powers as may from time to time be delegated to him
or her by the President or the board of Managers.
ARTICLE 6
RIGHTS AND OBLIGATIONS OF SHAREHOLDERS
Section 6.1 Limitation on Liability. Each Shareholder's liability shall be
limited as provided in the Nevada Act.
Section 6.2 No Liability for Company Obligations. No Shareholder will have
any personal liability for any debts or losses of the company beyond such
Shareholder's Capital Contributions, except as provided by law.
<PAGE>
Section 6.3 Priority and Return of Capital. Except as may be expressly
provided in Article 10, no Shareholder shall have priority over any other
Shareholder, either as to the return of Capital Contributions or as to Net
Profits, Net Losses, or distributions. This Section 6.4 shall not apply to loans
(as distinguished from Capital Contributions) which a Shareholder has made to
the Company.
Section 6.4 Purchase Upon Death. Upon the death of any Shareholder or the
dissolution of a corporate Shareholder (the "Deceased Shareholder"), the Company
shall have the irrevocable option, exercisable for 6 months after the date of
death of the Deceased Shareholder, to purchase from the estate of such Deceased
Shareholder, all Shares then owned by the estate of the Deceased Shareholder.
The Purchase Price for such Shares shall be the Fair Market Value and shall be
paid by delivery of an unsecured promissory note of the Company, payable to the
order of the Deceased Shareholder (or the personal representative, executor, or
administrator of the Deceased Shareholder, as the case may be), and bearing
interest at the Prime Rate in effect on the date of the closing plus tow
percentage points, with accrued and unpaid interest being due on each principal
installment payment date. The principal amount of such note shall be payable in
(i) eight (8) equal quarterly installments if the original principal amount of
the note is equal to or less than $1,000,000, (ii) twelve (12) equal quarterly
installments if the original principal amount of the note is greater than
$1,000,000 but equal to or less than $1,500,000; (iii) sixteen (16) equal
quarterly installments in the original principal amount of the note is greater
than $1,500,000 but equal to or less than $2,000,000; or (iv) twenty (20) equal
quarterly installments if the original principal amount is greater than
$2,000,000. Payment of quarterly installments shall commence on the first three
month anniversary of the closing date of any purchase of Shares pursuant to this
Section 6.5, payable to the order of the Deceased Shareholder (or the personal
representative, executor, or administrator of the Deceased Shareholder, as the
case may be).
Section 6.5 Failure to Deliver Shares to the Company. If a Shareholder
becomes obligated to sell any Shares to the Company or to the Other Shareholders
under this Agreement (the "Obligated Shareholder") and fails to deliver such
Shares in accordance with the terms of this Agreement, the Company or such Other
Shareholders (as hereinafter defined) may, in addition to all other remedies it
may have, tender to the Obligated Shareholder, at the address set forth in the
Share transfer records of the Company, the purchase price for such Shares as is
herein specified, and (i) in the case of Shares to be sold to the Company
pursuant to this Agreement, cancel such Shares on its books and records
whereupon all of the Obligated Shareholder's right, title and interest in and to
such Shares shall terminate, (ii) in the case of Shares to be sold to an Other
Shareholder under this Agreement, issue certificates representing such Shares to
the Other Shareholder and register the Other Shareholder on its Company's books
and records as the record owner of the Shares whereupon all of the Obligated
Shareholder's right, title and interest in and to such Shares shall terminate.
Section 6.6 Company's Inability to Purchase. If the Company is entitled to
purchase the Shares of a Shareholder pursuant to this Agreement and the Company
at such time is unable to fulfill its obligations hereunder because of the
Company's commitments to creditors or because of Board of Managers has
determined that the Company does not have financial wherewithal to perform the
obligation of the Company, the Company may assign its rights or delegate its
obligations hereunder to all other Shareholders (the "Other Shareholders'). Each
Other Shareholder shall have the right to purchase up to such Shareholder's
pro-rata Share made available on a pro-rata basis, to the other Shareholder who
did purchase a pro-rata allocation. The Other Shareholders may then perform all
<PAGE>
of the obligations of the Company, and exercise all rights of the Company, with
respect to the purchase of such Shares.
Section 6.7 Status of Shares Purchased by Company. Shares purchased by the
Company pursuant thereto shall not be deemed to be outstanding, and shall revert
to authorized, and unissued Shares.
Section 6.8 Minimum Distributions. The Company shall, unless restricted or
prohibited by the Nevada Act unless the Board of Managers determines otherwise,
make at least annually distributions to Shareholders in an amount that is deemed
by the Board of Managers sufficient to pay the combined estimated federal and
state income tax liability of Shareholders resulting solely from inclusion of
the operating results of the Company on the personal tax returns of the
Shareholders. The Board of Managers shall not be required to consider the
personal circumstances of Shareholders in making determination of the estimated
combined federal and state income tax liability of the Shareholders, and may
make an assumption as to the "tax bracket" applicable to Shareholders as a
group.
Section 6.9 Preemptive Rights to Purchase New Securities. The Company
hereby grants to each Shareholder the right to purchase up to a pro rata share
of any New Securities, as hereinafter defined (the "Purchase Rights"), which the
Company may, from time to time, propose to sell and issue. A pro rata share, for
purposes of this Purchase Right, is a fraction, the numerator of which is the
number of Shares then held by a Shareholder, and the denominator of which is the
total number of Shares then outstanding.
(a) Except as set forth below, "New Securities" shall mean any Ownership
Interest, whether now authorized or not, and any rights, options, or warrants to
purchase said Ownership Interest, and securities of any type that are, or may
become, convertible into Ownership Interests. Notwithstanding the foregoing,
"New Securities" does not include: (i) securities offered to the public
generally pursuant to a registration statement filed pursuant to the Securities
Act of 1933, or pursuant to Regulation A under the Securities Act of 1933; (ii)
securities issued pursuant to the acquisition of another Person by the Company
by a merger, share exchange, the purchase of substantially all of the assets, or
other reorganization whe3reby the Company or its Shareholders own not less than
fifty-one percent (51%) of the voting power of the surviving or successor
Person; (iii) Shares or related options exercisable for Shares issued to
employees of, officers, and Managers of the Company pursuant to any plan or
arrangement approved by the board of Managers of the Company; (iv) securities
issued pursuant to any rights or agreements including without limitation
convertible securities, options, and warrants, provided that the Purchase Right
under this Section 6.10 applies with respect to the initial sale of New
Securities or the grant by the Company of such rights or agreements; (v)
securities issued in connection with any recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Shareholder written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the New Securities. Each Shareholder shall have
fifteen (15) days from the date of receipt of any such notice to agree to
purchase up to its respective pro rata portion of shares of such New Securities
for the price and upon the terms specified in the notice by giving written
notice to the Company of such Shareholder's intentions and stating therein the
quantity of New Secretes to be purchased by such Shareholder.
<PAGE>
(c) In the event a Shareholder fails to exercise the Purchase Right
within said fifteen (15) day period, the Company shall have one hundred eighty
(180) days thereafter to sell or enter into a written agreement (pursuant to
which the sale of New Securities covered thereby shall be completed, if at all,
within sixty (60) days form the date of said agreement) to sell the New
Securities not purchased by the Shareholders at a price and upon such terms
which are no more favorable to the purchase of such New Securities than
specified in the Company's notice to the Shareholders. IN the event the Company
has not sold the New Securities or entered into a written agreement to sell the
New Securities within said one hundred eighty (180) day period (or completed the
sale of the new Securities within sixty (60) days from the date of said
agreement, as provided above), the Company shall not thereafter issue or sell
any New Securities without first offering such securities in the manner provided
in this Section 6.10.
(d) The Purchase Right granted to a Shareholder under this Section
6.10 shall expire upon the date such Shareholder no longer owns any Shares.
ARTICLE 7
MEETINGS OF SHAREHOLDERS
Section 7.1 Annual Meeting. A meeting of Shareholders shall be held
annually, within six (6) months of the end of the fiscal year of the Company.
The annual meeting shall be held at such time and place and on such date as the
Board of Managers shall determine from time to time and as shall be specified in
the notice of the meeting. Failure to hold the annual meeting of Shareholders as
provided above shall not invalidate any actions taken by the company after the
failure to hold the annual meeting as provided above.
Section 7.2 Special Meetings. Special meetings of Shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
any two (@) Managers or upon the written request of Shareholder or Shareholders
holding at least 50% of the then outstanding Shares held by Shareholders.
Special meetings of Shareholders shall be held at such time and place and on
such date as shall be specified in the notice of the meeting.
Section 7.3 Place of Meetings. Annual or special meetings of Shareholders
may be held within or outside the State of Nevada.
Section 7.4 Notice of Meetings. Written notice of annual or special
meetings of Shareholders stating the place, day, and hour of the meeting shall
be given not less than ten (10) nor more than fifty (50) days before the date of
the meeting, either personally or by mail, by or at the direction of the Board
of Managers or person calling the meeting, to each Shareholder entitled to vote
at such meeting. If mailed, such notice shall be deemed to be given two calendar
days after being deposited in the United States mail, addressed to each
Shareholder at the address of each shareholder as it appears on the books of the
Company, with postage thereon prepaid, Notice of a meeting may be waived by an
instrument in writing executed before or after the meeting. The waiver need not
specify the purpose of the meeting or the business transacted. Attendance at
such meeting in person or by proxy shall constitute a waiver of notice thereof.
Notice of any special meeting of Shareholders shall state the purpose or
purposes for which the meeting is called.
Section 7.5 Meeting of all Shareholders. If all of the Shareholders shall
meet at any time and place, either within or outside the State of Nevada, and
consent to the holding of a meeting at such time and place, such meeting shall
<PAGE>
be valid without call or notice, and at such meeting any lawful action may be
taken.
Section 7.6 Record Date. For the purpose of determining Shareholders
entitled to notice of or to vote at any meeting of Shareholders or any
adjournment thereof, or Shareholders entitled to receive payment of any
distribution, or in order to make a determination of Shareholders for any other
purpose, the date on which notice of the meeting is mailed or the date on which
the resolution declaring such distribution is adopted, as the case may e, shall
be the record date for such determination of Shareholders. When a determination
of Shareholders entitled to vote at any meeting of Shareholders has been made as
provided in this Section 7.6, such determination shall apply to any adjournment
thereof.
Section 7.7 Quorum. At all meetings of Shareholders, a majority of the
outstanding Shares held by Shareholders represented at the meeting in person or
by proxy, shall constitute a quorum for the transaction of business. In the
absence of a quorum at any such meeting, a majority of the Shares so represented
may adjourn the meeting from time to time for a period not to exceed sixty (60)
days without further notice. However, if at the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Shareholder of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The Shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
during such meeting of that number of Shares whose absence would cause less than
a quorum to be present.
Section 7.8 Manner of Acting. If a quorum is present, the affirmative vote
of Shareholders holding a majority of the Shares represented at the meeting, in
person or by proxy and entitled to vote shall be the act of the Shareholders,
unless the vote of a greater or lesser proportion or number is otherwise
required by the Nevada Act, by the Articles of Organization, or by this
Operating Agreement.
Section 7.9 Actions Requiring Shareholder Approval. In addition to specific
requirements for Shareholder action elsewhere in this Operating Agreement,
(a) The Shareholders hall have the right, by the affirmative vote of
Shareholders holding at least a majority of the Shares held by Shareholders to
approve the (I) sale, exchange, or other disposition if all, or substantially
all, of the Company's assets (other than in the ordinary course of the Company's
business) which is to occur as part of a single transaction or plan, (ii) any
merger of the Company into another Person, if the Company shall not be the
survivor of the Merger and (iii) election of Managers to the Board of Managers.
(b) The Shareholders hall have the right, by the affirmative vote of
Shareholders holding at least a majority of the Shares held by Shareholders to
approve the (I) amendment of the Operating Agreement (other than an amendment to
reflect the designation by the Board of Managers of any special class or series
of authorized but unissued Shares pursuant to the authority granted to the Board
of Managers pursuant to Section 4.8(I) hereof) and (ii) admission of new
Shareholders as provided in Article 14 hereof.
Section 7.10 Proxies. At all meetings of Shareholders, a Shareholder may
vote in person or by proxy executed in writing by the Shareholder or by a duly
<PAGE>
authorized attorney-in-fact. Such proxy shall be filed with the Board of
Managers of the Company before or at the time of the meeting. No proxy shall be
valid after eleven months from the date of its execution, unless otherwise
provided in the proxy.
Section 7.11 Action by Shareholders without a Meeting. Action required or
permitted to be taken at a meeting of Shareholders may be taken without a
meeting if the action is evidenced by one or more written consents describing
the action taken, signed by the Shareholders holding a majority of the
outstanding Shares held by Shareholders, or such greater number as may be
required to approve such action and delivered to the Board of Managers of the
Company for inclusion in the minutes or for filing with the Company records.
Action taken under this Section 7.11 is effective when the Shareholders required
to approve such action have signed the consent, unless the consent specifies a
different effective date. The record date for determining Shareholders entitled
to take action without a meeting shall be the date the first Shareholder signs a
written consent.
Section 7.12 Waiver of Notice. When any notice is required to be given to
any Shareholder, a waiver thereof in writing signed by the person entitled to
such notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
Section 7.13 Meeting by Telephone; Action by Consent. Shareholders may also
meet by conference telephone call if all Shareholders can hear one another on
such call and the requisite notice is given or waived.
ARTICLE 8
AUTHORIZED CAPITAL, CAPITAL CONTRIBUTIONS, AND LOANS
Section 8.1 Authorized Shares. The aggregate number of Shares which the
Company shall have the authority to issue is 5,000,000, all of which shall be
without par value.
The Board of Managers shall have the authority without Shareholder action
to issue all authorized but unissued Shares (including Treasury Shares) for such
consideration as the Board of Managers deems appropriate.
Section 8.2 Share Certificates. Shares shall be evidenced by a numbered
certificate in such form as shall be approved by the Board of Managers, signed
by the President and the Secretary. Any such Share certificates shall be kept in
a book and shall be issued in consecutive order therefrom. The name of the
person owning the Shares, the number and class of Shares, and the date of issue
shall be entered on the stub of each certificate. Share certificates exchanged
or returned shall be canceled by the Secretary and returned to their original
place in the Share book.
Section 8.3 Voting. Voting shall take place as follows:
In all matters, holders of Stock shall be entitled to one vote per share.
Section 8.4 Transfer of Shares. Transfers of Shares shall be made on the
Share books of the Company by the Transferring Shareholder in person or by power
of attorney, upon surrender of the old certificate evidencing the Shares to be
transferred, duly assigned to the transferee, and only upon compliance with the
provisions of this Operating Agreement. See Section 12.1.
<PAGE>
Section 8.5 Capital Contributions. Each initial Shareholder shall make an
Initial Capital Contribution of $.0001 per Share and each Person who thereafter
purchases Shares from the Company shall make a Capital Contribution in an amount
determined by the Board of Managers.
Section 8.6 Additional Contributions. Except as set forth in Section 8.4
hereof, no Shareholder shall be required to make any Capital Contributions or
loans to the Company. TO the extent approved by the Board of Managers, from time
to time Shareholders may be permitted to make additional Capital Contributions
and/or loans if and to the extent they so desire, and if the Board of Managers
determine that such additional Capital Contributions and/or loans are necessary
or appropriate in connection with the conduct of the Company's business
(including without limitation expansion or diversification). In such event,
Shareholders hall have the opportunity (but not the obligation) to participate
in such additional Capital Contributions and/or loans on a pro rata basis in
accordance with the number of Shares held of record.
Section 8.7 Withdrawal or Reduction of Contributions to Capital.
(a) A Shareholder shall not receive out of the Company's property any part
of such Shareholder's Capital Contribution until all liabilities of the Company,
except liabilities to Shareholders on account of their Capital Contributions,
have been paid or there remains property of the Company sufficient to pay them.
(b) A Shareholder, irrespective of the nature of such Shareholder's Capital
Contribution, has only the right to demand and receive cash in return for such
Capital Contribution.
ARTICLE 9
DISTRIBUTIONS
Section 9.1 Distributions. All distributions of cash or other property
shall be made to Shareholders as follows:
(a) First, to Shareholders and Economic Interest Holders until they have
received their full Preferred Returns, such distribution to be in proportion to
their accrued but unpaid Preferred Returns;
(b) Net, to the Shareholder and Economic Interest Holders in the proportion
that the positive Capital Account balance of each such Shareholder and Economic
Interest Holder bears to the positive Capital Account balance of all such
Shareholders and Economic Interest Holders until such balances are reduced to
zero;
(c) Finally, to all Shareholders and Economic Interest Holders pro rata in
accordance with the ratio that the number of Shares held of record by such
Shareholder and Economic Interest Holder bears to all Shares then outstanding.
Section 9.2 Limitation Upon Distributions. No distribution shall be made to
Shareholders if the distribution is prohibited by the Nevada Act.
Section 9.3 Interest on and Return of Capital Contributions. No Shareholder
or Economic Interest Holder shall be entitled to interest on its Capital
Contribution or to the return of its Capital Contribution, except as otherwise
<PAGE>
specifically provided for herein.
ARTICLE 10
ALLOCATIONS
Section 10.1 Net Profits. Net Profits shall be allocated for each Fiscal
Year as follows:
(a) Ten percent (10%) of profits will be paid to the President and
Secretary for managing DJH Holdings.
(b) Then, to Shareholders and Economic Interest Holders until the Net
Profits allocated to them for such Fiscal Year and all prior Fiscal years is
equal to 50% of the aggregate amount of the Net Losses allocated to them
pursuant to Section 10.2 hereof for all prior Fiscal Years;
(c) Finally, to Shareholders and Economic Interest Holders in the ratio
that the number of Shares held by such Shareholder or economic Interest Holder
bears to all Shares then outstanding.
Section 10.2 Net Losses. Net Losses shall be allocated:
(a) First, to Shareholders and Economic Interest Holders whose Capital
Accounts reflect an initial Capital Contribution, in the proportion that the
positive capital account balances of each of such Shareholders bears to the
positive capital account balances of all Shareholders, until the capital account
balances of such Shareholders equal zero;
(b) Next, to Shareholders and Economic Interest Holders until the aggregate
amount of Net Losses allocated to them for such fiscal year and all prior fiscal
years is equal to the aggregate Net Profit allocated to them pursuant to Section
10.1(C) hereof for all prior Fiscal Years; such allocation to be in the amount
of the Net Profit allocated to each of them pursuant to that Section;
(c) Finally, the balance, to Shareholders and Economic Interest Holders in
the ratio that the number of Shares held by such Shareholder or Economic
Interest Holder bears to all Shares then outstanding.
Section 10.3 Alternative Allocations. It is the intent of the Shareholders
that each Shareholder's distributive share of income, gain, loss, deduction,
credit (or item thereof) be determined and allocated consistently with the
provisions of the Code, including Sections 704(b) and 704(c) of the Code. If in
connection with the issuance of Shares or other new securities pursuant to the
provisions hereof, or if for any other reason, the Managers deem it necessary in
order to comply with the Code, the Managers may, and they hereby are, authorized
and directed to allocate income, gain, loss, deduction or credit (or items
thereof) arising in any year differently than as provided for in this Article 11
if, and to the extent (I) that allocating income, gain, loss, deduction or
credit (or item thereof) would cause the determinations and allocations of each
Shareholder's distributive share of income, gain, loss, deduction or credit (or
item thereof) not to be permitted by the Code and any Treasury Regulations
promulgated thereunder or (ii) inconsistent with a Shareholder's interest in the
Company taking into consideration all facts and circumstances. Any allocation
<PAGE>
made pursuant to this Section shall be deemed to be a complete substitute for
any allocation otherwise provided for in this Agreement, an no further amendment
of this Agreement or approval by any Shareholder shall be required to effectuate
such allocation. IN making any such allocations under this Section ("New
Allocations") the Managers are authorized to act in reliance upon advice of
counsel to the Company or the Company's regular certified public accountants
that, in their opinions after examining the relevant provisions of the Code and
any current or future proposed or final Treasury Regulations thereunder, the New
Allocation is necessary in order to ensure that, in either the then-current year
or in any preceding year, each Shareholder's distributive share of income, gain,
loss, deduction or credit (or items thereof) are determined and allocated in
accordance with the Code and the Shareholder's interests in the Company.
New Allocations made by the Managers in reliance upon the advice of counsel
and accountants as described above shall be deemed to be made in the best
interests of the Company and all of the Shareholders consistent with the duties
of the Managers hereunder and any such New Allocations shall not give rise to
any claim or cause of action by any Shareholder or Economic Interest Holder
against the Company or any Manager.
ARTICLE 11
BOOKS AND RECORDS
Section 11.1 Accounting Period. The Company's accounting period shall be
the calendar year.
Section 11.2 Records, Audits and Reports. The Company shall maintain
records and accounts of all operations and expenditures of the Company. The
Company shall keep at its principal place of business the following records:
(a) A current list of the full name and last known address of each
Shareholder, Economic Interest Owner and Manager,
(b) Copies of records to enable a Shareholder to determine the relative
voting rights of each Shareholder if any;
(c) A copy of the Articles of Organization of the Company and all
amendments thereto;
(d) Copies of the Company's federal, state, and local income tax returns
and reports, if any, for the three most recent years;
(e) Copies of the Company's written Operating Agreement, together with any
amendments thereto;
(f) Copies of any financial statements of the Company for the three most
recent years.
Section 11.3 Tax Returns. The Board of Managers shall cause the preparation
and timely filing of all tax returns required to be filed by the Company
pursuant to the Code and all other tax returns deemed necessary and required in
each jurisdiction in which the Company does business. Copies of such returns, or
<PAGE>
pertinent information therefrom, shall be furnished to the Shareholders within a
reasonable time after the end of the Company's fiscal year.
Section 11.4 Financial Statements, Reports, etc. The Company shall furnish
to each Shareholder:
(a) within one hundred fifty (150) days after the end of each fiscal year
of the Company, a balance sheet of the Company, as of the end of such fiscal
year and the related statements of income, Shareholders' equity, and changes in
cash flows for such fiscal year, prepared in accordance with generally accepted
accounting principles;
(b) within sixty (60) days after the end of each quarter, other than the
last quarter in each fiscal year, a balance sheet of the Company and an income
statement of the Company, unaudited but prepared in accordance with generally
accepted accounting principals;
(c) promptly following receipt by the Company, each audit response letter,
accountant's management letter, and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company or any of its subsidiaries.
(d) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations, and inquiries that could materially
adversely affect the Company;
(e) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property, or affairs of
the Company as to shareholders may reasonably request.
Section 11.5 Compliance with Laws. The Company shall comply with all
applicable laws, rules, regulations, and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
Section 11.6 Keeping of Records and Books of Account. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles, consistently
applied, reflecting all financial transactions of the Company and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts, and other purposes in connection with its
business shall be made.
ARTICLE 12
TRANSFERABILITY
Section 12.1 Transfer Restricted. No Shareholder Interest in the Company or
Corporation owning an interest in the Company may be transferred to a Person
without the prior written approval of (a) all of the Managers and (b)
Shareholders holding Shares constituting at least fifty percent (50%) of all
Shares. No Shareholder may Dispose of such Shareholder's Economic Interest in
the Company evidenced by the Shares unless such Disposition is a Permitted
Disposition.
Section 12.2 Successors to Economic Rights. References in this Operating
Agreement to Shareholder shall also be deemed to constitute a reference to
<PAGE>
Economic Interest Owners where the provisions would include those regarding
Capital Accounts, distributions, allocations, and contributions. A transferee
shall succeed to the transferor's Capital Contributions and Capital Account to
the extent related to the Economic Interest transferred, regardless of whether
such transferee becomes a Member.
ARTICLE 13
ADMISSION OF NEW SHAREHOLDERS
At any time after the date of the formation of the Company, an Person,
including a person who, by virtue of a Permitted Disposition becomes a holder of
an Economic Interest in the Company (a "Permitted Transferee") may become a
Shareholder if (a) such Person is approved in writing by Shareholders holding at
least fifty percent (50%) of the outstanding Shares held by Shareholders. Upon
the occurrence of (A) and (b) in the preceding sentence, such Person shall be
admitted as a Shareholder of the Company by (i) executing a counterpart of this
Agreement and (ii) if the Person is not a transferee in connection with a
Permitted Disposition, the payment of a Capital Contribution in an amount
determined by the Board of Managers and/or the payment of the purchase price of
the stock to be issued, said price to be determined by the Board of Managers.
Upon delivery to the Company of cash of such Capital Contribution, and/or
purchase price the Company shall issue a certificate evidencing the number of
Shares purchased in connection with the Shareholder Interest acquired by such
Person. No additional Shareholders (or substitute Shareholders) shall be
entitled to any retroactive allocation of losses, income or expense deductions
incurred by the Company. The Board of Managers may, at the time of Shareholder
is admitted, close the Company books (as though the Company's tax year had
ended) or make pro rata allocations of loss, income, and expense deductions to a
new Shareholder for that portion of the Company's tax year in which a
Shareholder was admitted in accordance with the provisions of 706(d) of the Code
and the Treasury Regulations promulgated thereunder.
ARTICLE 14
DISSOLUTION AND TERMINATION
Section 14.1 Dissolution.
(a) The Company shall be dissolved upon the occurrence of any of the
following events:
(i) by the vote or written consent of Shareholders holding at least a
majority of the Shares; or
(ii) the sale of all or substantially all of the Company's assets and
the collection of all proceeds therefrom; or
(b) If the Company is continued after the occurrence of an Event of
Dissolution pursuant to this Section, any successor in interest of the
Shareholder as to whom the Event of Dissolution occurred shall become an
Economic Interest Owner but shall not be admitted as a Shareholder except in
accordance with Article 14 hereof.
(c) A Shareholder shall not voluntarily withdraw from the Company or take
<PAGE>
any other voluntary action which causes an Event of Dissolution. A Shareholder
shall have no right to withdraw from the Company.
(d) Unless otherwise approved by Shareholders holding at least a majority
of the Shares held by the other Shareholders, a Shareholder who suffers or
incurs an Event of Dissolution or whose status as a Shareholder is otherwise
terminated (a "Withdrawing Shareholder)", regardless of whether such termination
was the result of a voluntary act by such Withdrawing Shareholder, shall not be
entitled to receive the fair value of his Membership Interest, and such
Withdrawing Shareholder shall become an Economic Interest Owner.
(e) Damages for breach of Section 14.1(C) shall be monetary damages only
(and not specific performance), and such damages may be offset against
distributions by the Company to which the Withdrawing Shareholder would
otherwise be entitled.
Section 14.2 Effective of Dissolution. Upon dissolution, if the business of
the Company is not continued, the Company shall commence to wind up its affairs
and shall file a statement of commencement of winding up, and publish the notice
permitted by the Nevada Act.
Section 14.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution, an accounting shall be made by the company's
independent accountants of the accounts of the Company and of the Company's
assets, liabilities, and operations, from the date of the last previous
accounting until the date of dissolution. The Manager(s) shall then immediately
begin to wind up the affairs of the Company consistent with maximization of
realization as the company's assets. All Shareholders acknowledge that final
collection of such indebtedness and distribution with respect thereto may extend
over a period of years and that winding up will proceed consistently with the
foregoing.
(b) If the Company is dissolved and its affairs are to be wound up, the
Board of Managers shall:
(i) Sell or otherwise liquidate all of the Company's assets consistent
with realization of full value of such assets and collection of any assets
outstanding (except to the extent the Manager(s) may determine to
distribute any assets to Shareholders and Economic Interest Holders in
kind),
(ii) Allocate any profit or loss resulting from such sales to
Shareholders in accordance with Section 10 hereof,
(iii) Discharge all liabilities of the Company, including liabilities
to Shareholders who are creditors, to the extent otherwise permitted by
law, other than liabilities to Shareholders for distributions, and
establish such Reserves as may be reasonably necessary to provide for
contingent or liabilities of the Company.
(iv) The remaining assets shall be distributed to Shareholders and
Economic Interest Holders, either in cash or in kind, as determined by the
Board of Managers, with any assets distributed in kind being valued for
this purpose at their fair market value, in accordance with the positive
balance (if any) in each Shareholder's or Economic Interest Holder's
Capital Account (as determined after taking account all Capital Account
<PAGE>
adjustments for the Company's taxable year during which the liquidation
occurs) with the balance, if any, being distributed pro rata to the
Shareholders and Economic Interest Holders in accordance with the Economic
Interests held by such holders. Any such distributions in respect of their
Capital Accounts shall be made in accordance with the time requirements set
forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
(v) If any assets of the Company are to be distributed in kind, the
net fair market value of such assets as of the date of dissolutions has be
determined by independent appraisal or by the Board of Managers. Such
assets shall be deemed to have been sold as of the date of dissolution for
their fair market value, and the Capital Accounts of Shareholders shall be
adjusted pursuant to the provisions of this Operating Agreement to reflect
such deemed sale.
(c) Notwithstanding anything to the contrary in this Operating Agreement,
upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Treasury Regulations, if any Shareholder or Economic Interest Holder has a
deficit Capital Account (after giving effective to all contributions,
distributions, allocations, and other Capital Account adjustments for all
taxable years, including the year during which such liquidation occurs), such
Shareholder or Economic Interest Holder shall nave no obligation to make a
Capital Contribution sufficient to eliminate the negative balance of such
Shareholder's Capital Account.
(d) Upon completion of the winding up, liquidation, and distribution of the
assets, the Company shall be deemed terminated.
Section 14.4 Certificate of Termination. When all debts, liabilities, and
obligation have been paid and discharged or adequate provisions have been made
therefor and all of the remaining property and assets have been distributed to
Shareholders and Economic Interest Holders, the Company shall file the Articles
of Dissolution in accordance with Nevada Revised Statutes.
Section 14.5 Return of Contribution Nonrecourse to Other Shareholders. Upon
dissolution, each Shareholder and Economic Interest Holder shall look solely to
the assets of the Company for the return of such Shareholder's Capital Account.
If the Company property remaining after the payment or discharge of the debts
and liabilities of the Company is insufficient to return the Capital Account of
one or more Shareholder or Economic interest Holder, including, without
limitation, all or any part of that Capital Account attributable to Capital
Contributions, then such Shareholders shall have no recourse against the
Company, any Manager, or any other Shareholder.
ARTICLE 15
MISCELLANEOUS PROVISIONS
Section 15.1 Application of Nevada Law. This Operating Agreement, and the
application of interpretation hereof, shall be governed exclusively by its terms
and by the laws of the State of Nevada, and specifically the Nevada Act.
Section 15.2 No Action for Partition. No Shareholder or Economic Interest
Holder has any right to maintain any action for partition with respect to the
property of the Company.
Section 15.3 Execution of Additional Instruments. Each Shareholder hereby
agrees to execute such other and further statements of interest and holdings,
<PAGE>
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
Section 15.4 Construction. Whenever the singular number is used in this
Operating Agreement and when required by the context, the same shall include the
plural and vice versa, and the masculine gender shall include the feminine and
neuter genders and vice versa.
Section 15.5 Headings. The headings in this Operating Agreement are
inserted for convenience only and are in no way intended to describe, interpret,
define, or limit the scope, extent or intent of this Operating Agreement or any
provision hereof.
Section 15.6 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any covenant or
condition of this Operating Agreement shall not prevent a subsequent act, which
would have originally constituted a violation, from having the effect of an
original violation.
Section 15.7 Rights and Remedies Cumulative. The rights and remedies
provided by this Operating Agreement are cumulative and the use of any one right
or remedy by any party shall not preclude or waive the right not use any or all
other remedies. Such rights and remedies are given in addition to any other
rights the parties may have by law, statue, ordinance, or otherwise.
Section 15.8 Severability. If any provision of this Operating Agreement or
the application thereof to any person or circumstance shall be invalid, illegal
or unenforceable to any extent, the remainder of this Operating Agreement and
the application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
Section 15.9 Heirs, Successors and Assigns. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
insure to the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, successors,
and assigns.
Section 15.10 Creditors. None of the provision of this Operating Agreement
shall be for the benefit of or enforceable by any creditor of the Company.
Section 15.11 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
Section 15.12 Federal Income Tax Elections; Tax Matters Partner. All
elections required or permitted to be made by the Company under the Code shall
be made by the Board of Managers as determined in their sole discretion. For all
purposes permitted or required by the Code, the Shareholders constitute and
appoint Cecilia Hoyng as Tax Matters Partner or, if Cecilia Hoyng is no longer a
Manager, then such other Shareholder as shall be designated by the Shareholders
holding a majority of the Shares. The provisions on limitations of liability of
the Shareholders and Managers contained herein and indemnification in Section
4.11 hereof shall be fully applicable to the Tax Matters Partner in his or her
capacity as such. The Tax Matters Partner may resign at any time by giving
written notice to the Company and each of the other Shareholders. Upon the
resignation of the Tax Matters Partner, a new Tax Matters Partner shall be
elected by Majority Consent of the Members.
<PAGE>
Section 15.13 Certification of Non-Foreign Status. In order to comply with
1445 of the Code and the applicable Treasury Regulations thereunder, in the
event of the disposition by the Company of a United States real property
interest as defined in the Code and Treasury Regulations, each Shareholder shall
provide to the Company, an affidavit stating, under penalties of perjury, (a)
the Shareholder's address, (b) United States taxpayer identification number, and
(c) that the Shareholder is not a foreign person as that term is defined in the
Code and Treasury Regulations. Failure by any Shareholder to provide such
affidavit by the date of such disposition shall authorize the Board of Managers
to withhold ten percent (10%) of each such Shareholder's distributive Share of
the amount realized by the Company on the disposition.
Section 15.14 Notices. Any and all notices, offers, demands, or elections
required or permitted to be made under this Agreement ("Notices") shall be in
writing, signed by the party giving such Notice, and shall be deemed given and
effective (a) when hand-delivered (either in person by the party giving such
notice, or by its designated agent, or by commercial courier) or (b) on the
third (3rd) business day (which term means a day when the United States Postal
Service, or its legal successor ("Postal Service") is making regular deliveries
of mail on all of its regularly appointed week-day rounds in Reno, Nevada)
following the day (as evidenced by proof of mailing) upon which such notice is
deposited, postage pre-paid, certified mail, return receipt requested, with the
Postal Service, and
(a) If to the Company
DJH Holdings, a Limited Liability Company
43 Taunton Green Street, Suite 3
Taunton, Massachusetts 02780
with a copy (which shall not constitute notice) to:
John K. Gallagher, Esq.
Guild, Russell, Gallagher & Fuller, Ltd.
100 W. Liberty Street, Suite 800
P.O. Box 2838
Reno, Nevada 89505
and
Robert L. Cooperstein
Law Office of Robert L. Cooperstein
Four Court Street, Suite 110
P.O. Box 2879
Taunton, Massachusetts 02780
(b) if to a Shareholder or Economic Interest Holder, to the Shareholder's
or Economic Interest Holder's address as reflected in the Share ownership
records of the Company or as the Shareholders shall designate to the Company in
writing.
<PAGE>
Section 15.15 Amendments. Any amendment to this Operating Agreement shall
be made in writing and signed by Shareholders holding at least fifty percent
(50%) of the Shares held by Shareholders.
Section 15.16 Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and the Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted. If any particular provision herein is
construed to be in conflict with the provisions of the Nevada Act or other law,
the provision so this Operating Agreement shall control to the fullest extent
permitted by law. The invalidity or unenforceability of any provision hereof
under applicable law shall not affect or invalidate the other provisions hereof,
and this Agreement shall be construed in all respects as if such invalid
provisions were omitted.
Section 15.17 Captions. Titles and captions are inserted for convenience
only and in no way define, limit, extend, or describe the scope of intent of
this Agreement or any of its provisions and in no way are to be construed to
affect the meaning or construction of this Agreement or any of its provisions.
Section 15.18 Banking. All funds of the Company shall be deposited in its
name in an account or accounts as shall be designated from time to time by the
Board of Managers. All funds of the Company shall be used solely for the
business of the Company. All withdrawals form the Company bank accounts shall be
authorized by Officers or by such other persons as the Board of Managers may
designate from time to time.
Section 15.19 Arbitration. Any dispute, controversy, or claim arising out
of or in connection with, or relating to, this Agreement or any breach or
alleged breach hereof shall, upon the request of any party involved, be
submitted to, and settled by, arbitration in the City of Reno, State of Nevada,
pursuant to the commercial arbitration rules then in effect of the American
Arbitration Association (or at any time or at any other place or under any other
form or arbitration at the sole discretion of the Board of Managers). Any award
rendered shall be final and conclusive upon the parties and a judgment thereon
may be entered in the highest court of the forum, state or federal, having
jurisdiction. The expenses of the arbitration shall be borne equally by the
parties to the arbitration, provided that each party shall pay for and bear the
cost of its own experts, evidence and counsel's fees, except that in the
discretion of the arbitrator, any award may include the cost of party's counsel
if the arbitrator expressly determines that the party against whom such award is
entered has caused the dispute, controversy or claim to be submitted to
arbitration as a dilatory tactic.
Section 15.20 Determination of Matters Not Provided For In This Agreement.
The Board of Managers shall decide any questions arising with respect to the
Company and this Agreement which are not specifically or expressly provided for
in this Agreement.
Section 15.21 Further Assurances. Each Shareholder agrees to cooperate, and
to execute and deliver in a timely fashion any and all additional documents
necessary to effectuate the purposes of the Company and this Operating
Agreement.
Section 15.22 Legends. Any certificate evidencing Share shall bear the
following legends:
<PAGE>
On the face of the certificate:
"TRANSFER OF SHARES EVIDENCED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE
WITH CONDITIONS PRINTED ON THE REVERSE OF THIS CERTIFICATE."
On the reverse:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES LAW OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND TRANSFERABLE ONLY
IN ACCORDANCE WITH THAT CERTAIN OPERATING AGREEMENT OF DJH HOLDINGS A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY IN RENO, NEVADA. NO
TRANSFER OR PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN
ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID AGREEMENT. BY ACCEPTANCE
OF THIS CERTIFICATE, ANY HOLDER, TRANSFEREE OR PLEDGE HEREOF AGREES TO BE BOUND
BY ALL OF THE PROVISIONS OF SAID AGREEMENT."
"SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT PURPOSES ONLY AND NOT FOR RESALE, TRANSFER OR DISTRIBUTION, HAVE BEEN
ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF APPLICABLE
STATE AND FEDERAL SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED OTHER THAN PURSUANT TO EFFECTIVE REGISTRATION UNDER SUCH LAWS, OR IN
TRANSACTIONS OTHERWISE IN COMPLIANCE WITH SUCH LAWS, AND UPON EVIDENCE
SATISFACTORY TO THE COMPANY OF COMPLIANCE WITH SUCH LAWS, AS TO WHICH THE
COMPANY MAY RELY UPON ANY OPINION OF COUNSEL SATISFACTORY TO THE COMPANY."
Each Shareholder shall promptly surrender the certificate representing
Shares to the Company so that the Company may affix the foregoing legends
thereto. A copy of this Agreement shall be kept on file in the principal office
of the Company in Reno, Nevada. Upon termination of all applicable restrictions
set forth herein and upon tender to the Company of the appropriate stock
certificates, the Company shall reissue to the holder of such certificates new
certificate which shall contain only the second paragraph of the restrictive
legend set forth above. This legend may be modified form time to time by the
Board of Managers of the Company to conform to such statutes or to this
Operating Agreement.
Section 15.23 Investment Representation. In addition to the restrictions on
transfer set forth above, each Shareholder understands that Shareholder must
bear the economic risk of this investment for an indefinite period of time
because the Share are not registered under the Securities Act of 1933, as
amended (the "1933 Act") or the securities laws of any state of other
jurisdiction. Shareholder has been advised that there is no public market for
the shares and that eh Shares are not being registered under the 1933 Act upon
<PAGE>
the basis that the transactions involving its sale are exempt from such
registration requirements, and that reliance by the Company on such exemption is
predicated in part on the Shareholder's representations set forth in this
Agreement. Each Shareholder acknowledges that no representations of any kind
concerning the future intent or ability to offer or sell the Share in public
offering or otherwise have been made to the Shareholder by the Company or any
other person or entity. The Shareholder understands that the Company makes no
covenant, representation or warranty with respect to the registration of
securities under the Securities Exchange Act of 1934, as amended, or its
dissemination to the public of any current financial or other information
concerning the Company. Accordingly, the Shareholder acknowledges that there is
no assurance that there will ever be any public market for the Share, and that
the Shareholder may not be able to publicly offer or sell any thereof.
Each Shareholder represents and warrants that the Shareholder is able to
bear the economic risk of losing Shareholder's entire investment in the Company,
which investment is not disproportionate to Shareholder's net worth, and that eh
Shareholder has adequate means of providing for Shareholder's current needs and
personal contingencies without regard to the investment in the Company. The
Shareholder acknowledges that an investment in the Company involves a high
degree of risk. The Shareholder acknowledges that Shareholder and Shareholder's
advisors have had an opportunity to ask questions of and to receive answ3ers
from the officers of the Company and to obtain additional information in writing
to the extent that the Company possesses such information or could acquire it
without unreasonable effort or expense: (I) relative tot eh Company and the
Shares; and (ii) necessary to verify the accuracy of any information, documents,
books and records furnished. Each Shareholder represents, warrants and covenants
to the Transferor and the Company that the Shareholder is a resident of the
state shown on Schedule 1 hereto and will be the sole party in interest as to
the Shares acquired hereunder and is acquiring the Shares for the Shareholder's
own account, for investment only, and not with a view toward the resale or
distribution thereof.
Each Shareholder agrees that the Shareholder will not attempt to pledge,
transfer, convey or otherwise dispose of the Shares except in a transaction that
is the subject of either (I) an effective registration statement under the 1933
Act and any applicable state securities laws, or (ii) an opinion of counsel,
which opinion of counsel shall be satisfactory to the Company, to the effect
that such registration is not required. The Company may rely on such an opinion
of Shareholder's counsel in making such determination. Each Shareholder consents
to the placement of legends on any certificates or documents representing any of
the Share stating that the Shares have not been registered under the 1933 Act or
any applicable state securities laws and setting froth or referring to the
restrictions on transferability and sale thereof. The Shareholder is aware that
the Company will make a notation in its appropriate records, and notify its
transfer agent, with respect to the restrictions on the transferability of the
Shares.
Each Shareholder represents that the Shareholder has consulted with the
Shareholder's attorneys, financial advisors and other regarding all financial,
securities and tax aspects of the proposed investment in the Company and that
such advisors have reviewed this Agreement and all documents relating to this
Operating Agreement on Shareholder's behalf. Shareholder and the Shareholder's
advisors have sufficient knowledge and experience in business and financial
matters to evaluate the Company, to evaluate the risks and merits of an
investment in the Company, to make an informed investment decision with respect
to investment in the Company, and to protect the investors' interest in
connection with the investor's acquisition of shares in the Company without
<PAGE>
the need for additional informed which would be required to be included in a
complete registration statement effective under the 1993 Act.
Section 15.24 Partnership not Intended for Non-Tax Purposes. The
Shareholders have formed this Company under the Act, and expressly disavow any
intention to form a partnership under Nevada's Uniform Partnership Act or the
Partnership Act or laws of any other state. The Shareholders do not intend to be
partners one to another or partners as to any third party. TO the extent any
Shareholder, by word or action, represents to another person that any other
Shareholder is a partner of that the Company is a partnership, the Shareholder
making such wrongful representation shall be liable to any other Shareholder who
incurs personal liability by reason of such wrongful representation.
IN WITNESS WHEREOF, the undersigned have set their hands and seals
effective as of November 3, 1997.
[SIGNATURES CONTINUED ON NEXT PAGE]
OPERATING AGREEMENT
Shareholder's Name and Address Shares Owned
Daniel & Cecilia Hoyng 2,750,000
310 Nichols Drive
Taunton, Massachusetts 02780
Louis & Dorothy Hoyng 10,000
504 West Fayette
Celina, Ohio 45822
(to be set aside for investors) 500,000
(to be set aside for future employees or managers) 630,000
(to be set aside for future issue) 1,000,000
<PAGE>
EXHIBIT A
CORPORATE RECORDS
<PAGE>
EXHIBIT B
STOCK LEGENDS
EXHIBIT 10.5
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT
Between
Bontempi Medical Corp. Canada and Bontempi Medical Corp. USA
and
National Boston Medical, Inc.
Bontempi Medical Corp. Canada, a Canadian corporation and Bontempi Medical Corp.
USA, a Massachusetts corporation, (collectively "Bontempi"), and National Boston
Medical, Inc., a Delaware corporation, ("NBM" or "Distributor"), in
consideration of the promises made herein and intending to be legally bound,
agree as follows:
RECITALS
Legal Status of Bontempi
Bontempi Medical Corp. Canada is a corporation duly organized, validly
existing, and in good standing under the laws of Canada, with corporate power to
own property and carry on its business as it is now being conducted. Bontempi
Medical Corp. USA is a corporation duly organized, validly existing, and in good
standing under the laws of Massachusetts, with corporate power to own property
and carry on its business as it is now being conducted. Bontempi has its
principal office and place of business at 8000 Jane Street, Unit 11,City of
Vaughan, Ontario, Canada.
Legal Status of Distributor
Distributor is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nevada, with corporate power to own
property and carry on its business as contemplated by this Agreement.
Distributor has its principal office and place of business at 43 Taunton Green,
P.O. Box 1161, Taunton, MA 02780.
Rights Granted by Bontempi Snc.
Bontempi entered into an agreement with Bontempi Snc., an Italian
corporation ("Bontempi Snc."), whereby Bontempi Snc. granted to Bontempi an
exclusive distributorship for and including the United States, Canada, Mexico
and the World Wide Web (worldwide) to distribute all of its approximately 10,500
medical, dental and veterinary instruments (the "Instruments") through and
including the year 2025.
Representations and Warranties of Bontempi
Bontempi represents and warrants that it has the sole and exclusive right
to sell all Bontempi Snc. instruments (currently estimated at 10,500) together
with any new Bontempi Snc. products in the United States, Mexico, Canada and the
World Wide Web (worldwide) and that such rights are fully assignable. Bontempi
hereby represents and warrants that it has not pledged, transferred nor assigned
<PAGE>
any right granted it by Bontempi Snc. to any third party, nor has Bontempi
entered into any contractual relationship which would prohibit or limit any
right created in Distributor herein.
Facilities, Ability, and Desire to Be Distributor
(1) Distributor has the facilities and ability to promote the sale and use
of the instruments manufactured by Bontempi Snc. and sold to Bontempi and is
desirous of selling such instruments on an exclusive basis in the territory
hereinafter described.
(2) Bontempi is desirous of having Distributor sell the Instruments in said
territory on the terms and conditions set forth herein and as its exclusive
Distributor.
DISTRIBUTORSHIP
Appointment
Bontempi appoints Distributor the exclusive and sole distributor for the
sale of the Instruments within the territory described as follows: the United
States, Mexico and the World Wide Web (worldwide) (the "Territory"). Bontempi
shall attempt to secure additional territories for the benefit of NBM at the
request of NBM.
Term
This Agreement shall continue in full force and effect through and
including the year 2025. This term shall be automatically extended (but not
reduced) to coincide with any term of extension between Bontempi and Bontempi
Snc., which extension shall require no further action on the part of the
officers of either party to this Agreement.
OPERATIONS
Purchase Requirements
During the term of this Agreement, Bontempi shall sell to Distributor, and
Distributor shall purchase from Bontempi, the amount of Instruments as described
in Appendix A at a price equal to 15% above the actual cost (actual cost is
defined as the price Bontempi Snc. sells the Instruments to Bontempi) of the
Instruments, for distribution in the territory described. In the event
Distributor fails to purchase the amount of Instruments as described in Appendix
A in any twelve (12) month period, and after notice and opportunity to cure (as
defined herein), Distributor shall forfeit the right to be Bontempi's exclusive
Distributor and shall thereafter be a non-exclusive Distributor for Bontempi.
Volume Discount
Should Distributor order a volume of Instruments from Bontempi sufficient
to warrant a reduction in cost from Bontempi Snc. to Bontempi, Distributor shall
receive the full amount of such cost savings, which shall be passed down from
Bontempi to Distributor in the form of a discount.
Right to Cover
In the event Bontempi fails to sell to Distributor the amount of
Instruments as described in Appendix A in any twelve (12) month period,
Distributor shall have the right to "cover" for the deficiency by either
purchasing like Instruments from a different supplier/manufacturer or to produce
the Instruments itself.
<PAGE>
In addition to the foregoing right to cover, should any default (as defined
herein) by Bontempi occur or should Bontempi fail to sell Distributor the amount
of Instruments as described in Appendix A for a period of three (3) successive
months (assuming the Instruments are available from Bontempi Snc.), NBM shall
have the right to contract directly with Bontempi Snc.
Sales Price of Equipment
The sales price of the Instruments in the Territory shall be determined in
the sole discretion of Distributor. NBM to consult with Bontempi to set retail
price points.
Costs
All manufacturing costs, including but not limited to the price of raw
materials, supplies and packaging shall be borne and paid for by Bontempi Snc.
All shipping costs between Italy and the United States shall be borne and paid
for by Distributor. Bontempi Snc. is also responsible for any Research and
Development and/or technical support reasonably necessary in connection with the
Instruments. Distributor's sole responsibility under this contract shall be the
sale and distribution of the product in the Territory.
Billing
Distributor shall maintain a $250,000 bank guarantee in favor of NBM,
Bontempi Snc. and Bontempi, which guarantee shall be increased as volume of
sales (and orders) requires. Upon expiration of the bank guarantee in November
1999, NBM shall provide a new guarantee which names only Bontempi as beneficiary
unless the expired guarantee is renewed by the same institution, in which case
the beneficiaries will remain the same.
Bontempi shall bill Distributor for all of the Instruments delivered
hereunder and Distributor shall pay for the Instruments purchased from Bontempi
within seventy-five (75) days from the date of Bontempi Snc. invoice. This
paragraph shall be subject to change in the event that Bontempi Snc. changes the
payment policy applicable to NBM.
Method of Payment
Although invoices may be submitted to NBM in the form of Italian Lira, NBM
shall make payment on all invoices submitted by Bontempi in the form of U.S.
dollars. The conversion rate between Italian Lira and U.S. dollars to be
adjusted on the first day of each month and immediately upon a 5% variance since
the last adjustment.
Shipping
Distributor shall bear all cost and expense associated with the shipping of
product from Bontempi Snc. to Distributor.
Referral of Direct Inquiries
Should Bontempi receive direct inquiries from potential customers in the
Territory, Bontempi shall promptly refer all such inquiries to Distributor.
Should NBM receive direct inquiries from potential customers in Canada, NBM
shall promptly refer such inquiries to Bontempi.
<PAGE>
Sales by Bontempi in the Territory
NBM shall, in its sole discretion, from time to time allow (in its sole
discretion) direct sales by Bontempi in the Territory. Any such sale shall
result in an additional commission paid by Distributor to Bontempi in the amount
of 15% of the retail sales price from Bontempi Snc., said commission not to
exceed 25% of the gross margin on the product.
Unauthorized Sales by Bontempi in the Territory
In the event that any sale is made by Bontempi, its affiliates or assigns
without the prior express written consent of Distributor, Distributor shall have
the following rights, in addition to any and all other available remedies either
in law or equity:
1. To require Bontempi to forfeit 100% of the proceeds of the
unauthorized sale to Distributor in addition to a penalty
equivalent to ten (10) times the proceeds of such
unauthorized sale, or the maximum penalty allowed by law.
2. To immediately trigger the default provisions of this
Agreement, which shall allow Distributor to contract
directly with Bontempi Snc.
Existing Customer List
Bontempi has existing customers in the Territory. Sales by NBM to persons
listed in this paragraph shall result in an additional payment of 15% of the
Bontempi Snc. cost by NBM to Bontempi:
<TABLE>
<S> <C>
1. Bio Horizons Implant Systems Inc. Birmingham, Alabama
2. CK Dental Specialties Orange, California
3. Class 1 Orthodontics Lubbock, Texas
4. Thompson Dental Mfg. Missoula, Montana
5. Salvin Dental Specialties Charlotte, North Carolina
6. I.M.I. Tampa, Florida
7. Indiana University Indianapolis, Indiana
8. Fairfield Orthodontics Fairfield, Connecticut
9. Grobet Dixon Carlstadt, New Jersey
10. University of Alabama at Birmingham Birmingham, Alabama
11. University of Michigan Dental School Deerborn, Michigan
12. Pittsburgh University Dental School Pittsburgh, Pennsylvania
13. Boston University Boston, Massachusetts
</TABLE>
Additional customers shall be added to this list with the prior written
consent of NBM to add such customer, which prior consent may be withheld by NBM
in its sole discretion. Should NBM approve such addition in writing, NBM and
Bontempi shall jointly pay the costs associated with training and/or selling to
such customer. Audit of Bontempi
NBM may from time to time require the semi-annual audit of the books and
records of Bontempi. Bontempi shall keep such books and records up to date and
in good order and accessible to NBM at the Bontempi corporate headquarters. NBM
shall bear the expense of any such audit.
<PAGE>
Distributor's Efforts, Facilities, and Personnel
Distributor will use its best efforts to promote the application and sale
of Bontempi's Instruments and will maintain adequate facilities and sales
personnel for this purpose.
Promotion of Equipment of Another Company
It is mutually understood and agreed between the parties that Distributor
may promote the application or sale of products manufactured by any other
company similar to the Instruments. It is further understood that Distributor is
in the business of promoting several products, the promotion of some of which
may interfere or cause a conflict of interest to arise involving the promotion
of this product. Both parties understand and accept this fact and waive and do
hereby waive any right to contest such a conflict of interest or interference.
Right of First Refusal
Bontempi hereby grants Distributor the "Right of First Refusal" to become
an Exclusive Distributor in the same territory as described herein for all new
products produced, manufactured or developed by Bontempi Snc. Although the terms
of any subsequent Distributorship Agreement for any future product would need to
be negotiated between the parties based on the costs involved in manufacturing,
the demand for the product, etc., it is the intention of the parties at this
time to bind Bontempi to offer the Right of First Refusal to Distributor based
on terms which are reasonable and not less favorable than offered to a third
party at that time and for that product.
Additionally, should Bontempi wish to sell, assign or transfer to any third
party its right to distribute the Instruments in Canada, NBM shall have a right
of first refusal not less favorable than offered to a third party at that time.
Bontempi As a Trading Entity
Should Bontempi and/or any related entity, affiliate or subsidiary list its
stock for trading upon any exchange, whether automated or not, NBM shall
immediately receive 20% of the outstanding stock of that entity.
TERMINATION
Grounds
Either party, at its election, may treat this agreement as having been
breached and, without prejudice to any other of its rights, may forthwith
terminate this Agreement by written notice to the other party on occurrence of
any of the following events:
1. The other party shall file a petition in bankruptcy or shall be
adjudged a bankrupt.
2. The other party shall file a petition in reorganization under the
provisions of federal or state bankruptcy laws.
3. The other party shall become or be declared insolvent.
4. A receiver of all or substantially all of the property of the
other party shall be appointed and not removed with thirty (30)
days.
<PAGE>
5. The other party shall make a general assignment for the benefits
of its creditors.
6. There shall be a substantial failure by the other party to
perform one or more of its obligations hereunder which shall not
have been cured within ninety (90) days after written notice
specifying the nature of such failure.
7. A failure by either party to comply with and/or meet the minimum
purchase requirements as set forth in Exhibit A.
Applicability of Terms After Termination
In the event of termination, this Agreement shall remain applicable to any
orders for Instruments previously ordered by Distributor or to any orders which
may be executed within ninety (90) days subsequent to the effective date of
termination.
INTERPRETATION AND ENFORCEMENT
Notices
Service of all notices under this Agreement shall be sufficient if given
personally, delivered by courier, or mailed, certified receipt, return receipt
requested to the party involved at its respective address set forth herein, or
at such address as such party may provide in writing from time to time in
accordance with this paragraph. Any such notice mailed to such address shall be
effective when delivered. At the time of execution of this Agreement, and until
further written notice is given by either party to the other, notices shall be
sent to:
NBM: National Boston Medical, Inc.
43 Taunton Green
P.O. Box 1161
Taunton, MA 02780
With a copy to: Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, Florida 33480
Bontempi: Bontempi Medical Corp.
261 Millway Avenue, Unit 11
Concord, Ontario
Canada L4K 4K9
Assignment
(1) Except as limited by the provisions of subparagraph (2), this Agreement
shall be binding on and inure to the benefit of the respective successors
and assigns of the parties.
(2) Any assignment by Bontempi of its rights hereunder, without the prior
written consent of Distributor, shall be void.
<PAGE>
Completeness of Instrument
This instrument contains all of the agreements, understandings,
representations, conditions, warranties, and covenants made between the parties
hereto. Unless set forth herein, neither party shall be liable for any
representations made, and all modifications and amendments hereto much be in
writing.
Board Approval
This Agreement shall be subject to the review and approval by the NBM Board
of Directors, as well as the attorneys and accountants for NBM. Such approval
shall automatically be deemed given, if not expressly withheld thirty (30) days
from execution of this Agreement.
Cash Payments
All amounts due hereunder shall be convertible to the restricted common
stock of NBM or any successor entity with the joint consent and approval of both
NBM and the person to whom the money is owed. NBM shall execute promissory notes
in the following amounts to the following individuals as a part of this
Agreement:
<TABLE>
<S> <C> <C>
1. Vittorio Bianchi $17,500
2. Anna Tiberi $17,500
3. Nello Mattarazzo $17,500
4. Anthony DiBattista $17,500
</TABLE>
These amounts shall be payable $500 (USD) per week beginning August 6, 1999
and shall accrue interest at a rate of 8% per annum.
NBM has paid the following amounts in connection with this Agreement:
<TABLE>
<S> <C> <C>
1. Alessandro and Darlene Gasbarro $15,000
2. Marco and Patricia Mannii $3,333
3. Adamo Santoianni $3,333
4. Maria Tiberi $3,333
5. Bontempi $25,000
</TABLE>
NBM shall also pay Bontempi $188,000 in connection with this Agreement in the
following manner:
<TABLE>
<S> <C> <C>
1. July 31, 1999 $15,714
2. August 7, 1999 $32,556
3. August 10, 1999 $3,093
4. August 17, 1999 $30,090
5. September 13, 1999 $18,047
6. As funds become available The remainder
</TABLE>
Stock Issuances
NBM has issued the following shares as partial consideration for the
rights granted herein:
<PAGE>
<TABLE>
<S> <C> <C>
1. Nello Matarazzo 658,333
2. Vittorio Bianchi 658,333
3. Anthony DiBattista 658,333
4. Alessandro and Darlene Gasbarro 250,000
5. Marco and Patricia Mannii 50,000
6. Maria Tiberi 50,000
7. Adamo Santoianni 50,000
</TABLE>
Controlling Law and Jurisdiction
The validity, interpretation, and performance of this Agreement shall be
controlled by and construed under the laws of the State of Florida, the state in
which this Agreement is being executed. Any claim or dispute arising out of this
Agreement shall be settled by a court of competent jurisdiction for which venue
will lie in Palm Beach County, Florida.
Cost of Enforcement
The cost of enforcement of the terms contained herein shall be bourne by
the non-prevailing party to any dispute arising hereunder.
Concurrent Remedies
No right or remedy herein conferred on or reserved to Bontempi or NBM is
exclusive of any other right or remedy herein or by the law or equity provided
or permitted; but each shall be commutative of every other right or remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise, and may be enforced concurrently therewith or from time to time.
Nonwaiver
No covenant or condition of this Agreement may be waived except by the
written consent of the parties. Forbearance or indulgence by either party in any
regard whatsoever shall not constitute a waiver of the covenant or condition to
be performed by the other party to which the same may apply, and, until complete
performance by the other party of any covenant or condition, the forbearing or
indulging party shall be entitled to invoke any remedy available to it under
this Agreement or by law or in equity despite said forbearance or indulgence.
Entire Agreement
This Agreement constitutes the entire agreement between Bontempi and NBM
and supersedes any prior understanding or written or oral agreements between the
parties respecting the within subject matter. It shall not be amended, altered,
or changed except by a written agreement signed by the parties hereto.
Gender; Number
Whenever the context of this Agreement requires, the masculine gender
includes the feminine or neuter, and the singular number includes the plural.
Whenever the word NBM or Bontempi is used herein, it shall include all
controlled, controlling or controlled by entities and individuals.
<PAGE>
Parties Bound
This Agreement shall be binding on and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, legal
representatives, successors, and permitted assigns.
Legal Construction
If any or more of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
thereof, and this Agreement shall constructed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
Executed this 17th day of July 1998.
BONTEMPI MEDICAL CORP. CANADA NATIONAL BOSTON MEDICAL, INC.
BONTEMPI MEDICAL CORP. USA
/s/ Vittorio Bianchi /s/ Daniel Hoyng
- ------------------------ -------------------------------
Vittorio Bianchi, President Daniel Hoyng, President, CEO, Chairman
<PAGE>
Appendix A
Minimum purchase requirements by Distributor from Bontempi shall be as follows:
Within one year from August 1, 1999, Distributor shall purchase from Bontempi
and Bontempi shall sell to Distributor a minimum of $500,000 (USD) in Instrument
orders.
This minimum shall increase 10% annually, but shall cease to increase when the
10% increase shall cause the minimum to exceed $3,000,000 (USD).
EXHIBIT 10.6
AGREEMENT FOR THE EXCHANGE OF STOCK
AGREEMENT made this 21st day of November, 1998, by and between National
Boston Medical, Inc., a Nevada corporation, (hereinafter referred to as the
"ISSUER") and Flex Marketing, Inc., an Ohio corporation ("FLEX"), and the
individuals listed in Exhibit A attached hereto, (the "SHAREHOLDERS"), which
SHAREHOLDERS own all of the issued and outstanding shares of FLEX.
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. EXCHANGE OF SECURITIES. Subject to the terms and conditions of this
Agreement, the ISSUER agrees to issued to SHAREHOLDERS, 400,000 shares of Rule
144, RESTRICTED common stock of ISSUER, $0.001 par value, in exchange for 100%
of the issued and outstanding shares of FLEX, such that FLEX shall become a
wholly owned subsidiary of the ISSUER. The shares to be issued to FLEX will not
be Registered, but will be issued pursuant to an exemption from Registration.
2. ADDITIONAL OBLIGATIONS. Exhibits B and E contain additional obligations
of the parties which are incorporated herein and made a part hereof.
3. REPRESENTATIONS AND WARRANTIES. ISSUER represents and warrants to
SHAREHOLDERS and FLEX the following:
i. Organization. ISSUER is a corporation duly organized, validly
existing, and in good standing under the laws of Nevada, and has all
necessary corporate powers to own properties and carry on a business, and
is duly qualified to do business and is in good standing in Nevada. All
actions taken by the ISSUER have been valid and in accordance with the laws
of the State of Nevada.
ii. Capital The authorized capital stock of ISSUER consists of
50,000,000 shares of common stock, $0.001 part value, 24,126,051 shares of
which were issued and outstanding November 17, 1998, and 20,000,000 share
of preferred stock, none of which are issued and outstanding.
iii. Ability to Carry Out Obligations. ISSUER has the right, power,
and authority to enter into and perform its obligations under this
Agreement. The execution and delivery of this Agreement by ISSUER and the
performance by ISSUER of its obligations hereunder will not cause,
constitute, or conflict with or result in (a) any breach or violation or
any of the provisions of or constitute a default under any license,
indenture, mortgage, charter, instrument, articles of incorporation, bylaw,
or other agreement or instrument to which ISSUER or its shareholders are a
party, or by which they may be bound, nor will any consents or
authorizations of any party other than those hereto be required, (b) an
event that would cause ISSUER to be liable to any party, or (c) an event
that would result in the creation or imposition or any lien, charge or
encumbrance on any asset of ISSUER or upon the securities of ISSUER to be
acquired by SHAREHOLDERS.
iv. Full Disclosure. None of the representations and warranties made
by the ISSUER, or in any certificate or memorandum furnished or to be
furnished by the ISSUER, contains or will contain any untrue statement of a
<PAGE>
material fact, or omit any material fact the omission of which would be
misleading.
v. Compliance with Laws. ISSUER has complied with, and is not in
violation of any federal, state, or local statute, law, and/or regulation
pertaining to ISSUER. ISSUER has complied with all federal and state
securities laws in connection with the issuance, sale and distribution of
its securities.
vi. Conduct of Business. Prior to the closing, ISSUER shall conduct
its business in the normal course.
vii. Corporate Documents. Copies of each of the following documents,
which are true, complete and correct in all material respects, will be
attached to and made a part of this Agreement:
1. Articles of Incorporation;
2. Bylaws;
3. List of Officers and Directors;
viii. Documents. All minutes, consents or other documents pertaining
to ISSUER to be delivered at closing shall be valid and in accordance with
both the laws of Nevada and of Florida.
ix. Title. The Shares to be issued to SHAREHOLDERS will be, at
closing, free and clear of all liens, security interests, pledges, charges,
claims and encumbrances of any kind. They will, however, be RESTRICTED
SECURITIES, as that term is defined by the Securities Act of 1933. The
Shares to be issued to SHAREHOLDERS will not be Registered, but will be
issued pursuant to an exemption from Registration. They will be subject to
certain resale restrictions imposed by Rule 144, or other applicable
provisions of state and/or Fed3eral law. However, none of such Shares are
or will be subject to any voting trust or agreement. No person holds or has
the right to receive any proxy or similar instrument with respect to such
shares, except as provided in this Agreement. The ISSUER is not a party to
any agreement which offers or grants to any person the right to purchase or
acquire any of the securities to be issued to SHAREHOLDERS. There is no
applicable local, state or federal law, rule, regulation, or decree which
would, as a result of the issuance of the Shares to SHAREHOLDERS, impair,
restrict or delay SHAREHOLDERS' voting rights with respect to the Shares.
The Availability of Federal and state exemptions and the legality of the
issuance of the Shares are conditioned upon, among other things, the fact that
the issuance of Shares to SHAREHOLDERS is for investment purposes only and not
with a view toward resale or distribution. Accordingly, SHAREHOLDERS represent
and do hereby represent that they are taking the Shares for their own account
and for the purpose of investment only, not with a view to, or in accordance
with, the distribution or sale of the Shares and that they will not sell,
pledge, assign or transfer or offer to sell, pledge, assign or transfer any of
their Shares without an effective registration statement under the Securities
Act, or an exemption therefrom and an opinion of counsel acceptable to the
Company that registration under the Securities Act is not required and that the
transaction complies with all applicable Federal and state securities or Blue
Sky laws.
3. SHAREHOLDERS and FLEX represent and warrant to ISSUER the following:
i. Organization. FLEX is a corporation duly organized, validly
existing, and in good standing under the laws of Ohio, and has all
necessary corporate powers to own properties and carry on a business, and
<PAGE>
is duly qualified to do business and is in good standing in Ohio. All
actions taken by the incorporators, directors and shareholders of FLEX have
been valid and in accordance with the laws of the State of Ohio.
ii. Capital. The authorized capital stock of FLEX consists of shares
of common stock, $ par value, of which 100 shares are issued and
outstanding. All outstanding shares are fully paid and nonassessable, free
of liens, encumbrances, options, restrictions and legal or equitable rights
of others not a party to this Agreement. At closing, there will be no
outstanding subscriptions, options, rights, warrants, convertible
securities, or other agreements or commitments obligating FLEX to issue or
to transfer from treasury and additional shares of its capital stock except
as set forth herein. None of the outstanding shares of FLEX are subject to
any stock restriction agreements. All of the shareholders of FLEX have
valid title to such shares and acquired their shares in a lawful
transaction and in accordance with the laws of the State of Ohio.
iii. Liabilities. FLEX is not aware of any pending, threatened or
asserted claims, lawsuits or contingencies involving FLEX or its common
stock. There is no dispute of any kind between FLEX and any third party,
and no such dispute will exist at the closing of this Agreement.
iv. Ability to Carry Out Obligations. FLEX has the right, power, and
authority to enter into and perform its obligations under this Agreement.
The execution and delivery of this Agreement by FLEX and the performance by
FLEX of its obligations hereunder will not cause, constitute, or conflict
with or result in (a) any breach or violation or any of the provisions of
or constitute a default under any license, indenture, mortgage, charter,
instrument, articles of incorporation, bylaw, or other agreement or
instrument to which FLEX or its shareholders are a party, or by which they
may be bound, no will any consents or authorizations of any party other
than those hereto be required, (b) an event that would cause FLEX to be
liable to any party, or (c) an event that would result in the creation or
imposition or any lien, charge or encumbrance on any asset of FLEX or upon
the securities of FLEX to be acquired by ISSUER.
v. Full Disclosure. None of the representations and warranties made by
FLEX, or in any certificate or memorandum furnished or to be furnished by
FLEX, contains or will contain any untrue statement of a material fact, or
omit any material fact the omission of which would be misleading.
vi. Compliance with Laws. FLEX has complied with, and is not in
violation of any federal, state, or local statute, law, and/or regulation
pertaining to FLEX. FLEX has complied with all federal and state securities
laws in connection with the issuance, sale and distribution of its
securities.
vii. Corporate Documents. Copies of each of the following documents,
which are true complete and correct in all material respects, will be
attached to and made a part of this Agreement:
1. Articles of Incorporation;
2. Bylaws;
3. List of Officers and Directors;
4. State of Liabilities of FLEX (Exhibit "C"); and
5. Statement of Assets of FLEX (Exhibit "D").
6. Obligations to Vitko (Exhibit "E")
<PAGE>
viii. Documents. All minutes, consents or other documents pertaining
to FLEX to be delivered at closing shall be valid and in accordance with
the laws of Ohio.
4. CLOSING. The closing of this transaction shall take place at the law
offices of Mintmire & Associates @ 265 Sunrise Avenue, Suite 204, Palm Beach,
Florida.
5. EXPENSE PROVISION. ISSUER and FLEX agree to and shall reimburse the
other for any and all expenses, debts, claims or similar charges not disclosed
to the other herein and further agree that such items, if any, may be offset by
either party against any amounts owed or due the other.
6. REMEDIES.
i. Arbitration. Any controversy or claim arising out of, or relating
to, this Agreement, or the making, performance, or interpretation thereof,
shall be settled by arbitration in Palm Beach County, Florida in accordance
with the Rules of the American Arbitration Association under its Commercial
Arbitration Rules then existing, and judgment on the arbitration award may
be entered in any court having jurisdiction over the subject mater of the
controversy.
7. MISCELLANEOUS.
i. Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall
in now way be deemed to define, limit, or add to the meaning of any
provision of this Agreement.
ii. No Oral change. This Agreement and any provision herein, may not
be waived, changed, modified, or discharged orally, but only by a written
agreement signed by both parties to this Agreement.
iii. No Waiver. Except as otherwise provided herein, no waiver of any
covenant, condition, or provision of this Agreement shall be deemed to have
been made unless expressly in writing and signed by the party against whom
such waiver is charged; and (a) the failure of any party to insist in any
one or more cases upon the performance of any of the provisions, covenants,
or conditions of this Agreement or to exercise any option herein contained
shall not be construed as a waiver or relinquishment for the future of any
such provisions, covenants, or conditions, (b) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision
hereof shall not be deemed a waiver of such breach or failure, and (c) no
waiver by any party of one breach by another party shall be construed as a
waiver with respect to any other or subsequent breach.
iv. Ability to Ask Questions. SHAREHOLDERS have been given a full
opportunity to ask questions of and to receive answers from the ISSUER
concerning the terms and conditions of this Agreement and the business of
the ISSUER, and to obtain additional information necessary to verify the
accuracy of the information given him/her or to obtain such other
information as is desired in order to evaluate the ISSUER and this
transaction. All such questions have been answered to the full satisfaction
of the SHAREHOLDER.
v. Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
<PAGE>
vi. Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings.
vii. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
viii. Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed
to have been duly given on the date of service if served personally on the
party to whom notice is to be given, or on the third day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed, and by
fax, as follows:
ISSUER: National Boston Medical, Inc.
P.O. Box 1161
43 Taunton Green, 3rd Floor
Taunton, MA 02780
With a copy to: Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
FLEX: Flex Marketing, Inc.
P.O. Box 22
Canfield, OH 44406
ix . Agreement to Carry Out Purpose. The parties agree to execute any
and all additional documents reasonably required to effect and carry out
the terms of this Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this 21st
day of November, 1998.
ISSUER FLEX
National Boston Medical, Inc. Flex Marketing, Inc.
a Nevada Corporation an Ohio corporation
By: By:/s/ Remon Hayek
Its:_____________________ Its: C.E.O.
SHAREHOLDERS
Ernest Zavoral Remon Hayek
/s/ Ernest Zavoral /s/ Remon Hayek
<PAGE>
EXHIBIT A
===========================================================================
- -------------------------------------------------------------------------
<PAGE>
ADDITIONAL OBLIGATIONS - EXHIBIT "B"
1. FLEX shall secure a full settlement with David M. Vitko, whereby David M.
Vitko agrees to settle and dismiss that certain lawsuit filed by Vitko and
others against FLEX and others (Case NO. 98- CV-349, in the Court of Common
Pleas for the County of Columbia, Ohio) for a total settlement amount of
$275,000.00 plus interest thereon at the rate of Percent ( %) per annum; such
sum shall be payable by FLEX in equal monthly installments in the amount of
$__________. As soon as practicable, common stock of ISSUER (subject to
registration rights) shall be registered and issued to Vitko in an amount equal
to the value of the balance of the outstanding indebtedness at the time of
delivery of the registered common stock to David M. Vitko in full satisfaction
of such indebtedness. Pending registration of the Common stock, FLEX and ISSUER
agree to and shall be jointly obligated to make the monthly installment payments
on said indebtedness. In return for the foregoing consideration, David M. Vitko
agrees to transfer, sell and assign to FLEX, ISSUER, or their designees, all
right, title and interest in and to Patent No. 5,352,188 (the "Patent") along
with the first option to purchase or license any and all patent of David M.
Vitko relating to the Backstroke, whether said products or patents are now in
existence or are developed in the future by David M. Vitko, subject to certain
specified royalty payments otherwise required herein.
2. FLEX has an indebtedness in the amount of $100,000,00 plus Interest thereon
to Scott Evans. FLEX shall undertake to repay such indebtedness in monthly or
other installment amounts agreeable to Scott Evans. As soon as practicable,
common stock of ISSUER (subject to registration rights) shall be registered and
issued to Evans in an amount equal to the value of the balance of the
outstanding indebtedness at the time of delivery of the registered common stock
to Scott Evans, in full satisfaction of such indebtedness. Pending registration
of the common stock, FLEX shall be obligated to make the monthly or other
installments on said indebtedness.
3. FLEX or Remon Hayek has an indebtedness in the approximate amount of
$150,000.00 plus interest thereon to The Cortland Bank. FLEX shall undertake to
repay such indebtedness in monthly or other installment amounts agreeable to The
Cortland Bank. As soon as practicable, common stock of ISSUER (subject to
registration rights) shall be registered and issued to The Cortland Bank in an
amount equal to the value of the balance of the outstanding indebtedness at the
time of delivery of the registered common stock to The Cortland Bank, in cull
satisfaction of such indebtedness. Pending registration of the common stock.
FLEX shall be obligated to make the monthly or other installments on said
indebtedness. National Boston medical, Inc. agrees to guarantee such
indebtedness, should such guarantee be necessary to cause The Cortland Bank to
release Ernest Zavoral and Remon Hayek from their personal guarantees of the
FLEX indebtedness to said bank and should the terms of such guarantee be
acceptable to National Boston Medical.
4. The 400,000 shares of common stock referenced in paragraph I of the Agreement
for the Exchange of Stock shall be distributed in equal amounts to Remon Hayek
and Ernest Zavoral.
5. Ernest Zavoral shall enter into an employment agreement with ISSUER,
satisfactory to both ISSUER and Zavoral, providing for employment with FLEX in
exchange for 100,000 shares of common stock of ISSUER, the exact terms and
conditions of said employment agreement and delivery of common stock to be
specified in the employment agreement.
<PAGE>
6. FLEX shall pay royalties on the Patent in the total amount of five percent
(5%) of the gross sales of the product covered by the Patent (the "Royalty")
said payments to be made in the following amounts: (a) two percent (2%) of Vitko
(as evidenced by Exhibit D); (b) one and one half percent (1- 1/2%) to Hayek;
and (c) one and one half percent (1-1/2%) to Zavoral, representing the total
amount of five percent (5%). Should FLEX fail to pay the Royalty as set forth
herein, written notification of failure to pay the Royalty, FLEX fails to pay
the Royalty, the Patent shall revert back to Vitko, Hayek and Zavoral.
7. Vitko, Hayek and Zavoral each agree to transfer, sell and assign to FLEX,
ISSUER, or its designee, all the right, title and interest in and to the Patent,
and agree to execute any and all documents requested by FLEX to secure any and
all claims to ownership of the Patent at any time in the future FLEX may
request.
8. ISSUER agrees pay $10,000 in cash and to issue a total of 20,000 shares of
the unrestricted common stock of ISSUER to Aggers & Joseph (a legal partnership)
to compensate said Aggers & Joseph for legal fees and expenses incurred on
behalf of FLEX.
ISSUER: SHAREHOLDERS
National Boston Medical, Inc.,
a Nevada corporation /s/ Ernest Zavoral
Ernest Zavoral
By:
Its: /s/ Remon Hayek
Remon Hayek
FLEX
Flex Marketing, Inc.
By: /s/ Remon Hayek
Its: CEO
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT C
11/21/98
Flex Marketing, Inc.
Unpaid Bills by Vendor
As of November 21, 1998
Type Date Num Due Date Aging Open
Balance
<S> <C> <C> <C> <C> <C>
Aggers & Joseph Attorneys at Law
Bill 8/28/98 9/27/98 56 9,843.75
Bill 10/30/98 11/29/98 177.75
Bill 10/30/98 11/29/98 3,937.50
Total Aggers & Joseph Attorneys At Law 13,959.00
Alltell
Bill 10/30/98 11/29/98 451.33
Total Alltell 451.33
Ameritect
Bill 10/16/98 11/15/98 6 131.07
Total Ameritect 131.07
Anthem Blue Cross & Blue Shield
Bill 11/1/98 12/1/98 713.96
Total Anthem Blue Cross & Blue Shield
ASW Logistics, Inc.
Bill 10/31/98 11/30/98 330.00
Bill 11/1/98 933a 12/1/98 342.00
Bill 11/13/98 426a 12/13/98 65.00
Total ASW Logistics, Inc. 737.00
Barryan Productions
Bill 10/30/98 11/29/98 14,982.00
Total Barryan Productions 14,982.00
Debbi Bowell
Bill 10/20/98 11/19/98 2 750.00
Total Debbi Bowell 750.00
Donalee Wood
Bill 11/1/98 12/1/98 79.10
Total Donalee Wood 79.10
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Eastern Tool and Machine, Inc.
Bill 11/12/97 12/12/97 344 10,250.00
Total Eastern Tool and Machine, Inc. 10,250.00
Ernest Zavoral
Bill 6/6/97 7/6/97 503 2,444.41
Bill 4/25/98 5/25/98 180 4,214.30
Total Ernest Zavoral 6,658.71
Estate Mold & Machine Co.
Bill 1/23/98 2/22/98 272 4,466.60
Bill 4/13/98 016687 5/13/98 192 1,481.25
Bill 6/29/98 017180 7/29/98 115 65.86
Bill 8/26/98 0175504 9/25/98 57 12,066.62
Total Estate Mold & Machine Co.
Fit TV
Bill 5/1/98 5/31/98 174 4,441.08
Bill 6/1/98 7/1/98 143 1,589.55
Bill 6/1/98 7/1/98 143 79.94
Bill 7/1/98 7/31/98 113 757.17
Bill 7/1/98 7/31/98 113 71.54
Total Fit TV 5,939.28
Gold Fox Internet Services
Bill 10/9/98 11/6/98 13 365.00
Total Gold Fox Internet Services 365.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT C
11/21/98
Flex Marketing, Inc.
Unpaid Bills by Vendor
As of November 21, 1998
Type Date Num Due Date Aging Open
Balance
<S> <C> <C> <C> <C> <C>
Let's Live
Bill 10/19/97 11/18/97 368 9,265.00
Bill 11/21/97 12/21/97 335 9,265.00
Total Let's Live 18,530.00
Michele G. Cemi
Bill 6/27/98 7/27/98 117 895.00
Total Michele G. Cemi 895.00
Remon P. Hayek
Bill 11/1/98 11/11/98 740 872.06
Bill 6/1/98 7/1/98 1,376.29
Total Remon P. Hayek 2,248.35
Robert Ellas
Bill 3/6/98 4/5/98 230 3,275.00
Total Robert Ellas 3,275.00
Ski Limited
Bill 12/8/97 1/7/98 318 225.00
Total Ski Limited 225.00
THG Construction Management
Bill 8/30/97 8/30/97 448 1,377.76
Bill 1/1/98 1/31/98 294 750.00
Bill 2/1/98 3/3/98 263 750.00
Bill 3/1/98 3/31/98 235 750.00
Bill 4/1/98 5/1/98 204 750.00
Bill 5/1/98 5/31/98 174 750.00
Bill 5/19/98 6/18/98 156 2,337.17
Bill 5/25/98 6/24/98 150 155.77
Bill 6/1/98 7/1/98 143 750.00
Bill 7/1/98 7/31/98 113 750.00
Bill 8/1/98 8/31/98 82 750.00
Bill 9/1/98 10/1/98 51 750.00
Bill 10/1/98 10/31/98 21 750.00
Bill 10/1/98 10/31/98 21 222.86
Bill 11/1/98 12/1/98 750.00
Total THG Construction Management 12,343.56
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
United Parcel Service
Bill 10/24/98 438 11/23/98 25.85
Bill 10/24/98 438 11/23/98 117.95
Bill 10/31/98 448 11/30/98 12.00
Bill 11/7/98 458 12/7/98 17.87
Bill 11/14/98 468 12/14/98 12.00
Total United Parcel Service 185.47
Total 111,519.16
</TABLE>
<PAGE>
ADDITIONAL OBLIGATIONS TO VITKO - EXHIBIT "E"
1. David M. Vitko agrees to settle and dismiss that certain lawsuit filed by
Vitko and others against FLEX and other (case No. 98-CV-349, int eh Court of
Common Pleas for the County of Columbia, Ohio) for a total settlement amount of
$275,000.00 plus interest thereon at the rate of _______ percent (___%) per
annum; such sum shall be payable by FLEX in equal monthly installments in the
amount of $__________. As soon as practicable, common stock of ISSUER (subject
to registration rights) shall be registered and issued to Vitko in an amount
equal to the value of the balance of the outstanding indebtedness at the time of
delivery of the registered common stock to David M. Vitko in full satisfaction
of such indebtedness. Pending registration of the Common stock, FLEX and ISSUER
agree to and shall be jointly obligated to make the monthly installment payments
on said indebtedness. In return for the foregoing consideration, David M. Vitko
agrees to transfer, sell and assign to FLEX, ISSUER, or their designees, all
rights, title and interest in and to Patent No. 5,352,118 (the "Patent") along
with the first option to purchase or license any and all patents of David M.
Vitko relating to the Backstroke, whether said products or patents are now in
existence or are developed in the future by David M. Vitko, subject to certain
specified royalty payments otherwise required herein.
2. Vitko agrees to transfer, sell and assign to FLEX, ISSUER, or its designee,
all the right, title and interest in and to the Patent, and further agrees to
execute any and all documents requested by FLEX or ISSUER to secure any and all
claims to ownership of the Patent at any time in the future FLEX or ISSUER may
so request.
3. FLEX shall pay royalties on the Patent in the total amount of two percent
(2%) to Vitko (the "Royalty"). If after 30 days of receipt of written
notification of failure to pay the Royalty. FLEX fails to pay the Royalty, all
right, title and interest in and to the Patent shall revert back to Vitko, Hayek
and Zavoral, as their interests may then be.
VITKO FLEX
/s/ David M. Vitko By:/s/ Remon Hayek
- -------------------- ------------------------
David M. Vitko Flex Marketing, Inc.
Its: CEO
D.V. BACK PRODUCTS, LTD.
EXHIBIT 10.7
SPIN-OFF AGREEMENT
THIS SPIN-OFF AGREEMENT is made this _________ day of January, 1999,
by and between NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with its
principal place of business at 43 Taunton Green, 3rd Floor, Taunton, MA 02780
("NBM") and FRAGRANCE EXPRESS, INC., a Florida corporation, with its registered
office at 3550 Gateway Drive, Pompano Beach, FL 33069, ("FEF").:
WHEREAS the parties wish to enter into a Spin-Off Agreement with the
intention of modifying the relationship between NBM (the parent) and FEF (the
subsidiary) such that FEF will no longer be a subsidiary of NBM; and
WHEREAS FEF hereby represents and warrants that it has free and clear
title to a parcel of real estate located in Athens, Georgia subject only to a
first and second mortgage in the estimated amount of $585,000 total (the
"Property");
NOW THEREFORE, in consideration of the mutual promises herein
contained herein, as well as other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
SPIN-OFF
NBM shall return all issued and outstanding stock of FEF to FEF for
deposit in its treasury, such that FEF shall no longer be a wholly-owned
subsidiary of NBM at such time that FEF shall conduct a share exchange with
Telenetworx, Inc., a Florida corporation ("TI"), such that FEF shall become a
wholly-owned subsidiary of TI. Should FEF fail to complete the transaction
described in this paragraph, this entire agreement shall be voidable in the sole
discretion of NBM. As a part of this transaction, NBM shall be issued 15% of all
of the issued and outstanding stock of TI calculated immediately after
consummation of the share exchange between FEF and TI. The estimated capital
structure of TI after consummation of the share exchange with FEF is as follows:
1. 5,000,000 common shares issued and outstanding
2. 600,000 preferred shares issued and outstanding
A. Preferred shares to be convertible to common shares 10 for 1
B. Preferred shares to be convertible to common shares 1 year from
the date of execution of the share exchange between FEF and TI
C. Preferred shares to have full voting rights as if converted (10
for 1) form date of issuance
Should the capital structure of TI comply with the figures above
(subsequent to the share exchange between FEF and TI), NBM shall accept
certificate representing 165,000 preferred shares of TI as 15% of the issued and
outstanding stock of TI.
<PAGE>
ARTICLE 2
PIGGYBACK REGISTRATION
At any time that FEF or TI proposes to file a registration statement,
the Company shall cause to be included in such registration statement any
securities issued or subject to issuance to NBM in this transaction.
ARTICLE 3
NOTE
FEF shall immediately upon execution of this agreement cause a demand
note in the amount of $700,000 to be executed in favor of NBM. The Note shall
accrue interest as of the date of execution of this agreement at a rate of 10%
per annum and shall be secured by a third mortgage on the Property.
ARTICLE 4
PAYMENT OF NOTE
Payment of the Note is contemplated in one (1) of the following three
(3) ways:
3. Cash
4. Common Stock of TI which is free of any restrictive
legend (Free-Trading) 5. Refinance of the Property.
ARTICLE 5
IRREVOCABLE AGREEMENT TO REFINANCE THE PROPERTY
FEF, by execution of the signature page affixed hereto, hereby
irrevocably for a period of sixty (60) days from the date of execution of this
agreement empowers NBM, in NBM's sole discretion, to refinance the Property in
the minimum amount of $2 million which accrues interest at a maximum rate of 12%
per annum. It is understood by FEF that FEF shall not have the right to refuse
any refinancing deal presented to it by NBM which conforms to the above terms.
FEF shall have no right to transfer title to such property for sixty (60) days
from execution of this agreement unless FEF has obtained the prior express
written consent of NBM. FEF shall be solely responsible for repayment of the
refinanced amount.
ARTICLE 6
USE OF PROCEEDS OF PROPERTY REFINANCING
The use of proceeds of the refinancing of the Property shall be as
follows:
1st: to pay off the existing 1st and 2nd mortgages (approximately $585,000)
2nd: to pay off the Note by FEF to NBM in the amount of $700,000 described
herein
3rd: the remainder of the proceeds shall be paid to FEF (or its designee)
ARTICLE 7
AGREEMENT FOR THE EXCHANGE OF STOCK
Paragraph 4 of the Agreement for the Exchange of Stock dated October
8, 1998 between NBM and FEF is hereby made null and void. The remaining
<PAGE>
provisions of that Agreement remain in full force and effect.
ARTICLE 8
REMOVAL FROM THE BOARD OF DIRECTORS
Mr. Robert Bartlett and Ms Tracy Trimachi shall resign from the Board
of Directors of NBM effective immediately upon execution of this agreement.
ARTICLE 9
CONFIDENTIALITY
Neither party shall disclose any trade secrets of the other party to
persons other than those bound by the terms of this Agreement. Northing in the
foregoing sentence shall prohibit disclosure of any information which is
publicly known at or after the time of disclosure, which is already known to the
recipient, or which is required to be disclosed by law.
ARTICLE 10
AGREEMENT NOT TO COMPETE
A. FEF agrees that during the period commencing on the date of this
Agreement and continuing until the date three (3) years after this Agreement is
terminated, it will not directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
investor, or financier or in any other individual or representative capacity, or
otherwise, engage or participate in any business which competes with the
business of NBM or any company or individual supplying services or product to
NBM. FEF covenants that during the term referenced above, it will not, either
for itself or for any other person or entity, except as may be required by the
terms of this Agreement either directly or indirectly: (1) call on, solicit,
take away or hire any customers, employees, principals, lessors, distributors or
suppliers or other personnel or independent contractors, of NBM or any company
supplying services or product to NBM, (2) acquire or attempt to acquire rights
for providing any product or services in competition with NBM or any company
supplying services or product to NBM, or (3) engage in any act which would
interfere with or harm any business relationship with any customer, lessor,
employee, principal or supplier of NBM or any company supplying services or
product to NBM.
B. The parties agree that a breach of the covenants described int his
Section will result in substantial damages to NBM, which would be difficult, if
not impossible to ascertain. FEF agrees that in the event of such a breach or
threatened breach, NBM shall have the right to a Restraining Order and in
Injunction, without bond or other security (all of which is waived) both
temporary and permanent, enjoining and restraining any such breach or threatened
breach. Such injunctive relief shall be in addition to any other remedy
available to NBM at law or in equity. Nothing in this Agreement shall be
construed to prohibit or prevent NBM from initiating an action or otherwise
recovering any damages that may be sustained as a result of the breach or
threatened breach by FEF. FEF also agrees that NBM may pursue any remedy
available to it including voiding this agreement in its sole discretion, and the
pursuit of any one such remedy at any time will not be deemed an election of
remedies or waiver of right to pursue any other remedy.
C. Lotions which are used for beauty purposes only, but which have
no medicinal value and which do not compete with any NBM product, are
<PAGE>
specifically excluded from this agreement.
ARTICLE 11
GENERAL PROVISIONS
Warranty
Each party represents and warrants to the other that it has the power
and authority to execute and deliver, and to perform its obligations under this
Agreement, and that neither the execution or delivery of this Agreement nor the
performance of its obligations hereunder will constitute a breach of the terms
or provisions of any contract or violate any law or the rights of any third
party.
Governing Law
This agreement shall be governed and construed in accordance with the
laws of Massachusetts and any dispute or litigation which arises out of this
agreement shall be settled by a court of competent jurisdiction in the state of
Massachusetts.
Entire Agreement
This Agreement sets forth the entire Agreement or any understanding
between the parties as to its subject matter and supersedes all other documents,
verbal commitments or understandings made before conclusion of this Agreement
except as provided for in Article 6, and none of the terms of this Agreement may
be amended or modified except in writing signed by both parties.
Assignment
This Agreement may not be assigned by either party without the prior
written consent of the other party except that any party may assign this
Agreement to any successor corporation (including the surviving corporation in
any consolidation or merger) or assignee of all or substantially all of its
business. In the event of such an assignment, the assigning party shall remain
jointly and severally liable with the assignee for the full and timely
performance by such assignee of the assigning party's obligations hereunder.
Notices
Any notice, consent or approval required or permitted under this
Agreement shall be in writing and shall be delivered to the following address
(i) personally by hand or (ii) by certified mail, postage prepaid with return
receipt requested:
If to the NBM: National Boston Medical, Inc.
43 Taunton Green, 3rd Floor
Taunton, MA 02780
With a copy to: Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
<PAGE>
If to FEF: Fragrance Express, Inc.
3550 Gateway Drive
Pompano Beach, FL 33069
All notices shall be deemed effective upon the date delivered by hand
or if mailed, as of the date which is five (5) days after the date of mailing.
Either party may change its address for notice purposes by notifying the other
party of such changes of address in accordance with the foregoing.
Waivers
No waiver of any term or condition of this Agreement shall be valid
except when made by an instrument in writing expressly waiving such term or
condition signed by the waiving party. A waiver by any party of any term or
condition of this Agreement shall be cumulative and not in limitation of any
other remedy, right, obligation or agreement of any other party.
Severability
If any part of this Agreement is contrary to, prohibited by or deemed
invalid under the laws of any jurisdiction which laws govern the subject of this
agreement, such provision shall, as to such jurisdiction be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, without
invalidation or affecting the validity or enforceability of such provision in
any other jurisdiction.
Specific Performances
The parties acknowledge that there may be no adequate remedy at law
for any violation of sections of this Agreement, and that in addition to any
other remedies which might be available, such Sections shall be specifically
enforceable in accordance with their terms.
Headings
Headings contained in this Agreement are for convenience of reference
only and shall not affect the meaning or construction under the provisions of
this Agreement.
Voluntary Agreement
Each party warrants that before signing this Agreement such party has
been fully advised of its contents and meaning, has had independent legal
counsel explain the meaning and legal significance of each and every provision
therein, and executes this Agreement freely and voluntarily with full knowledge
and understanding of its contents.
Cumulative Remedies
No remedies or election hereunder shall be deemed exclusive, but
shall, whenever possible, be cumulative with all other remedies at law or in
equity.
Attorney Fees
In the event any action, proceeding or litigation, judicial or non-
<PAGE>
judicial, arises out of the subject matter of this Agreement the prevailing
party shall be entitled to payment of all costs, expenses and attorney fees
incurred.
Successor/Assigns
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, personal representative
and assigns. The parties each agree to take such further action and deliver such
ancillary document as may be reasonable or necessary in order to carry out the
terms and provisions of this Agreement.
Authority
Each individual executing this Agreement in a representative capacity
warrants to the other party that such person has sufficient authority to bind
the party on behalf of whom they are executing this document.
Duplicate Originals
Any fully executed copy of this Agreement shall be deemed for all
purposes as a duplicate original. All originals and duplicate must be signed
before a notary or will be considered invalid.
EXECUTED by the parties effective as of the date first written above.
Fragrance Express, Inc.
By: /s/ Robert Bartlett, President
---------------------------------
Robert Bartlett, President
National Boston Medical, Inc.
By: /s/ Daniel Hoyng
---------------------------------
Daniel Hoyng, co-CEO and Chairman
STATE OF FLORIDA
COUNTY OF Broward
BEFORE ME, personally appeared Robert Bartlett, to me known to be the
person described in and who executed the foregoing Spin-Off Agreement and
acknowledged to and before me that he executed the said instrument for the
purposes therein expressed.
WITNESS my hand and official seal this 20 day of January, 1999.
/s/ Charlene Miller
-----------------------------
[seal] Charlene Miller Notary Public
My Commission # CC 730134 My Commission Expires:
Expires: April 2, 2002 (Notary Seal)
Bonded through Notary Public Underwriters
EXHIBIT 10.8
EQUITY
COMMUNICATIONS
February 12, 1998
Mr. Daniel Hoyng, President
National Boston Medical, Inc.
43 Taunton Green, Suite 3
Taunton, MA 02780
Dear Mr. Hoyng:
This letter will confirm the following agreement and understanding between
National Boston medical, Inc. (Boston) and Ira Weingarten d.b.a Equity
Communications (EC) with respect to the following:
1) Boston shall retain EC and EC agrees to be retained by Boston as its
Financial Public Relations Counsel for a period of one (1) year commencing
February 16, 1998 and terminating on February 15, 1999. A total professional fee
of Sixty Thousand ($60,000) Dollars shall be payable for the one (1) year
services, which payments shall be due in increments of Five thousand ($5,000)
Dollars per month, subject to the following:
(a) Upon initial funding of moneys to Boston from any investment or
loan source in the gross amount of $250,000 or greater, an amount
equal to Five thousand ($5,000) Dollars for each month of unpaid
services rendered by EC from February 16, 1998 under this
agreement shall be paid to EC., provided said amount paid shall
not exceed ten (10%) percent of the initial funding.
2) If, as of May 15, 1998, Boston is still privately-held by the same
shareholders that own it today, if it has not been purchased, or merged, or
acquired, or reversed merged, or taken public either through a 15 C211 filing or
any other mechanism, then the Company shall have the option to terminate this
agreement upon 10 days written notice.
(a) If this Agreement in not terminated on May 15, 1998 it shall
automatically continue for its full term, until February 15,
1999, and monthly fee payments of $5,000 shall be due without
exception or limitation.
(b) If this agreement is not terminated by either party as of
February 15, 1999, it shall continue on a month to month basis
thereafter.
3) In addition to the monthly fee compensation, Boston agrees to issue to EC
and/or its assigns, an amount equal to 1.5% of the total number of common shares
that shall be outstanding on a fully diluted basis as of the first day that the
company's shares are publicly traded, which we anticipate shall be SEVENTY FIVE
THOUSAND (75,000) common shares after first having reverse split the stock on a
three for four basis. These shares are to be issued, and EC and/or its assigns
shall take physical possession of these shares, on or before March 15, 1998.
(a) If, as of May 15, 1998, Boston is still privately-held by the
same shareholders that own it today, if it has not been purchased,
<PAGE>
or merged, or acquired, or reversed merged, or taken public
either through a 15C 211 filing or any other mechanism, then the
Company shall have the option of canceling these shares and
returning them to treasury. To exercise this option, Boston shall
have 10 days from May 15, 1998 to notify EC in writing.
(b) Boston stock to be issued to EC shall include registration rights
consisting of two (2) piggy-back rights. Boston shall provide EC
with thirty (30) days notice of its intention to file a
registration statement. EC shall have fifteen (15) days from date
of receipt of such notice to submit a written registration
request relating to some or all of the shares to be issued to EC.
The registration rights granted to EC hereunder shall not be
deemed extinguished unless all shares requested to be registered
have in fact been registered.
4) Boston agrees to reimburse EC for expense incurred in the Company's behalf.
EC agrees to spend no more that $700 on any one project without the personal
approval of an authorized officer of Boston.
(a) The following items will be routinely rebilled to Boston: long
distance telephone charges, travel, postage, fax, photocopying,
messenger and courier services, and editorial meals. The
following items, which would require EC to utilize outside
venders and/or supervise the work of others, (which Boston does
not at the present time expect to need) would, if required, be
rebilled to the Company only as authorized, and include a
standard service fee of 17.64%; printing, production, package
distribution, mailing list development and maintenance, art work,
consultants, photography, and visual presentation.
5) Where possible, transportation arrangements involving service for Boston will
be made by a travel agent designated by the Company, and such transportation
will be billed directly to Boston by the agent. In the event Mr. Weingarten or
Mr. Chizzik must fly cross-country utilizing red-eye service, they shall be
entitled to fly business class, or first class if business class is not
available using the least possible airfare, such as frequent flyer upgrades,
etc.
6) EC, in consideration of the remuneration stated above, agrees to provide
comprehensive public relation services for Boston, to include introductions to
various security dealers, investment advisors, analysts, and members of the
financial community, organization of and participation in meetings with
prospective investment bankers and others who may assist the company in becoming
a publicly traded entity, assistance as needed in the negotiation and
implementation of a satisfactory investment banking agreement, editorial
assistance in the development of discussion materials, and preparation and
distribution of press releases. Corporation by both parties to insure
uninterrupted communications is presumed.
7) Representations and Procedures:
(a) Each person executing this Agreement has the full right, power,
and authority to enter into this Agreement on behalf of the party
for whom they have executed this Agreement, and the full right,
power, and authority to execute any and all necessary instruments
in connection with this Agreement, and to fully bind such party
to the terms and conditions and obligations of this Agreement.
<PAGE>
(b) This Agreement, together with any and all exhibits, shall
constitute the entire Agreement between the parties with respect
to the subject matter hereof and supersedes any and all prior or
contemporaneous oral and written agreements and discussions
between or among any of them. The parties hereto acknowledge and
agree that there are no conditions, covenants, agreements and
understandings between or among any of them except as set forth
in this Agreement. This Agreement may be amended only by a
further writing signed by all parties hereto.
(c) Venue in the event of litigation shall be in the State of
California, County of Santa Barbara. The losing party agrees to
pay all reasonable legal costs of the prevailing party, including
attorneys' fees.
(d) Boston hereby agrees and consents at its sole cost and expense to
indemnify, and hold EC harmless from liability arising out of any
legal or administrative action in which EC is named and/or which
is brought against EC which directly or indirectly arises out of
misstatement or omission of a material fact in any information,
verbal representation, or written documentation upon, or is
utilized in any manner by EC in drafting press releases and/or
other financially and publically oriented communications.
(e) This Agreement may be executed either as a single document or in
one or more counterparts, each of which shall be deemed an
original and all of which, taken together, shall constitute one
and the same instrument. Execution of this Agreement by facsimile
signature shall be acceptable, and each party agrees to provide
the original executed pages to the other party within 10 days.
(f) Any notice required to be given pursuant to this agreement shall
be deemed given and served when such notice is deposited in the
United States Mail, first class, certified or registered, and
addressed to the principal offices of the parties as they appear
on this Agreement, unless a written change of address
notification has been sent and received.
Sincerely yours,
/s/ Ira Weingarten
- -----------------------
Equity Communications
By Ira Weingarten
President
Accepted by:
By:/s/ Daniel Hoyng President, Client
- -------------------
Signature Title
Date: Feb 27, 1998.
EXHIBIT 10.9
GENERAL RELEASE OF ALL CLAIMS
For and in the sole consideration of the sum of One Hundred
Seventy-Five thousand (175,000) Regulation D Rule 504 Free-Trading Shares of the
common stock of National Boston Medical, Inc. to be issued to Steve Chizzik,
whose address is 954 Ridgewood Road, Milburn, NJ 07041, the receipt and
sufficiency of which is hereby acknowledged, the Undersigned (hereinafter
referred to as "Releasors") on their behalf, hereby release and forever
discharge National Boston Medical, Inc. (hereinafter referred to as "Releasee"),
its or their heirs, executors, administrators, subsidiaries, parent companies,
agents and assigns, from any debt or other liability arising out of or from that
certain Agreement between Release and Ira Weingarten d.b.a. Equity
Communications dated on or about February 27, 1998.
The Release hereby declare that the terms of this General Release
have been completely read and are fully understood and voluntarily accepted for
the purposes of making a full and final compromise, adjustment and settlement of
any and all claims, disputed or otherwise, on account of the Agreement
above-mentioned, and for the express purpose of precluding forever any further
or additional claims arising out of the aforesaid.
This General Release is freely and voluntarily executed by the
Releasors after being apprised of all relevant information and data by their
consultants and/or attorneys. The Releasors in executing this General Release do
not rely on any inducements, promises, or representations made by the Release or
any of the Releasee's representatives. Furthermore, no promise, inducement, or
agreement not herein set forth, has been made to the Releasors and this General
Release contains the entire agreement between the parties hereto, and the terms
of this General Release are contractual and not merely a recital.
Further, the Releasors have or will discharge or indemnify, defend
and save harmless the Release from any and every claim, right, action, demand,
and lien, known or unknown, to either party hereto of every kind or character
which may ever be asserted by reason of or in relation to said Agreement.
The Releasors represent and warrant that no other person or entity
has or has had any interest in the Agreement referred to in this General Release
and that they have the sole right and exclusive authority to execute this
General Release and receive the sum specified in it and that they have not sold,
assigned, transferred, conveyed, or otherwise disposed of any of the claims,
referred to in the Agreement or in this General Release.
This General Release shall be construed and interpreted in accordance
with the laws of the State of Florida.
The Releasors hereby accept the sum set out above as final payment of
the consideration set forth above, and executed this General Release on the 23rd
Day of November, 1998.
BY: /s/Ira Weingarten
----------------------------
Ira Weingarten, Individually
BY: /s/ Ira Weingarten
----------------------
Ira Weingarten d.b.a Equity Communications
<PAGE>
BY: /s/ Steve Chizzik
-------------------------
Steve Chizzik
STATE OF CALIFORNIA
COUNTY OF SANTA BARBARA
BEFORE ME, personally appeared Ira Weingraten, to me known to be the
person described in and who executed the foregoing General Release of All Claims
and acknowledged to and before me that he/she executed the said instrument for
the purposes therein expressed.
WITNESS my hand and official seal this 23 day of November, 1998.
/s/Denise Hemo
---------------------------
[seal] Notary Public
My Commission Expires: 4/7/2000
(Notarial Seal)
EXHIBIT 10.10
AGREEMENT
This is an agreement by and between National Boston Medical, Inc. (NBMI), a
Delaware corporation and Rothschild Reserve International, Inc. (ROTHSCHILD),
Florida corporation, and Mayflower Industries, Inc. (MAYFLOWER), a Delaware
corporation.
ROTHSCHILD and MAYFLOWER agree to provide a fully trading public shell (PUBCO)
for NBMI. The private stock of NBMI will be exchanged for a control block of the
PUBCO stock. In return, NBMI will provide the following consideration.
ROTHSCHILD and MAYFLOWER will receive just prior to the merger 325,000 shares
each for a total of 650,000 shares of the private stock of NBMI. The 650,000
shares of NBMI will be converted to public shares in the proportion assuming a
one-to-one ratio to 200,000 shares each of restricted 144 shares for a total of
400,000 shares of PUBCO and an additional 112,500 shares each for free trading
shares for a total of 225,000 shares of PUBCO. Should the ratio be different
than one-to-one, the PUBCO shares would be proportioned accordingly. ROTHSCHILD
and MAYFLOWER will do their best efforts to raise $3-5 million in capital for
PUBCO by September 1, 1998.
For raising capital and for funds raised through licensing agreements for a new
PUBCO, ROTHSCHILD and MAYFLOWER will be entitled to three and one-half percent
(31/2%) each, for a total of seven percent (7%), for accomplishing such
transactions.
The estimated cost of doing the merger is $250,000. This should be inclusive of
the SEC attorney. For any other introductions-to Market Makers, PR firms,
Attorneys, CPA firms, registration on Berlin, UK or other countries exchanges,
European market making, Wall Street Journal announcementsintroduction and
assistance in secondary offerings are separate expenses and paid by PUBCO when
they are agreed to by all parties.
NBMI should advance to ROTHSCHILD fifty percent (50%) of the $250,000 today to
be gin covering some of the costs. ROTHSCHILD will maintain an audit of all
expenses and unused funds will be returned to NBMI. Should the costs slightly
exceed $250,000, though not anticipated, NBMI would have to agree or reject the
additional expenses. The due diligence on the PUBCO candidates will begin
immediately upon signing of this agreement. The anticipated completion date for
the merger is on or before July 1, 1998.
The parties here in, by their endorsement below, agree and accept the terms of
this agreement.
/s/ Daniel Hoyng 5/21/98
- --------------------------- --------------
Daniel Hoyng, President Date
National Boston Medical, Inc.
/s/ Bruce D. Randall 5/21/98
- ------------------------- --------------
Bruce D. Randall, COO Date
National Boston Medical, Inc.
<PAGE>
/s/ Alexis I. Mandelbaum 5/21/98
- --------------------------- --------------
Alexis I. Mandelbaum, President Date
Rothschild Reserve
International, Inc.
/s/ Gerard Latulippe 5/21/98
- -------------------------- ---------------
Gerard Latulippe, President Date
Mayflower Industries, Inc.
EXHIBIT 10.11
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into as of October 9,
1998 by and between FRAGRANCE EXPRESS, INC., a Nevada corporation, with offices
at 43 Taunton Green, Taunton, MA 02780 (the "Company") and Good Works, Inc., and
or its affiliates, successors or assigns ("Consultant")
WITNESSETH:
WHEREAS Consultant provides corporate growth development consulting
services;
WHEREAS the Company desires to engage the services of Consultant in
accordance with the terms and conditions set forth in this Agreement, and;
WHEREAS in the context of this Agreement, the term "Transaction" shall mean
issuance of stock or any other securities, spin-off or redeployment of assets,
or divisions, restructuring, or other transaction undertaken by the Company or
any person or entity acting together with or for the benefit of the Company. The
term "Value" shall mean the aggregate value of a Transaction, including present
and future cash, royalties, securities, warrants and any other form of payment
or dividend. "Consideration" shall mean all consideration paid to respective
parties, including cash, royalties, securities, warrants and any other form of
payment or dividend.
NOW, THEREFORE, in consideration of the mutual promises and conditions set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Services
Consultant shall provide the following services to the Company:
(A) Provide consulting and liaison services to the Company as requested in
connection with the establishment and implementation of a corporate
development growth plan (1) to procure near term and longer term
working capital for operations and expansion (2) to repay certain
debt. Such plans also may encompass other priorities as set forth by
both parties.
(B) Provide consulting and liaison services to the Company in connection
with the implementation and completion of its corporate development
plan (including subsidiaries and affiliates), it being understood that
such services should not be construed as engaging in broker dealer
activities;
(C) Review the present capital structure of the Company (including
subsidiaries and affiliates), its stock trading patterns, market
making activities, and external investment community information;
advise and coordinate the development and implementation of a plan to
maximize shareholder values; and work in conjunction with management
and legal counsel.
<PAGE>
(D) Assist, when requested by the Company, and monitor the Company's
investor relations activities which may include assistance in the
review and creation of corporate communications, press releases, and
presentations.
(E) Review, comment and advise on all development and financial proposals
the Company receives during the term of this agreement when requested
by the Company.
(F) Board participation if requested by the Company.
2. Compensation
If the Company is successful in raising short and/or long term capital
through the activities of Consultant, in consideration of the services
provided by Consultant under this Agreement, the Company agrees to pay the
following:
A. An initial flat fee payment of 500,000 Free-Trading shares (pre-split)
upon execution of this Agreement.
B. If the Company is successful in structuring its overall program and
objectives outlined in Paragraph 1 and such success is demonstrated by
the value of the common stock of the Company in the trading market,
the Company agrees to the following incentive compensation:
1. If the common stock of the Company trades at a closing bid price of
$1 (pre-split) on or by the close of trading on October 21, 1998, a
total of 125,000 (post-split) shares (50% Free-Trading shares / 50%
Rule 144 shares) to be paid to Consultant.
2. If the Common Stock of the Company trades at a closing bid price of
$4 (post-split) ($1 pre-split) for a period of twenty (20) days from
and after October 19,1998 (defined as a $4 closing bid price for a
minimum of 15 out of 20 trading days), a total of 125,000 post-split
shares (Free-Trading / 50% Rule 144) shall be paid to Consultant.
3. If the Common Stock of the Company trades at a closing bid price of
$5 (post-split) ($1.25 pre-split) for a period of twenty (20) days
from and after November 16,1998 (defined as a $4 closing bid price for
a minimum of 15 out of 20 trading days), a total of 125,000 post-split
shares (Free-Trading / 50% Rule 144) shall be paid to Consultant.
4. If the Common Stock of the Company trades at a closing bid price of
$5 (post-split) for a period of twelve (12) months after (2) and (3)
above, (defined as a $5 closing bid price for a minimum of 75% of the
trading days and within 80% of $5 during such time period), a total of
125,000 post-split shares (50% Free-Trading / 50% Rule 144) shall be
paid to Consultant.
<PAGE>
C. If Consultant is successful in structuring a program under which the
Company raises money to meet the Company's cash needs in the form of
convertible debt, debt with warrants or similar incentive, preferred
stock or other equity participation and the Company is not required to
pay any fees to third parties, the Company agrees to the following
incentive compensation:
1. Payment equal to ten percent (10%) of the Transaction Value
received by the Company; and
2. A bonus equivalent to three percent (3%) of the Transaction Value
received by the Company payable in the form of a 3 year option to
purchase Rule 144 Common Stock of the Company to be issued at Market
Price. (Example - $100,000 is raised, 3% equals $3,000, Market Price
at time of execution is $5/share, bonus equals 600 Rule 144 shares).
3. Expenses
The Company agrees to reimburse Consultant and its affiliates, for all
reasonable out-of-pocket expenses and costs incurred in connection with the
performance of its services under this Agreement including but not limited
to travel expenses, courier costs, postage, long distance telephone calls
and outside consultants, however all such expenses incurred shall be first
pre-approved in writing by the President of the Company.
4. Indemnification
The parties agree to execute an indemnity agreement, acceptable to both
parties which shall survive any termination of this Agreement. The Company
and Consultant each represent that they have the authority to enter into
this Agreement, and have obtained all necessary consents. Both further
represent that there are no existing agreements that would prohibit or
prevent the terms of the Agreement from being implemented.
5. Term
This Agreement may be terminated with cause by either party during the term
of the Incentive Program set forth in Paragraph 2 herein and may be
terminated without cause on by either party with 30 days written notice.
6. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida with jurisdiction and venue vested in the
County of Palm Beach.
7. Miscellaneous
This Agreement constitutes the entire agreement between us, and may not be
amended or modified except in writing signed by both parties hereto. If any
provision of this Agreement shall be held or made invalid by a statute,
rule, or otherwise, the remainder
<PAGE>
of this Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable. This
Agreement and the schedule hereto have been drafted jointly by the parties
and, in the event of any ambiguities in the language hereof, there shall be
no inference drawn in favor of or against either party. The parties agree
to submit any dispute or claim and all counterclaims and cross claims
arising from the interpretation, performance, breach or any other aspect of
this Agreement or any of its terms or provisions to final binding
arbitrations by a panel of three arbitrators selected in accordance with
the rules of the American Arbitration Association in West Palm Beach,
Florida in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and the Code of Civil Procedure; the arbitrator's
decision shall be final and conclusive and confirmed by way of court
judgement. The prevailing party shall be entitled to recover from the other
party the cost of the arbitration, including reasonable attorney's fees.
Either party may initiate an arbitration as provided in the Commercial
Arbitration Rules and the Code of Civil Procedure.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first written above.
GOOD WORKS, INC. FRAGRANCE EXPRESS, INC.,
a Nevada Corporation
BY:/s/ Gerard Latulippe BY:/s/ Daniel Hoyng
- -------------------------- ----------------------------
Gerard Latulippe Dan Hoyng
EXHIBIT 10.12
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into as of October 9,
1998 by and between FRAGRANCE EXPRESS, INC., a Nevada corporation, with offices
at 43 Taunton Green, Taunton, MA 02780 (the "Company") and Rothschild Reserve
International, Inc., and or its affiliates, successors or assigns ("Consultant")
WITNESSETH:
WHEREAS Consultant provides corporate growth development consulting
services;
WHEREAS the Company desires to engage the services of Consultant in
accordance with the terms and conditions set forth in this Agreement, and;
WHEREAS in the context of this Agreement, the term "Transaction" shall mean
issuance of stock or any other securities, spin-off or redeployment of assets,
or divisions, restructuring, or other transaction undertaken by the Company or
any person or entity acting together with or for the benefit of the Company. The
term "Value" shall mean the aggregate value of a Transaction, including present
and future cash, royalties, securities, warrants and any other form of payment
or dividend. "Consideration" shall mean all consideration paid to respective
parties, including cash, royalties, securities, warrants and any other form of
payment or dividend.
NOW, THEREFORE, in consideration of the mutual promises and conditions set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Services
Consultant shall provide the following services to the Company:
A. Provide consulting and liaison services to the Company as requested in
connection with the establishment and implementation of a corporate
development growth plan (1) to procure near term and longer term
working capital for operations and expansion (2) to repay certain
debt. Such plans also may encompass other priorities as set forth by
both parties.
B. Provide consulting and liaison services to the Company in connection
with the implementation and completion of its corporate development
plan (including subsidiaries and affiliates), it being understood that
such services should not be construed as engaging in broker dealer
activities;
C. Review the present capital structure of the Company (including
subsidiaries and affiliates), its stock trading patterns, market
making activities, and external investment community information;
advise and coordinate the development and implementation of a plan to
maximize shareholder values; and work in conjunction with management
and legal counsel.
<PAGE>
D. Assist, when requested by the Company, and monitor the Company's
investor relations activities which may include assistance in the
review and creation of corporate communications, press releases, and
presentations.
E. Review, comment and advise on all development and financial proposals
the Company receives during the term of this agreement when requested
by the Company.
F. Board participation if requested by the Company.
2. Compensation
If the Company is successful in raising short and/or long term capital
through the activities of Consultant, in consideration of the services
provided by Consultant under this Agreement, the Company agrees to pay the
following:
A. An initial flat fee payment of 250,000 Free-Trading shares (pre-split)
upon execution of this Agreement.
B. If the Company is successful in structuring its overall program and
objectives outlined in Paragraph 1 and such success is demonstrated by
the value of the common stock of the Company in the trading market,
the Company agrees to the following incentive compensation:
1. If the common stock of the Company trades at a closing bid price of
$1 (pre-split) on or by the close of trading on October 21, 1998, a
total of 62,500 (post-split) shares (50% Free-Trading shares / 50%
Rule 144 shares) to be paid to Consultant.
2. If the Common Stock of the Company trades at a closing bid price of
$4 (post-split) ($1 pre-split) for a period of twenty (20) days from
and after October 19,1998 (defined as a $4 closing bid price for a
minimum of 15 out of 20 trading days), a total of 62,500 post-split
shares (Free-Trading / 50% Rule 144) shall be paid to Consultant.
3. If the Common Stock of the Company trades at a closing bid price of
$5 (post-split) ($1.25 pre-split) for a period of twenty (20) days
from and after November 16,1998 (defined as a $4 closing bid price for
a minimum of 15 out of 20 trading days), a total of 62,500 post-split
shares (Free-Trading / 50% Rule 144) shall be paid to Consultant.
4. If the Common Stock of the Company trades at a closing bid price of
$5 (post-split) for a period of twelve (12) months after (2) and (3)
above, (defined as a $5 closing bid price for a minimum of 75% of the
trading days and within 80% of $5 during such time period), a total of
62,500 post-split shares (50% Free-Trading / 50% Rule 144) shall be
paid to Consultant.
C. If Consultant is successful in structuring a program under which the
Company raises money to meet the Company's cash needs in the
<PAGE>
form of convertible debt, debt with warrants or similar incentive,
preferred stock or other equity participation and the Company is not
required to pay any fees to third parties, the Company agrees to the
following incentive compensation:
1. Payment equal to five percent (5%) of the Transaction Value
received by the Company; and
2. A bonus equivalent to one and one half percent (1.5%) of the
Transaction Value received by the Company payable in the form of a 3
year option to purchase Rule 144 Common Stock of the Company to be
issued at Market Price. (Example - $100,000 is raised, 1.5% equals
$1,500, Market Price at time of execution is $5/share, bonus equals
300 Rule 144 shares).
3. Expenses
The Company agrees to reimburse Consultant and its affiliates, for all
reasonable out-of-pocket expenses and costs incurred in connection with the
performance of its services under this Agreement including but not limited
to travel expenses, courier costs, postage, long distance telephone calls
and outside consultants, however all such expenses incurred shall be first
pre-approved in writing by the President of the Company. 4. Indemnification
The parties agree to execute an indemnity agreement, acceptable to both
parties which shall survive any termination of this Agreement. The Company
and Consultant each represent that they have the authority to enter into
this Agreement, and have obtained all necessary consents. Both further
represent that there are no existing agreements that would prohibit or
prevent the terms of the Agreement from being implemented.
5. Term
This Agreement may be terminated with cause by either party during the term
of the Incentive Program set forth in Paragraph 2 herein and may be
terminated without cause on by either party with 30 days written notice.
6. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida with jurisdiction and venue vested in the
County of Palm Beach.
7. Miscellaneous
This Agreement constitutes the entire agreement between us, and may not be
amended or modified except in writing signed by both parties hereto. If any
provision of this Agreement shall be held or made invalid by a statute,
rule, or otherwise, the remainder of this Agreement shall not be affected
thereby and, to this extent, the provisions of this Agreement shall be
deemed to be severable. This Agreement and the schedule hereto
<PAGE>
have been drafted jointly by the parties and, in the event of any
ambiguities in the language hereof, there shall be no inference drawn in
favor of or against either party. The parties agree to submit any dispute
or claim and all counterclaims and cross claims arising from the
interpretation, performance, breach or any other aspect of this Agreement
or any of its terms or provisions to final binding arbitrations by a panel
of three arbitrators selected in accordance with the rules of the American
Arbitration Association in West Palm Beach, Florida in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and
the Code of Civil Procedure; the arbitrator's decision shall be final and
conclusive and confirmed by way of court judgement. The prevailing party
shall be entitled to recover from the other party the cost of the
arbitration, including reasonable attorney's fees. Either party may
initiate an arbitration as provided in the Commercial Arbitration Rules and
the Code of Civil Procedure.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first written above.
ROTHSCHILD RESERVE FRAGRANCE EXPRESS, INC.,
INTERNATIONAL, INC., a Nevada Corporation
a Florida Corporation
BY:/s/ Alexis I. Mandelbaum BY:/s/ Daniel Hoyng
- -------------------------------- ----------------------
Alexis I. Mandelbaum, President Dan Hoyng, President
EXHIBIT 10.13
EQUITY
COMMUNICATIONS
February 1, 1999
Mr. Daniel Hoyng, President
National Boston Medical, Inc.
43 Taunton Green, Suite 3
Taunton, MA 02780
Dear Mr. Hoyng:
This letter will confirm the following agreement and understanding between
National Boston Medical, Inc. (Boston) and Ira Weingarten d.b.a Equity
Communications (EC) and its assigns, with respect to the following:
1. Boston shall retain EC and EC agrees to be retained by Boston as its
Financial Public Relations Counsel for a period of six months commencing
February 1, 1999 and terminating on August 1, 1999. A total professional
fee of Thirty Thousand ($30,000) Dollars shall be payable for the six month
services, which payments shall be due in increments of Five Thousand
($5,000) Dollars per month.
A. If this agreement is not terminated on August 1, 1999, it shall
continue on a month to month basis thereafter.
2. Payments for the first two months of service, totaling ten thousand dollars
($10,000), shall be due and payable on March 1, 1999. Thereafter, fees are
to be billed on the first day of each succeeding month, and are due and
payable on the fifteenth day of that month.
3. Boston agrees to reimburse EC for expense incurred in the Company's behalf.
EC agrees to spend no more than $700 on any one project without the
personal approval of an authorized officer of Boston.
A. The following items will be routinely rebilled to Boston: long
distance telephone charges, travel, postage, fax, photocopying,
messenger and courier services, and editorial meals. The following
items, which would require EC to utilize outside venders and/or
supervise the work of others, (which Boston does not at the present
time expect to need) would, if required, be rebilled to the Company
only as authorized, and include a standard service fee of 17.64%:
printing, production, package distribution, mailing list development
and maintenance, art work, consultants, photography, copywriting (e.g.
annual report) and visual presentations.
<PAGE>
4. Where possible, transportation arrangements involving service for Boston
will be made by a travel agent designated by the Company, and such
transportation will be billed directly to Boston by the agent. In the event
Mr. Weingarten or Mr. Chizzik must fly cross-country utilizing red-eye
service, they shall be entitled to fly business class, or first class if
business class is not available using the least possible airfare, such as
frequent flyer upgrades, etc.
5. EC, in consideration of the compensation stated above, agrees to provide
public relation services for Boston, to include responding to shareholder
inquiries; preparation of press releases, shareholder letters and reports;
and, as may be appropriate, introductions to various security dealers,
investment advisors, analysts, and members of the financial community.
Cooperation by both parties to ensure uninterrupted communications is
presumed. Boston agrees to keep EC continuously informed of its progress;
to supply information necessary to produce releases, letters, and reports
in a timely manner; and to review such documents for accuracy and
completeness before their dissemination to the public.
A. Professional services pursuant to this contract will be provided by
Ira Weingarten and Steve Chizzik, both of whom agree to devote such
time as they feel is necessary to carry out this assignment.
7. Representations and Procedures:
A. Each person executing this Agreement has the full right, power, and
authority to enter into this Agreement on behalf of the party for whom
they have executed this Agreement, and the full right, power, and
authority to execute any and all necessary instruments in connection
with this Agreement, and to fully bind such party to the terms and
conditions and obligations of this Agreement.
B. This Agreement, together with any and all exhibits, shall constitute
the entire Agreement between the parties with respect to the subject
matter hereof and supersedes any and all prior or contemporaneous oral
and written agreements and discussions between or among any of them.
The parties hereto acknowledge and agree that there are no conditions,
covenants, agreements and understandings between or among any of them
except as set forth in this Agreement. This Agreement may be amended
only by a further writing signed by all parties hereto.
C. Venue in the event of litigation shall be in the State of California,
County of Santa Barbara. The losing party agrees to pay all reasonable
legal costs of the prevailing party, including attorney's fees.
D. Boston agrees that at its sole expense and cost to indemnify, defend
and hold harmless EC from and administrative or other claim which is
asserted against EC as a result of any material misstatement or
omission of fact by Boston in any information, verbal representation,
or written documentation supplied to EC by Boston which is in turn
incorporated or utilized by EC in any manner including
<PAGE>
but not limited to press releases, letters to shareholders and/or
other public communications.
E. This Agreement may be executed either as single document or in one or
more counterparts, each of which shall be deemed an original and all
of which, taken together, shall constitute one and the same
instrument. Execution of this Agreement by facsimile signature shall
be acceptable, and each party agrees to provide the original executed
pages to the other party within 10 days.
F. Any notice required to be given pursuant to this agreement shall be
deemed given and served when such notice is deposited in the United
States Mail, first class, certified or registered, and addressed to
the principal offices of the parties as they appear on this Agreement,
unless a written change of address notification has been sent and
received.
Sincerely yours,
/s/ Ira Weingarten
- ---------------------
Equity Communications
By Ira Weingarten
President
Accepted by:
By: /s/ Daniel J. Hoyng CEO, Client
- ------------------------------------------
Signature Title
Date: Feb 11, 1999.
EXHIBIT 10.14
GENERAL RELEASE OF ALL CLAIMS
For and in sole consideration of a check by National Boston Medical,
Inc., a Nevada corporation ("Releasee") in favor of Equity Communications
("Releasor") in the amount of Seven thousand five hundred dollars ($7,500), the
receipt and sufficiency of which is hereby acknowledged, Releasor on its behalf,
hereby releases and forever discharges Releasee, its officers, directors,
shareholders, representatives, successors, subsidiaries, parent companies,
agents and assigns from any and all claims, demands, verdicts, judgments,
damages, actions, causes of action or suits of any kind or nature whatsoever
and/or damages, known and unknown, which have resulted or may in the future
develop either directly or indirectly from any business transactions or contract
between Releasor and Releasee, specifically including, but not limited to the
letter agreement between Releasor and Releasee dated February 1, 1999.
Releasor hereby declares that the terms of this General Release have
been completely read and are fully understood and voluntarily accepted for the
purposes of making a full and final compromise, adjustment and settlement of any
and all claims, verdicts, and/or judgments, disputed or otherwise, on account of
the damages above-mentioned, and for the express purpose of precluding forever
any further or additional claims arising out of the aforesaid.
It is understood and agreed that this release is the compromise of
doubtful and disputed claims, and that the payment made is not to be construed
as an admission of liability on the part of the Releasee and that said Releasee
denies any liability to Releasor, except for the amount specified in the
Promissory Note of even date herewith and intends merely to avoid the expense
and inconvenience of litigation.
This General Release is freely and voluntarily executed by Releasor
after being apprised of all relevant information and data by its consultants
and/or attorneys. Releasor in executing this General Release does not rely on
any inducements, promises, or representations made by Releasee or any of the
Releasee's representatives. Furthermore, no promise, inducement, or agreement
not herein set forth, has been made to Releasor and this General Release
contains the entire agreement between the parties hereto, and the terms of this
General Release are contractual and not merely a recital.
Releasor represents and warrants that no other person or entity has
or has had any interest in the claims, demands, obligations, or causes of action
referred to in this General Release and that it has the sole right and exclusive
authority to execute this General Release and that its has not sold, assigned,
transferred, conveyed, or otherwise disposed of any of the claims, demands,
obligations, or causes of action referred to in this General Release.
This General Release shall be construed and interpreted in accordance
with the laws of the State of Florida.
Releasor hereby executes this General Release on this the 13th day of
April, 1999.
/s/ Ira Weingarten
- ----------------------------------------
Ira Weingarten, President, Equity Communications
<PAGE>
STATE OF California
COUNTY OF Santa Barbara
BEFORE ME, personally appeared Ira Weingarten, to me known to be the
person described in and who executed the foregoing General Release of All Claims
and acknowledged to and before me that he executed the said instrument for the
purposes therein expressed.
WITNESS may hand and official seal this the 13th day of April, 1999.
/s/ Susan D. Alvarado
-------------------------
[seal] Susan D. Alvarado Notary Public
Commission # 1081204 My Commission Expires:
Notary Public-California (Notary Seal)
Santa Barbara County
My Commission Expires Dec 16, 1999
EXHIBIT 10.15
GFC
COMMUNICATIONS CORP.
February 11, 1999
Daniel J. Hoyng
President and co-CEO
National Boston Medical, Inc.
43 Tauton Green
Tauton, MA 02780
Re: Public Relations and Advertising services
Dear Mr. Hoyng:
This letter sets forth the agreement (the "Agreement") between National Boston
Medical, Inc. (the "Company") and GFC Communications Corp. ("GFC"), concerning
public relations, advertising, and related advisory services (hereafter being
referred to as the "Services") rendered to the Company from February 11, 1999
and continuing through February 10, 2000 (approximately 12 months).
When countersigned in the space provided below, this letter shall serve as our
agreement, as follows:
1. The Services
GFC shall provide public and financial communication services to the
Company, and serve, when requested, as the Company liaison and
spokesperson. Such services shall include but are not limited to the timely
response, by fax, telephone or mail, to all inquiries related to the
Company form the press, shareholders, or other interested parties. Such
response shall consist of written materials, such as copies of public
announcements, press kits, current corporate profits of the Company, and
teleconferencing as necessary. Additionally, GFC agrees to make reasonable
efforts to increase public participation in the Company's activities by
organizing and supervising the production of corporate advertising,
internet web site(s), and quarterly and annual financial reports
(collectively, the "Services") as approved by the Company.
With respect to providing the Services, GFC agrees to make itself available
for reasonable amounts of time and upon reasonable notice, devote
reasonable and good faith attention to the Company's other communications
and public relations needs. Specific assignments, however, will be mutually
agreed upon and may incur additional fees to the Company. It is understood
that GFC does not perform investment advisory services and/or advise any
person or entity to buy or sell the Company's stock, and that as a liaison
between the Company and its shareholders, GFC only disseminates information
as an intermediary on behalf of the Company.
2. Compensation for the Services
In compensation for the Services, the Company agrees to pay GFC a base fee
equal to Five Thousand Dollars ($5,000) per month ("Compensation"), due
monthly in arrears, thirty (30) days following the effective date of this
Agreement, and payable no later than fifteen (15) days
<PAGE>
following the close of each calendar month.
In addition, the Company shall reimburse GFC for out-of-pocket expenses in
connection with GFC's Services to the Company, including but not limited to
expenses related to telecommunication and travel; third-party advertising,
consulting, and mail processing; postage and express mail; and related
materials (according to, but not limited to, the Schedule of Standard
Expenses, Item 14, below) within thirty (30) days upon GFC submitting to
the Company an invoice itemizing such expenses. Interest on any overdue
balance owed to GFC by the Company shall accrue at 1.5% per month.
Unless otherwise agreed and approved in writing between GFC and the
Company, all such third party and out-of-pocket expenses exceeding $1,800
per instance incurred by GFC in performing the Services under this
Agreement and not covered by the Compensation shall be subject to approval
by the Company in advance (See form "Addendum A," attached.). The Company
has sixty (60) days form the date of invoice to contest any charges over
one thousand eight hundred dollars ($1,800) that it believes were not
approved, after which time such charges shall be considered approved in
writing.
3. Method of Compensation
At the Company's election, the Compensation may be paid in cash or in
shares of the Company's common stock (the "Fee Shares"). In the event the
Compensation contains Fee Shares, the company shall provide GFC a minimum
of (250,000) shares of the Company's free- trading common stock in the name
of GFC.
GFC will send the Company a statement for fees and costs. Unless objection
is made to GFC's bill, sufficient common stock of the Company, net of
commission, shall then be sold forthwith at the prevailing market price to
satisfy such statement. GFC may occasionally sell a reasonable amount of
fee shares ahead of amounts due to GFC, or may delay the sale of shares, in
order to accommodate the selling broker.
In the course of GFC's representation of the Company, if all of the Free
Shares are sold, additional shares sufficient to cover projected fees and
costs shall be remitted, in an amount contemporaneously agreed to by the
parties, under the same terms and conditions as enumerated above. At the
conclusion of GFC's representation of the Company, and the payment of all
final fees and costs, may unused Fee Shares or sale proceeds shall
forthwith be returned to the Company.
4. Termination
Either party may terminate upon thirty (30) days prior written notice to
the other. In the event of termination, all fees and charges owed by the
Company to GFC up until the effective date of termination (including any
unreimbursed expenses) will be paid to GFC within ten (10) days of the
later of the effective termination date or the notice date. Interest on any
overdue balance owed to GFC by the Company shall accrue at 1.5% per month.
Upon termination of this Agreement the Company is to pay for all authorized
work in progress. GFC shall transfer, assign and make available to the
Company, or its representative, all property and materials in GFC's
possession or control which belong to and were paid for by the Company.
<PAGE>
5. Reports
At the Company's request, GFC agrees to supply a report at least once a
month, verbally or included in the billing invoice, on general activities
and actions taken on behalf of the Company.
6. Materials
The Company agrees to furnish any supplies and materials with GFC may need
regarding the Company, its management, products, financial and business
status and plans.
7. Independent Contractor Status
GFC is acting as an independent contractor, and not as an employee or
partner of the Company. As such, neither party has the authority to bind
the other, nor make any unauthorized representations on the behalf of the
other.
8. Indemnification
The Company shall indemnify GFC and its officers and employees and hold
them harmless for any acts, statements or decisions made by GFC in reliance
upon information supplied to GFC by the Company, or in accordance with
instructions from or acts, statements or decisions approved by the Company.
This indemnity and hold harmless obligation shall include expenses and fees
including attorneys fees incurred by GFC in connection with the defense of
any act, suit or proceeding arising out of the foregoing.
9. Confidential Information
GFC will use its best efforts to maintain the confidential nature of the
proprietary or confidential information the Company entrusts to it through
strict control of its distribution and use. Further, GFC will use its best
efforts to guard against any loss to the Company through the failure of GFC
or their agents to maintain the confidential nature of such information.
"Proprietary" and "confidential information," for the purpose of this
Agreement shall mean any and all information supplied to GFC which is not
otherwise available to the public, including information which may be
considered "inside information" within the meaning of the U.S. securities
laws, rules and regulations.
10. Option to Purchase Shares and Restricted Stock Bonus
In consideration for GFC entering into this Agreement, the company hereby
grants GFC immediately exercisable options to purchase up to Three Hundred
Thousand (400,000) shares of its common stock, exercisable as follows (in
U.S. dollars, and adjusted for stock splits):
Seventy-five Thousand (75,000) shares at seventy five cents ($0.75), and
Seventy-five Thousand (75,000) shares at One Dollar Fifty Cents ($1.50),
Seventy-five Thousand (75,000) at Two Dollars and Fifty Cents ($2.50), One
Hundred and Seventy-five Thousand (175,000) shares at Three Dollars Fifty
Cents ($3.50). The options shall have a life of three years.
Upon its first and sixth month of engagement of GFC, the Company will issue
<PAGE>
to GFC 200,000 shares of the Company's common stock, restricted under SEC
Rule 144.
11. Other Transactions
GFC may, on its own accord and outside of the scope of the Services to be
provided under this Agreement, choose to investigate possible acquisitions
or merger candidates for the Company, or identify sources of financing for
certain of the Company's lines of business (collectively, a "business
Opportunity"). GFC shall also be entitled to receive from the Company a
"Transaction Fee," as a result of any transaction effected by the Company
with a Business Opportunity introduced by GFC or by a third party
introduced by GFC. A Business Opportunity shall include the merger, sale of
assets, consolidation or other similar transaction or series or combination
of transactions whereby the Company or its subsidiaries transfer to the
other, or both transfer to a third entity or person, assets or any interest
in its business in exchange for stock, assets, securities, cash or other
valuable property or rights, or wherein they may a contribution of capital
or services to a joint venture, commonly owned enterprise or venture with
the other for purposes of future business operations and opportunities.
To be a Business Opportunity covered by this section, the transaction must
occur during the term of this Agreement, or during the period of one year
after the expiration of this Agreement. In the event this paragraph shall
apply, any Transaction Fee due shall be based upon the net value of the
consideration, securities, property, business, assets or other value given,
paid, transferred or contributed by, or to the Company, and shall be equal
to five percent (5%) of the first One Million Dollars ($1,000,000) of such
net value, four percent (4%) of the second One Million Dollars
($1,000,000), three percent (3%) of the third One Million Dollars
($1,000,000), two percent (2%) of the fourth One Million Dollars
($1,000,000) and one percent (1%) of all of the remaining net value. Unless
otherwise mutually agreed in writing prior to the closing of any Business
Opportunity, the Transaction Fee shall be paid in cash or in kind at the
closing of the transaction.
12. Issuance and Registration of Shares
If the Fee Share provided are not registered or free-trading, as soon as
practicable following the execution of this Agreement, the Company will
include the Option Shares and the Fee Shares, if any, in an appropriate
Registration Statement to be filed with the Securities and Exchange
Commission. In the event the compensation hereunder contains Fee Shares,
GFC, at its sole discretion, may request that such shares may be issued
prior to registration or instead of registration in reliance on exemptions
from registration provided by Section 4(2) of the Securities Act of 1933
(the "Act"), Regulation D of the Act, and applicable state securities laws.
14. Schedule of Standard Expenses
The following sets forth the standard expenses for financial communications
and public relations services between GFC Communications and the Company.
Standard expenses may include but are not limited to:
<TABLE>
<CAPTION>
Description Cost
<S> <C>
Facsimile Transmission (including long distance charges): $0.60/page
<PAGE>
First Class Mail, Standard letter/Press Release, including postage
& materials: $0.60 ea.
Bulk Rate Mail, Standard Letter, including postage & materials: $0.50 ea.
Two page fact sheet w/Cover Letter, Custom Business Reply
Card, including materials, First Class Mail: $1.25 ea.
Two page fact sheet w/Cover Letter, Custom Business Reply
Card, including materials, Bulk Rate Mail: $1.15 ea.
Bulk Rate Reply card return postage & processing: $0.60 ea.
Complete Investor Package (as supplied by Company),
w/Cover Letter, 2 day, U.S. Postal Service Priority Mail: $4.00 ea.
Express Mail (i.e., Federal Express Standard Overnight): Standard Carrier Rates
Telephone, Photocopies and Teleconferencing Charges: Standard Carrier Rates
Travel Standard Carrier Rates
</TABLE>
These rates are subject to change due to an increase or decrease in third party
vendor rates.
If the foregoing is agreeable, please indicate your approval by dating and
signing below and returning an original copy to me.
Very truly yours,
GFC COMMUNICATIONS CORPORATION
Signed: /s/ Geoffrey C. Plank
- -----------------------------
Geoffrey C. Plank
President
GFC Communications Corp.
APPROVAL AND ACCEPTANCE
READ AND ACCEPTED this 18th day of Feb, 1999, with an effective date retroactive
to the date services were first performed for the Company.
NATIONAL BOSTON MEDICAL, INC. (NBM)
Signed: /s/ Daniel J. Hoyng
- -------------------------------
Name: ___________________
Title: ____________________
Daniel J. Hoyng
President
National Boston Medical, Inc.
<PAGE>
GFC COMMUNICATIONS FINANCIAL PUBLIC RELATIONS
COMMUNICATIONS AGREEMENT
ADDENDUM "A"
Additional activities for financial communications and financial public
relations services between GFC Communications and the Company:
Description Fee/Expense Amount One time or Monthly?
1) 50,000 mailing of fact sheet @ US $1.15 ea One-time
APPROVAL AND ACCEPTANCE
READ AND ACCEPTED this _____ day of ___________, 19____.
GFC COMMUNICATIONS CORPORATION
Signed: _______________________________
Geoffrey C. Plank
President
GFC Communications Corp.
250 S. Australian Ave. Ste. 1503
West Palm Beach, FL 33401
READ AND ACCEPTED this ________ day of ___________, 19_____.
NATIONAL BOSTON MEDICAL, INC.
Signed: _____________________________
Name: ______________________________
Title: _______________________________
Daniel J. Hoyng
President
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
EXHIBIT 10.16
FINANCIAL PUBLIC RELATIONS
CONSULTING AGREEMENT
THIS FINANCIAL PUBLIC RELATIONS CONSULTING AGREEMENT, made this 5th day of May
1999 by and between: National Boston Medical, Inc. located at 43 Taunton Green,
Ste. 5, Taunton, MA 02780 (herein referred to as the "COMPANY") and BUYING POWER
NETWORK, located at 3200 N. Federal Highway, Suite 221, Boca Raton, Florida
33431 engaged in providing financial public relations services (hereinafter
referred to as "CONSULTANT").
WITNESSETH THAT:
WHEREAS, the COMPANY requires financial public relations services and
desires to employ CONSULTANT to provide such services as an independent
contractor consultant, and CONSULTANT is agreeable to such employment, and the
parties desire a written document formalizing and defining their relationship
and evidencing the terms of their agreement;
NOW, THEREFORE, intending to be legally bound, and in consideration of the
mutual promises and covenants, the parties have agreed as follows:
1. APPOINTMENT. The COMPANY hereby appoints CONSULTANT as its financial
public relations counsel and hereby retains and employs CONSULTANT, on the terms
and conditions of this Agreement. CONSULTANT accepts such appointment and agrees
to perform the services upon the terms and conditions of this Agreement.
2. TERM. The term of this Agreement shall begin on Monday, May 3, 1999 and
shall terminate on November 3, 1999.
3. SERVICES
(a) CONSULTANT shall act, generally, as financial public relations counsel,
essentially acting (1) as liaison between the COMPANY and its brokerage market;
(2) as advisor to the COMPANY with respect to existing and potential market
makers, broker-dealers, and investors as well as being the liaison between the
COMPANY and such persons; and (3) as advisor to the COMPANY with respect to
communications and information (e.g., interviews, press releases, financial
media, etc.) As well as planning, designing, developing, organizing, writing and
distributing such communications and information with the exception of Due
Diligence Packages.
(b) CONSULTANT shall seek to make the COMPANY, its management, its
products, and its financial situation and prospects, known to the financial
press, publications and TV financial new programs, financial talk shows,
broker-dealers, institutional investors, market makers, investment advisors, and
other members of the financial community as well as the internet financial media
and the public generally.
(c) CONSULTANT, in providing the foregoing services, shall be responsible
for all costs of providing the services, not including out-of-pocket expenses
for postage, delivery service.
4. LIMITATIONS ON SERVICES. The parties recognize that certain
responsibilities and obligations are imposed by federal and state
<PAGE>
securities laws and by the applicable rules and regulations of stock exchanges,
the National Association of Securities Dealers, in-house "due diligence" or
"compliance" departments of brokerage houses, etc. Accordingly, CONSULTANT
agrees:
(a) CONSULTANT shall NOT release any financial or other information or data
about the COMPANY without the consent, approval and signature of the COMPANY,
signatures on press releases are necessary.
(b) CONSULTANT shall NOT conduct any meetings with financial investors
without informing the COMPANY in advance of the proposed meeting and the format
or agenda of such meeting and the COMPANY may elect to have a representative of
the COMPANY attend at such meeting.
(c) CONSULTANT shall NOT release any information or data about the COMPANY
to any selected or limited person(s), entity, or group if CONSULTANT is aware
that such information or data has not been generally released or promulgated.
(d) After notice by the COMPANY of filing for a proposed public offering of
securities of the COMPANY, and during any period of restriction on publicity,
CONSULTANT shall not engage in any public relations efforts not in the normal
course without approval of counsel for the COMPANY and of counsel for the
underwriter(s), if any.
5. DUTIES OF COMPANY
(a) COMPANY shall supply CONSULTANT, on a regular and timely basis with all
approved data and information bout the COMPANY, its management, its products,
and its operations and COMPANY shall be responsible for advising CONSULTANT of
any facts which would affect the accuracy of an y prior data and information
previously supplied to CONSULTANT so that CONSULTANT may take corrective action.
(b) COMPANY shall promptly supply CONSULTANT: with full and complete copies
of all filings with all federal and state securities agencies, with full and
complete copies of all shareholder reports and communications whether or not
prepared with CONSULTANT'S assistance; with all data and information supplied to
any analyst, broker-dealer, market maker, or other member of the financial
community; and with all product/services brochures, sales materials, etc. (this
is usually a due diligence package.)
(c) COMPANY shall promptly notify CONSULTANT of the filing of any
registration statement for the sale of securities and of any other event which
triggers any restrictions on publicity.
(d) COMPANY shall contemporaneously notify CONSULTANT if any information or
data being supplied to CONSULTANT has not been generally released or
promulgated. A signature on material will do - CONSULTANT does deliver minimum
disclosure.
6. REPRESENTATION AND INDEMNIFICATION
(a) The COMPANY shall be deemed to make a continuing representation of the
accuracy of any and all material facts, material, information, and data which it
supplies to CONSULTANT and the COMPANY acknowledges its awareness that
<PAGE>
CONSULTANT will rely on such continuing representation in disseminating such
information and otherwise performing its public relations functions.
(b) CONSULTANT, in the absence of notice in writing from COMPANY, will rely
on the continuing accuracy of material, information, and data supplied by the
COMPANY.
(c) COMPANY hereby agrees to indemnify CONSULTANT against, and to hold
CONSULTANT harmless from, any claims, demands, suits, loss, damages, and etc.
arising out of CONSULTANT's reliance upon the accuracy and continuing accuracy
of such facts, material, information, and data, unless CONSULTANT has been
negligent in fulfilling the duties and obligations hereunder.
(d) COMPANY hereby authorizes CONSULTANT to issue, in CONSULTANT'S sole
discretion, corrective, amendatory, supplemental, or explanatory press releases,
shareholder communications and reports, or data supplied to analysts,
broker-dealers, market makers, or other members of the financial community.
7. COMPENSATION
(a) Buying Power Network, in providing the foregoing services, shall be
responsible for all costs incurred except company will be responsible for
mailing of due diligence requests (or expenses for preparation and mailing of
due diligence packages by Buying Power Network). Your cost in expense fees will
be as follows: $50,000 shares of free-trading common stock or cash or a
combination of both upon signing contract. $35,000 shares of free trading common
stock or cash or a combination of both on 2nd contract month and $25,000 shares
of free trading common stock or cash or a combination of both 3rd contract
month. The remaining contract months will be an option program as will be
proposed under separate cover.
8. BILLING AND PAYMENT. The monthly basic fee provided for in Paragraph
7(a) shall be due and payable without billing. Billings and payments for special
services (Paragraph 7) shall be as agreed.
9. RELATIONSHIP OF PARTIES. CONSULTANT is a Florida Corporation,
responsible for compensation of its agents, employees and representatives, as
well as all applicable withholding therefrom and taxes thereon (including
unemployment compensation) and all workmen's compensation insurance. This
Agreement does not establish any partnership, joint venture, or other business
entity or association between the parties and neither party is intended to have
any interest in the business or property of the other.
10. TERMINATION. This agreement may be terminated by either party prior to
the expiration of the term provided in Paragraph 2 above only in writing at
least five business days prior to the expiration of current contract month. If
this should happen, Company is responsible for all expenses to that date. All
stock left in B.P.N.'s account upon any cancellation date, will be returned to
Company minus expenses to that date.
11. ATTORNEY FEES. Should either party default in the terms or conditions
of this Agreement and suit be filed as a result of such default, the prevailing
party shall be entitled to recover all costs incurred as a result of such
<PAGE>
default including all costs and reasonable attorney fees, expenses and court
costs through trial and appeal.
12. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by the other party.
13. ASSIGNMENT. The rights and obligations of the parties under this
Agreement shall inure to the benefit of, and shall be binding upon, the
successors and assigns of the parties.
14. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail,
return receipt requested, to the principal office of the party being notified.
15. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties and may be modified only by agreement in writing, signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought. This Agreement shall be governed for all purposes by the
laws of the State of Florida. If any provision of this Agreement is declared
void, such provision shall be deemed severed from this Agreement, which shall
otherwise remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement.
BUYING POWER NETWORK
By:/s/ Terry Ritchie Date 4/30/99
- ---------------------------------
Terry Joyce Ritchie, President/CEO
Buying Power Network
NATIONAL BOSTON MEDICAL, INC.
By: /s/ Daniel J. Hoyng Date 4/29/99
- ----------------------------------
Daniel Hoyng, President
National Boston Medical, Inc.
EXHIBIT 10.17
OPERATING AGREEMENT
FOR
BOSTON MEDICAL MARKETING,
a limited liability company
ARTICLE 1.
DEFINITIONS
The following capitalized terms are used in this Operating Agreement with
the meanings thereafter ascribed:
"Affiliate" means (a) in the case in an individual, any relative of such
Person, (b) any officer, directors, trustee, partner, manager, employee or
holder of ten percent (10%) or more of any class of the voting securities of or
equity interest in such Person; (c) any corporation, partnership, limited
liability company, trust or other entity controlling, controlled by or under
common control with such Person; or (d) any officer, director, trustee, partner,
manager, employee or holder of ten percent (10%) or more of the outstanding
voting securities of any corporation, partnership, limited liability company, or
trust or other entity controlling, controlled by or under common control with
such Person.
"Articles of Organization" means the Articles of Organization of Boston
Medical Marketing as filed with the Secretary of State of Nevada as the same may
be amended from time to time.
"Capital Account" means a capital account maintained in accordance with the
rules contained in Treas. Reg. Section 1.701-1(b)(2) as maintained in accordance
with the rules contained in Treas. Reg. Section 1.701-1(b)(2) as maintained in
accordance with applicable rules under the Code and as set forth in Treas. Reg.
Section 1.704-1(b)(2)(4) as amended form time to time.
"Capital Contribution" means any contribution to the capital of the Company
in cash or property by a Shareholder whenever made.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company" means Boston Medical Marketing, a Limited Liability Company.
"Deceased Holder" has the meaning ascribed to such term in Section 6.5
hereof.
"Disposition" means any transfer or attempted transfer of all or any part
of the rights and incidents of ownership of the Shares, including, in the case
of a Shareholder, the right to vote, and the right to possession of shares as
collateral for indebtedness, whether such transfer is outright or conditional,
inter vivos or testamentary, voluntary or involuntary, or for or without
consideration.
"Distributable Cash" means all cash, revenues, and funds received by the
Company from Company operations, less the sum of the following to the extent
paid or set aside by the Company: (a) all principal and interest payments on
indebtedness of the Company and all other sums paid to lenders; (b) all cash
expenditures incurred incident to the normal operation of the Company's
business; (c) such Reserves as the Board of Managers deems reasonably
<PAGE>
necessary to the proper operation of the Company's business.
"Economic Interest" means a Shareholder's share of the Company's Net
Profits, Net Losses and distributions of the Company's assets pursuant to this
Operating Agreement with share shall be equal to the quotient of the number of
Shares held of record by such Shareholder divided by the total number of Shares
then outstanding.
"Economic Interest Holder" means a holder of Shares which only represent an
Economic Interest and not any right to vote or otherwise participate in the
affairs or management of the Company.
"Entity" means any general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust,
cooperative, or association or any foreign trust or foreign business
organization.
"Event of Dissolution" means an event so defined in NRS 86.491.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" at any time and from time to time means the quotient of
(a) the fair market value of the Company as of the date immediately prior to the
relevant meaning, as determined in good faith by the Board of Managers of the
Company, divided by (b) the total number of Shares outstanding on the applicable
date. In making the determination of the Fair Market Value pursuant to this
subsection, the Board of Managers shall assume that fair market value of the
Company is equal to the amount which would be paid in cash for the Company, as a
going concern, by an unaffiliated third party financial buyer, and may take into
account such additional factors as may be relevant to such valuation, including
without limitation, the absence of a trading market for the Shares, the minority
status of the Shares, and such other facts and circumstances as may be material.
The Board of Managers may, but shall not be obligated to, engage in the services
of a reputable, experience investment banking firm to assist it in the
determination of Fair Market Value. The cost of determining Fair Market Value
shall be borne by the Company.
"Fiscal Year" means the Company's fiscal year, which shall be the calendar
year.
"Initial Capital Contribution" means the initial contribution to the
capital of the Company made by a Shareholder pursuant to this Operating
Agreement, which shall be $.0001 per Share.
"Manager" means one or more Persons designated or elected to the Board of
Managers pursuant to this Agreement.
"Net Capital Contribution" as to a Shareholder means the aggregate Capital
Contribution by such Shareholder reduced by the amounts distributed to such
Shareholder as returns of capital.
"Net Losses" means the Company's taxable loss as computed under the Code.
"Net Profits" means the Company's taxable income and gain as computed under
the Code.
"Nevada Act" means Chapter 86 of the Nevada Revised Statutes ("NRS").
<PAGE>
"New Securities" has the meaning ascribed to such term in Section 6.10
hereof.
"Officer" means one or more persons appointed by the Board of Managers
pursuant to Article 6 hereof.
"Operating Agreement" means this Operating Agreement as originally executed
and as amended from time to time.
"Permitted Disposition" means a Disposition by an assignment of an Economic
Interest in the Company (evidenced by the Shares to be assigned):
(a) to which each Shareholder consents in writing;
(b) effected pursuant to the provisions of Section 12.1 hereof; or
(c) to a member o such Shareholder's immediate family, as defined in the
regulations promulgated under Section 15 of the Exchange Act, or to
any trust for his or their benefit.
The foregoing notwithstanding, no Permitted Disposition shall entitle the
transferee to the rights and benefits of a Shareholder, unless and until such
transferee is admitted to the Company as a Shareholder in the manner described
in Article 14 hereof. In addition, no Disposition shall be a Permitted
Disposition unless the Transferring Shareholder shall have obtained in written
agreement of the transferee, that such transferee will be bound by, and the
Shares proposed to be transferred will be subject to, the restrictions on
transfer in Article 13 of this Operating Agreement.
"Person" means any individual or entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such "Person"
where the context so permits.
"Preferred Return" means an amount computed as if it were interest to each
Shareholder's Net Capital Contribution, from time to time, as determined by the
Board of Managers from time to time.
"Prime Rate" means the "prime rate" as announced from time to time.
"Reserve" means with respect to any fiscal period, funds set aside or
amounts allocated during such period to reserves which shall be maintained in
amounts deemed sufficient by the Board of Managers for working capital and to
pay taxes, insurance, debt service, or other costs or expenses incident to the
ownership or operation of the Company's business.
"Shareholder" means each of the parties who executes a counterpart of this
Operating Agreement as a Shareholder and each of the parties who may hereafter
become Shareholders pursuant to this Agreement. If a Manager has purchased or
received a Shareholder Interest in the Company, such Manager will have all the
rights of a Shareholder with respect to such Shareholder Interest, and the term
"shareholder" as used herein shall include a Manager to the extent such Manager
has purchased a Shareholder Interest in the Company. If a Person is an
Shareholder immediately prior to the purchase or other acquisition by such
Person or an Economic Interest, such Person shall have all the rights of a
Shareholder with respect to such purchased or otherwise acquired Shareholder
Interest or Economic Interest, as the case may be.
<PAGE>
"Shareholder Interest" means a Shareholder's entire interest in the Company
consisting of such Shareholder's Economic Interest together with the right to
vote on, consent to, or otherwise participate in any decision or action of or by
the Shareholders granted pursuant to this Operating Agreement or the Nevada Act.
A Shareholder is entitled to one vote for each Share held by such Shareholder on
all matters that require or are submitted by the Board of Managers to a vote or
other action by the Shareholders.
"Shares" are the basis for determining a Shareholder's share of the Net
Profits and Net Losses, distributions of the Company's assets pursuant to this
Operating Agreement, and the voting rights of Shareholders. Shares shall be
evidenced by certificates in the form approved by the Board of Managers. Shares
shall be designated as either Class A Common Stock or Class B Common Stock,
pursuant to Article 8.
"Transaction" means the Company shall consummate (a) a sale of all or
substantially all of the assets of the Company, (b) the merger of the Company
into another person or any consolidation, share exchange, combination,
reorganization, or like transaction in which the Company is not the survivor or
in which Persons holding a majority of the Shares of the Company issued and
outstanding immediately prior to the consummation of such transaction and any
related transaction hold less than a majority of the issued and outstanding
equity interests of the resulting or surviving person immediately after the
consummation of such transaction or transactions, or (c) a sale or transfer of
85% or more of the issued and outstanding Shares of the Company held by
Shareholder.
"Transferring Shareholder" means Shareholder who sells, assigns, pledges,
hypothecates, or otherwise transfers for consideration or gratuitously all or
any portion of the Shares held of record by such Shareholder.
"Treasury Regulations" or "Regulations" means the Federal Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Withdrawing Shareholder" means a Shareholder who counts or incurs in Event
of Dissociation within the meaning of NRS 86.491.
ARTICLE 2
BUSINESS OF COMPANY
The Company may engage in any lawful business whatsoever, or which shall at
any time appear conducive to or expedient for the protection or benefit of the
Company and its assets. The Company shall have all powers necessary to or
reasonably connected with the Company's business which may be legally exercised
by a limited liability company under the Nevada Act or which are necessary,
customary, convenient, or incident to the realization of its business purpose.
ARTICLE 3
NAMES AND ADDRESSES OF SHAREHOLDERS
The names and addresses of the Shareholders are set out on Schedule 1
hereto under the caption Shareholder's Name and Address.
<PAGE>
ARTICLE 4
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management. The full and entire management of the business and
affairs of the Company shall be vested in the Board of Managers which shall have
and may exercise all of the powers that may be exercised or performed by the
Company. Except for situations in which the approval of the Shareholders is
expressly required by this Operating Agreement or by non-waivable provisions of
applicable law, the Board of Managers shall have full and complete authority,
power and discretion to manage and control the business, affairs, and properties
of the Company, to make all decisions regarding those matters, and to perform
any and all other acts or activities customary or incident to the management of
the Company's business.
Section 4.2 Number, Tenure, and Qualifications. The Board of Managers shall
initially consist of five (5) persons. The Shareholders shall, from time to
time, fix by resolution the precise number of the Board of Managers, provided
that there shall be not less than five (5) nor more than twelve (12) Managers.
Managers shall be elected at each annual meeting of Shareholders and shall hold
office until the first to occur of the death (or dissolution as the case may
be), resignation, or removal of such Manager, or until a successor to such
Manager shall been elected and qualified.
Section 4.3 Manner of Action,. Quorum. At any time when there is more than
one Manager, the Board of Managers may not take any action permitted to be taken
by the Board of Managers, unless the Board of Managers act at any regular or
special meeting held in accordance with Section 4.5 hereof or by unanimous
written consent in accordance with Section 4.6 of this Operating Agreement. A
majority of the Board of Managers shall constitute a quorum for the transaction
of business at any meeting. All resolutions adopted and all business transacted
by the Board of Managers shall require the affirmative vote of a majority of the
Managers present at the meeting. Managers need not be residents of the State of
Nevada or Shareholders of the Company.
Section 4.4 Vacancies. The Managers may fill the place of any Manager which
may become vacant prior to the expiration of his term, such appointment by the
Managers to continue until the expiration of the term of the Manager whose place
has become vacant, or may fill any vacancy created by reason of an increase in
the number of Managers, such appointment by the Managers to continue for a term
of office until the next election of Managers by the Shareholders and until the
election of the successor.
Section 4.5 Meetings. The Managers shall meet annually, without notice,
following the annual meeting of the Shareholders. The Board of Managers may set
any number of regular meetings by resolution. No notice need be given for any
annual or regular meeting of the Board of Managers. Special meetings of the
Managers may be called at any time by any two Managers, on two days written
notice to each manager, which notice shall specify the time and place of the
meeting. Notice of any such meeting may be waived by an instrument in writing
executed before or after the meeting. Managers may attend and participate in
meetings either in person or by means of conference telephones or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such
communication equipment shall constitute presence in person at any meeting.
Attendance in person at such meeting shall constitute a waiver of notice
thereof.
Section 4.6 Action in Lieu of Meeting. Any action to be taken at a meeting
of the Managers, or any action that may be taken, shall be signed by all of the
<PAGE>
Managers and any further requirement of law pertaining to such consents have
been complied with.
Section 4.7 Removal. Any Manager may be removed from office with cause,
upon the majority vote of the Shareholders, at a meeting with respect to which
notice of such purpose is given. For purposes of this provision, cause shall be
defined as conduct which is fraudulent or otherwise detrimental to the business
and/or reputation of the Company.
Section 4.8 Certain Powers of the Board of Managers. The Board of Managers
shall have plenary power and authority to conduct the business of the Company.
Without limiting the generality of the preceding sentence or the powers
described in Section 4.1 hereof, the Board of Managers shall have full power and
authority to authorize the Company.
(a) To acquire property from any Person as the Board of Managers may
determine. The fact that a Manager or a Shareholder is directly or indirectly
affiliated or connected with any such person shall not prohibit the Board of
Managers from dealing with that Person.
(b) To borrow money for the Company from banks, other lending institutions,
one or more Manager, Shareholder, or affiliates of a Manager or Shareholders on
such terms as the Managers deem appropriate, and in connection therewith, to
hypothecate, encumber and grant security interest in the assets of the Company
to secure repayment of the borrowed sums. NO debt shall be contracted or
liability incurred by or on behalf of the Company except by the Board of
Managers, or to the extent permitted under the Nevada Act, by agents or
employees of the Company expressly authorized to contract such debt or incur
such liability by the Board of Managers.
(c) To purchase liability and other insurance to protect the Company's
property and business.
(d) To invest any Company funds temporarily (by way of example but not
limitation) in time deposits, short-term governmental obligations, commercial
paper or other investments.\
(e) Upon the affirmative vote of the Shareholders holding at least a
majority of the Shares held by the Shareholders, to sell or otherwise dispose of
all or substantially all of the assets of the Company as part of a single
transaction or plan so long as such disposition is not in violation of or a
cause of a default under any other agreement to which the Company may be bound.
The affirmative vote of the Shareholders shall not be required with respect to
any sale or disposition of the Company's assets in the ordinary course of the
Company's business.
(f) To execute on behalf of the Company all instruments and documents,
including, without limitation, checks; drafts; notes and other negotiable
instruments; mortgages or deeds of trust; security agreements; financing
statements; documents providing for the acquisition, mortgage or disposition of
the Company's property; assignments; bills of sale; leases; partnership
agreements, operating agreement of other limited liability companies; and any
other instruments or documents necessary, in the opinion of the Board of
Managers, to the business of the Company.
(g) To employ accountants, legal counsel, managing agents, or other experts
to perform services for the Company and to compensate them from Company funds.
(h) To enter into any and all other agreements on behalf of the Company,
with any other Person for any purpose, in such forms as the Board of Managers
may approve.
<PAGE>
(i) To create offices and to delegate executive responsibility to them, and
to appoint individuals, who need not be Managers, to serve as such officers at
the pleasure of the Board of Managers.
(j) To do and perform all other acts as may be necessary or appropriate to
the conduct of the Company's business.
(k) To issue authorized but unissued Shares.
(l) To fix, without Shareholder action, the relative rights, privileges,
preferences as to (i) allocations of taxable income, gain, and loss and (ii)
distributions.
Unless authorized by the Board of Managers, no attorney-in-fact, employee,
or other agent of the Company shall have any power or authority to bind the
Company in any way, to pledge it credit, or to render it liable pecuniary for
any purpose. NO Shareholder shall have any power or authority to bind the
Company unless the Shareholder has been authorized by the Board of Managers to
act as an agent of the Company in accordance with the previous sentence.
Section 4.9 Liability for Certain Acts. No Manager shall be liable to the
Company or to any Shareholder for any loss or damage sustained by the Company or
any Shareholder except loss or damage resulting from (a) intentional misconduct,
(b) knowing violation of law, or (c) a transaction from which such Manager
received an improper personal benefit in violation or breach of the provisions
of this Operating Agreement or the Nevada Act. The Managers shall be entitled to
rely on information, opinions, reports, or statements, including but not limited
to financial statements or other financial data, prepared or presented by any
Officer or by third persons employed by an Officer.
Section 4.10 Indemnity of the Managers, Officers, Employees, and Other
Agents. To the fullest extent permitted by the Nevada Act, the Company shall
indemnify the Managers and its Officers, if any, from and against all costs of
defense (including reasonable attorneys' fees), judgments, fines, and amounts
paid in settlement suffered by a Manager because a Manager was made a party to
an action because the Manager is or was a Manager or an Officer of the Company
or an Officer, director, partner, or manager of another Person at the request of
the Company, and make advances for expenses to such Managers and officers with
respect to such matters to the maximum extent permitted under applicable law.
Section 4.11 Resignation. Any Manager of the Company may resign at any time
by giving written notice to the Shareholders of the Company. The resignation of
any Manager as a Manager shall take effect upon receipt of notice thereof or at
such later time as shall be specified in such notice, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. The resignation of a Manager who is also a Shareholder shall
not affect the Manager's rights as a Shareholder and shall not constitute an
Event of Dissolution as to such Manager.
Section 4.12 Officers' and Managers' Compensation. Any salaries or other
compensation of the Officers shall be fixed by the Board of Managers, and no
Officer shall be prevented from receiving such salary by reason of the fact that
he is also a Shareholder of the Company. Managers who are employees of the
Company shall not receive special or separate compensation for serving as the
Board of Managers, but may receive compensation as Officers or employees.
<PAGE>
ARTICLE 5
OFFICERS
Section 5.1 General Provisions. The Officers of the Company shall consist
of a President, and a Secretary/Treasurer who shall be elected by the Board of
Managers, and such other officers as may be elected by the Board of Managers or
appointed as provided in this Operating Agreement. Each Officer shall be elected
or appointed for a term of office running until the meeting of the Board of
Managers following the next annual meeting of the Shareholders, or such other
term as provided by resolution of the Board of Managers or the appointment to
office. Each Officer shall serve for the term of office for which he or she is
elected or appointed and until his or her successor has been elected or
appointed and has qualified or his or her earlier resignation, removal from
office, or death. Any two or more offices may be held by the same person, except
that the President and the Secretary/Treasurer shall not be the same person.
Section 5.2 President. The President shall be the chief executive officer
of the Company and shall have general and active management of the operation of
the Company subject to the authority of the Board of Managers. The President
shall be responsible for the administration of the Company, including general
supervision of the policies of the Company and general active management of the
financial affairs of the Company, and shall execute bonds, mortgages, or other
contracts in the name and on behalf of the Company.
Section 5.3 Vice President. The Company may have one or more Vice
Presidents, elected by the Board of Managers or appointed by the President, who
shall perform such duties and have such powers as may be delegated by the
President or the Board of Managers.
Section 5.4 Secretary/Treasurer. The Secretary shall keep minutes of all
meetings of the Shareholders and the Board of Managers and have charge of the
minute books and shall perform such other duties and have such other powers as
may from time to time be delegated to him or her by the President or the Board
of Managers. The Secretary/Treasurer shall be charged with the management of the
financial affairs of the Company, shall have the power to recommend action
concerning the Company's affairs to the President, and shall perform such other
duties and have such other powers as may from time to time be delegated to him
or her by the President or the board of Managers.
ARTICLE 6
RIGHTS AND OBLIGATIONS OF SHAREHOLDERS
Section 6.1 Limitation on Liability. Each Shareholder's liability shall be
limited as provided in the Nevada Act.
Section 6.2 No Liability for Company Obligations. No Shareholder will have
any personal liability for any debts or losses of the company beyond such
Shareholder's Capital Contributions, except as provided by law.
Section 6.3 Priority and Return of Capital. Except as may be expressly
provided in Article 10, no Shareholder shall have priority over any other
Shareholder, either as to the return of Capital Contributions or as to Net
Profits, Net Losses, or distributions. This Section 6.4 shall not apply to loans
<PAGE>
(as distinguished from Capital Contributions) which a Shareholder has made to
the Company.
Section 6.4 Purchase Upon Death. Upon the death of any Shareholder or the
dissolution of a corporate Shareholder (the "Deceased Shareholder"), the Company
shall have the irrevocable option, exercisable for 6 months after the date of
death of the Deceased Shareholder, to purchase from the estate of such Deceased
Shareholder, all Shares then owned by the estate of the Deceased Shareholder.
The Purchase Price for such Shares shall be the Fair Market Value and shall be
paid by delivery of an unsecured promissory note of the Company, payable to the
order of the Deceased Shareholder (or the personal representative, executor, or
administrator of the Deceased Shareholder, as the case may be), and bearing
interest at the Prime Rate in effect on the date of the closing plus tow
percentage points, with accrued and unpaid interest being due on each principal
installment payment date. The principal amount of such note shall be payable in
(i) eight (8) equal quarterly installments if the original principal amount of
the note is equal to or less than $1,500,000, (ii) sixteen (16) equal quarterly
installments if the original principal amount of the note is greater than
$1,500,000 but equal to or less than $2,000,000; or (iv) twenty (20) equal
quarterly installments if the original principal amount is greater than
$2,000,000. Payment of quarterly installments shall commence on the first three
month anniversary of the closing date of any purchase of Shares pursuant to this
Section 6.5, payable to the order of the Deceased Shareholder (or the personal
representative, executor, or administrator of the Deceased Shareholder, as the
case may be).
Section 6.5 Failure to Deliver Shares to the Company. If a Shareholder
becomes obligated to sell any Shares to the Company or to the Other Shareholders
under this Agreement (the "Obligated Shareholder") and fails to deliver such
Shares in accordance with the terms of this Agreement, the Company or such Other
Shareholders (as hereinafter defined) may, in addition to all other remedies it
may have, tender to the Obligated Shareholder, at the address set forth in the
Share transfer records of the Company, the purchase price for such Shares as is
herein specified, and (i) in the case of Shares to be sold to the Company
pursuant to this Agreement, cancel such Shares on its books and records
whereupon all of the Obligated Shareholder's right, title and interest in and to
such Shares shall terminate, (ii) in the case of Shares to be sold to an Other
Shareholder under this Agreement, issue certificates representing such Shares to
the Other Shareholder and register the Other Shareholder on its Company's books
and records as the record owner of the Shares whereupon all of the Obligated
Shareholder's right, title and interest in and to such Shares shall terminate.
Section 6.6 Company's Inability to Purchase. If the Company is entitled to
purchase the Shares of a Shareholder pursuant to this Agreement and the Company
at such time is unable to fulfill its obligations hereunder because of the
Company's commitments to creditors or because of Board of Managers has
determined that the Company does not have financial wherewithal to perform the
obligation of the Company, the Company may assign its rights or delegate its
obligations hereunder to all other Shareholders (the "Other Shareholders'). Each
Other Shareholder shall have the right to purchase up to such Shareholder's
pro-rata Share made available on a pro-rata basis, to the other Shareholder who
did purchase a pro-rata allocation. The Other Shareholders may then perform all
of the obligations of the Company, and exercise all rights of the Company, with
respect to the purchase of such Shares.
Section 6.7 Status of Shares Purchased by Company. Shares purchased by the
Company pursuant thereto shall not be deemed to be outstanding, and shall revert
to authorized, and unissued Shares.
<PAGE>
Section 6.8 Minimum Distributions. The Company shall, unless restricted or
prohibited by the Nevada Act unless the Board of Managers determines otherwise,
make at least annually distributions to Shareholders in an amount that is deemed
by the Board of Managers sufficient to pay the combined estimated federal and
state income tax liability of Shareholders resulting solely from inclusion of
the operating results of the Company on the personal tax returns of the
Shareholders. The Board of Managers shall not be required to consider the
personal circumstances of Shareholders in making determination of the estimated
combined federal and state income tax liability of the Shareholders, and may
make an assumption as to the "tax bracket" applicable to Shareholders as a
group.
Section 6.9 Preemptive Rights to Purchase New Securities. The Company
hereby grants to each Shareholder the right to purchase up to a pro rata share
of any New Securities, as hereinafter defined (the "Purchase Rights"), which the
Company may, from time to time, propose to sell and issue. A pro rata share, for
purposes of this Purchase Right, is a fraction, the numerator of which is the
number of Shares then held by a Shareholder, and the denominator of which is the
total number of Shares then outstanding.
(a) Except as set forth below, "New Securities" shall mean any Ownership
Interest, whether now authorized or not, and any rights, options, or warrants to
purchase said Ownership Interest, and securities of any type that are, or may
become, convertible into Ownership Interests. Notwithstanding the foregoing,
"New Securities" does not include: (i) securities offered to the public
generally pursuant to a registration statement filed pursuant to the Securities
Act of 1933, or pursuant to Regulation A under the Securities Act of 1933; (ii)
securities issued pursuant to the acquisition of another Person by the Company
by a merger, share exchange, the purchase of substantially all of the assets, or
other reorganization whe3reby the Company or its Shareholders own not less than
fifty-one percent (51%) of the voting power of the surviving or successor
Person; (iii) Shares or related options exercisable for Shares issued to
employees of, officers, and Managers of the Company pursuant to any plan or
arrangement approved by the board of Managers of the Company; (iv) securities
issued pursuant to any rights or agreements including without limitation
convertible securities, options, and warrants, provided that the Purchase Right
under this Section 6.10 applies with respect to the initial sale of New
Securities or the grant by the Company of such rights or agreements; (v)
securities issued in connection with any recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Shareholder written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the New Securities. Each Shareholder shall have
fifteen (15) days from the date of receipt of any such notice to agree to
purchase up to its respective pro rata portion of shares of such New Securities
for the price and upon the terms specified in the notice by giving written
notice to the Company of such Shareholder's intentions and stating therein the
quantity of New Secretes to be purchased by such Shareholder.
(c) In the event a Shareholder fails to exercise the Purchase Right within
said fifteen (15) day period, the Company shall have one hundred eighty (180)
days thereafter to sell or enter into a written agreement (pursuant to which the
sale of New Securities covered thereby shall be completed, if at all, within
sixty (60) days form the date of said agreement) to sell the New Securities not
purchased by the Shareholders at a price and upon such terms which are no more
favorable to the purchase of such New Securities than specified in the Company's
notice to the Shareholders. IN the event the Company has not sold the New
Securities or entered into a written agreement to sell the New Securities within
<PAGE>
said one hundred eighty (180) day period (or completed the sale of the new
Securities within sixty (60) days from the date of said agreement, as provided
above), the Company shall not thereafter issue or sell any New Securities
without first offering such securities in the manner provided in this Section
6.10.
(d) The Purchase Right granted to a Shareholder under this Section 6.10
shall expire upon the date such Shareholder no longer owns any Shares.
ARTICLE 7
MEETINGS OF SHAREHOLDERS
Section 7.1 Annual Meeting. A meeting of Shareholders shall be held
annually, within six (6) months of the end of the fiscal year of the Company.
The annual meeting shall be held at such time and place and on such date as the
Board of Managers shall determine from time to time and as shall be specified in
the notice of the meeting. Failure to hold the annual meeting of Shareholders as
provided above shall not invalidate any actions taken by the company after the
failure to hold the annual meeting as provided above.
Section 7.2 Special Meetings. Special meetings of Shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
any two (2) Managers or upon the written request of Shareholder or Shareholders
holding at least 25% of the then outstanding Shares held by Shareholders.
Special meetings of Shareholders shall be held at such time and place and on
such date as shall be specified in the notice of the meeting.
Section 7.3 Place of Meetings. Annual or special meetings of Shareholders
may be held within or outside the State of Nevada.
Section 7.4 Notice of Meetings. Written notice of annual or special
meetings of Shareholders stating the place, day, and hour of the meeting shall
be given not less than ten (10) nor more than fifty (50) days before the date of
the meeting, either personally or by mail, by or at the direction of the Board
of Managers or person calling the meeting, to each Shareholder entitled to vote
at such meeting. If mailed, such notice shall be deemed to be given two calendar
days after being deposited in the United States mail, addressed to each
Shareholder at the address of each shareholder as it appears on the books of the
Company, with postage thereon prepaid, Notice of a meeting may be waived by an
instrument in writing executed before or after the meeting. The waiver need not
specify the purpose of the meeting or the business transacted. Attendance at
such meeting in person or by proxy shall constitute a waiver of notice thereof.
Notice of any special meeting of Shareholders shall state the purpose or
purposes for which the meeting is called.
Section 7.5 Meeting of all Shareholders. If all of the Shareholders shall
meet at any time and place, either within or outside the State of Nevada, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or notice, and at such meeting any lawful action may be
taken.
Section 7.6 Record Date. For the purpose of determining Shareholders
entitled to notice of or to vote at any meeting of Shareholders or any
adjournment thereof, or Shareholders entitled to receive payment of any
distribution, or in order to make a determination of Shareholders for any other
purpose, the date on which notice of the meeting is mailed or the date on which
the resolution declaring such distribution is adopted, as the case may e, shall
be the record date for such determination of Shareholders. When a determination
<PAGE>
of Shareholders entitled to vote at any meeting of Shareholders has been made as
provided in this Section 7.6, such determination shall apply to any adjournment
thereof.
Section 7.7 Quorum. At all meetings of Shareholders, a majority of the
outstanding Shares held by Shareholders represented at the meeting in person or
by proxy, shall constitute a quorum for the transaction of business. In the
absence of a quorum at any such meeting, a majority of the Shares so represented
may adjourn the meeting from time to time for a period not to exceed sixty (60)
days without further notice. However, if at the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Shareholder of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The Shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
during such meeting of that number of Shares whose absence would cause less than
a quorum to be present.
Section 7.8 Manner of Acting. If a quorum is present, the affirmative vote
of Shareholders holding a majority of the Shares represented at the meeting, in
person or by proxy and entitled to vote shall be the act of the Shareholders,
unless the vote of a greater or lesser proportion or number is otherwise
required by the Nevada Act, by the Articles of Organization, or by this
Operating Agreement.
Section 7.9 Actions Requiring Shareholder Approval. In addition to specific
requirements for Shareholder action elsewhere in this Operating Agreement,
(a) The Shareholders hall have the right, by the affirmative vote of
Shareholders holding at least a majority of the Shares held by Shareholders to
approve the (I) sale, exchange, or other disposition if all, or substantially
all, of the Company's assets (other than in the ordinary course of the Company's
business) which is to occur as part of a single transaction or plan, (ii) any
merger of the Company into another Person, if the Company shall not be the
survivor of the Merger and (iii) election of Managers to the Board of Managers.
(b) The Shareholders hall have the right, by the affirmative vote of
Shareholders holding at least a majority of the Shares held by Shareholders to
approve the (I) amendment of the Operating Agreement (other than an amendment to
reflect the designation by the Board of Managers of any special class or series
of authorized but unissued Shares pursuant to the authority granted to the Board
of Managers pursuant to Section 4.8(I) hereof) and (ii) admission of new
Shareholders as provided in Article 14 hereof.
Section 7.10 Proxies. At all meetings of Shareholders, a Shareholder may
vote in person or by proxy executed in writing by the Shareholder or by a duly
authorized attorney-in-fact. Such proxy shall be filed with the Board of
Managers of the Company before or at the time of the meeting. No proxy shall be
valid after eleven months from the date of its execution, unless otherwise
provided in the proxy.
Section 7.11 Action by Shareholders without a Meeting. Action required or
permitted to be taken at a meeting of Shareholders may be taken without a
meeting if the action is evidenced by one or more written consents describing
the action taken, signed by the Shareholders holding a majority of the
outstanding Shares held by Shareholders, or such greater number as may be
<PAGE>
required to approve such action and delivered to the Board of Managers of the
Company for inclusion in the minutes or for filing with the Company records.
Action taken under this Section 7.11 is effective when the Shareholders required
to approve such action have signed the consent, unless the consent specifies a
different effective date. The record date for determining Shareholders entitled
to take action without a meeting shall be the date the first Shareholder signs a
written consent.
Section 7.12 Waiver of Notice. When any notice is required to be given to
any Shareholder, a waiver thereof in writing signed by the person entitled to
such notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
Section 7.13 Meeting by Telephone; Action by Consent. Shareholders may also
meet by conference telephone call if all Shareholders can hear one another on
such call and the requisite notice is given or waived.
ARTICLE 8
AUTHORIZED CAPITAL, CAPITAL CONTRIBUTIONS, AND LOANS
Section 8.1 Authorized Shares. The aggregate number of Shares which the
Company shall have the authority to issue is 5,000,000, of which 4,750,000
share, without par value, shall be designated as Class A Common Stock, and
250,000 shares, without par value, shall be designed as Class B Common Stock.
The Class A Common Stock and Class B Common Stock shall be identical in all
respects and have equal rights and privileges, except as otherwise provided in
this Article 8.
The Board of Managers shall have the authority without Shareholder action
to issue all authorized but unissued Shares (including Treasury Shares) for such
consideration as the Board of Managers deems appropriate.
Section 8.2 Share Certificates. Shares shall be evidenced by a numbered
certificate in such form as shall be approved by the Board of Managers, signed
by the President and the Secretary. Any such Share certificates shall be kept in
a book and shall be issued in consecutive order therefrom. The name of the
person owning the Shares, the number and class of Shares, and the date of issue
shall be entered on the stub of each certificate. Share certificates exchanged
or returned shall be canceled by the Secretary and returned to their original
place in the Share book.
Section 8.3 Voting. Voting shall be divided between the Class A Common
Stock and Class B Common Stock as follows:
In all matters, holder of Class A Common Stock shall be entitled to one
vote per share and holders of Class B Common Stock shall be entitled to twenty
votes per share.
Section 8.4 Transfer of Shares. Transfers of Shares shall be made on the
Share books of the Company by the Transferring Shareholder in person or by power
of attorney, upon surrender of the old certificate evidencing the Shares to be
transferred, duly assigned to the transferee, and only upon compliance with the
provisions of this Operating Agreement. See Section 12.1.
Section 8.5 Capital Contributions. Each initial Shareholder shall make an
Initial Capital Contribution of $.0001 per Share and each Person who thereafter
<PAGE>
purchases Shares from the Company shall make a Capital Contribution in an amount
determined by the Board of Managers.
Section 8.6 Additional Contributions. Except as set forth in Section 8.4
hereof, no Shareholder shall be required to make any Capital Contributions or
loans to the Company. TO the extent approved by the Board of Managers, from time
to time Shareholders may be permitted to make additional Capital Contributions
and/or loans if and to the extent they so desire, and if the Board of Managers
determine that such additional Capital Contributions and/or loans are necessary
or appropriate in connection with the conduct of the Company's business
(including without limitation expansion or diversification). In such event,
Shareholders hall have the opportunity (but not the obligation) to participate
in such additional Capital Contributions and/or loans on a pro rata basis in
accordance with the number of Shares held of record.
Section 8.7 Withdrawal or Reduction of Contributions to Capital.
(a) A Shareholder shall not receive out of the Company's property any part
of such Shareholder's Capital Contribution until all liabilities of the Company,
except liabilities to Shareholders on account of their Capital Contributions,
have been paid or there remains property of the Company sufficient to pay them.
(b) A Shareholder, irrespective of the nature of such Shareholder's Capital
Contribution, has only the right to demand and receive cash in return for such
Capital Contribution.
ARTICLE 9
DISTRIBUTIONS
Section 9.1 Distributions. All distributions of cash or other property
shall be made to Shareholders as follows:
(a) First, to Shareholders and Economic Interest Holders until they have
received their full Preferred Returns, such distribution to be in proportion to
their accrued but unpaid Preferred Returns;
(b) Net, to the Shareholder and Economic Interest Holders in the proportion
that the positive Capital Account balance of each such Shareholder and Economic
Interest Holder bears to the positive Capital Account balance of all such
Shareholders and Economic Interest Holders until such balances are reduced to
zero;
(c) Finally, to all Shareholders and Economic Interest Holders pro rata in
accordance with the ratio that the number of Shares held of record by such
Shareholder and Economic Interest Holder bears to all Shares then outstanding.
Section 9.2 Limitation Upon Distributions. No distribution shall be made to
Shareholders if the distribution is prohibited by the Nevada Act.
Section 9.3 Interest on and Return of Capital Contributions. No
Shareholder or Economic Interest Holder shall be entitled to interest on its
Capital Contribution or to the return of its Capital Contribution, except as
otherwise specifically provided for herein.
<PAGE>
ARTICLE 10
ALLOCATIONS
Section 10.1 Net Profits. Net Profits shall be allocated for each Fiscal
Year as follows:
(a) First, to Shareholders and Economic Interest Holders until the Net
Profits allocated to them for such Fiscal Year and all prior Fiscal Years is
equal to 50% of the aggregate amount of the Net Losses allocated to them
pursuant to Section 10.2 hereof for all prior Fiscal Years;
(b) Finally, to Shareholders and Economic Interest Holders in the ratio
that the number of Shares held by such Shareholder or economic Interest Holder
bears to all Shares then outstanding.
Section 10.2 Net Losses. Net Losses shall be allocated:
(a) First, to Shareholders and Economic Interest Holders whose Capital
Accounts reflect an initial Capital Contribution, in the proportion that the
positive capital account balances of each of such Shareholders bears to the
positive capital account balances of all Shareholders, until the capital account
balances of such Shareholders equal zero;
(b) Next, to Shareholders and Economic Interest Holders until the aggregate
amount of Net Losses allocated to them for such fiscal year and all prior fiscal
years is equal to the aggregate Net Profit allocated to them pursuant to Section
10.1(C) hereof for all prior Fiscal Years; such allocation to be in the amount
of the Net Profit allocated to each of them pursuant to that Section;
(c) Finally, the balance, to Shareholders and Economic Interest Holders in
the ratio that the number of Shares held by such Shareholder or Economic
Interest Holder bears to all Shares then outstanding.
Section 10.3 Alternative Allocations. It is the intent of the Shareholders
that each Shareholder's distributive share of income, gain, loss, deduction,
credit (or item thereof) be determined and allocated consistently with the
provisions of the Code, including Sections 704(b) and 704(c) of the Code. If in
connection with the issuance of Shares or other new securities pursuant to the
provisions hereof, or if for any other reason, the Managers deem it necessary in
order to comply with the Code, the Managers may, and they hereby are, authorized
and directed to allocate income, gain, loss, deduction or credit (or items
thereof) arising in any year differently than as provided for in this Article 11
if, and to the extent (i) that allocating income, gain, loss, deduction or
credit (or item thereof) would cause the determinations and allocations of each
Shareholder's distributive share of income, gain, loss, deduction or credit (or
item thereof) not to be permitted by the Code and any Treasury Regulations
promulgated thereunder or (ii) inconsistent with a Shareholder's interest in the
Company taking into consideration all facts and circumstances. Any allocation
made pursuant to this Section shall be deemed to be a complete substitute for
any allocation otherwise provided for in this Agreement, an no further amendment
of this Agreement or approval by any Shareholder shall be required to effectuate
such allocation. IN making any such allocations under this Section ("New
Allocations") the Managers are authorized to act in reliance upon advice of
counsel to the Company or the Company's regular certified public accountants
that, in their opinions after examining the relevant provisions of the Code and
any current or future proposed or final Treasury Regulations thereunder, the New
Allocation is necessary in order to ensure that, in either the then-current year
or in any preceding year, each Shareholder's distributive share of income, gain,
<PAGE>
loss, deduction or credit (or items thereof) are determined and allocated in
accordance with the Code and the Shareholder's interests in the Company.
New Allocations made by the Managers in reliance upon the advice of counsel
and accountants as described above shall be deemed to be made in the best
interests of the Company and all of the Shareholders consistent with the duties
of the Managers hereunder and any such New Allocations shall not give rise to
any claim or cause of action by any Shareholder or Economic Interest Holder
against the Company or any Manager.
ARTICLE 11
BOOKS AND RECORDS
Section 11.1 Accounting Period. The Company's accounting period shall be
the calendar year.
Section 11.2 Records, Audits and Reports. The Company shall maintain
records and accounts of all operations and expenditures of the Company. The
Company shall keep at its principal place of business the following records:
(a) A current list of the full name and last known address of each
Shareholder, Economic Interest Owner and Manager,
(b) Copies of records to enable a Shareholder to determine the relative
voting rights of each Shareholder if any;
(c) A copy of the Articles of Organization of the Company and all
amendments thereto;
(d) Copies of the Company's federal, state, and local income tax returns
and reports, if any, for the three most recent years;
(e) Copies of the Company's written Operating Agreement, together with any
amendments thereto;
(f) Copies of any financial statements of the Company for the three most
recent years.
Section 11.3 Tax Returns. The Board of Managers shall cause the preparation
and timely filing of all tax returns required to be filed by the Company
pursuant to the Code and all other tax returns deemed necessary and required in
each jurisdiction in which the Company does business. Copies of such returns, or
pertinent information therefrom, shall be furnished to the Shareholders within a
reasonable time after the end of the Company's fiscal year.
Section 11.4 Financial Statements, Reports, etc. The Company shall furnish
to each Shareholder:
(a) within one hundred fifty (150) days after the end of each fiscal year
of the Company, a balance sheet of the Company, as of the end of such fiscal
year and the related statements of income, Shareholders' equity, and changes in
cash flows for such fiscal year, prepared in accordance with generally accepted
accounting principles;
<PAGE>
(b) within sixty (60) days after the end of each quarter, other than the
last quarter in each fiscal year, a balance sheet of the Company and an income
statement of the Company, unaudited but prepared in accordance with generally
accepted accounting principals;
(c) promptly following receipt by the Company, each audit response letter,
accountant's management letter, and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company or any of its subsidiaries.
(d) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations, and inquiries that could materially
adversely affect the Company;
(e) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property, or affairs of
the Company as to shareholders may reasonably request.
Section 11.5 Compliance with Laws. The Company shall comply with all
applicable laws, rules, regulations, and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
Section 11.6 Keeping of Records and Books of Account. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles, consistently
applied, reflecting all financial transactions of the Company and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts, and other purposes in connection with its
business shall be made.
ARTICLE 12
TRANSFERABILITY
Section 12.1 Transfer Restricted. No Shareholder Interest in the Company or
Corporation owning an interest in the Company may be transferred to a Person
without the prior written approval of (a) all of the Managers and (b)
Shareholders holding Shares constituting at least two-thirds (66.67%) of all
Shares. No Shareholder may Dispose of such Shareholder's Economic Interest in
the Company evidenced by the Shares unless such Disposition is a Permitted
Disposition.
Section 12.2 Successors to Economic Rights. References in this Operating
Agreement to Shareholder shall also be deemed to constitute a reference to
Economic Interest Owners where the provisions would include those regarding
Capital Accounts, distributions, allocations, and contributions. A transferee
shall succeed to the transferor's Capital Contributions and Capital Account to
the extent related to the Economic Interest transferred, regardless of whether
such transferee becomes a Member.
ARTICLE 13
ADMISSION OF NEW SHAREHOLDERS
At any time after the date of the formation of the Company, an Person,
including a person who, by virtue of a Permitted Disposition becomes a holder of
an Economic Interest in the Company (a "Permitted Transferee") may become a
Shareholder if (a) such Person is approved in writing by all of the Managers and
<PAGE>
(b) the admission of such person as a Shareholder is approved in writing by
Shareholders holding at least two-thirds (66.67%) of the outstanding Shares held
by Shareholders. Upon the occurrence of (a) and (b) in the preceding sentence,
such Person shall be admitted as a Shareholder of the Company by (i) executing a
counterpart of this Agreement and (ii) if the Person is not a transferee in
connection with a Permitted Disposition, the payment of a Capital Contribution
in an amount determined by the Board of Managers and/or the payment of the
purchase price of the stock to be issued, said price to be determined by the
Board of Managers. Upon delivery to the Company of cash of such Capital
Contribution, and/or purchase price the Company shall issue a certificate
evidencing the number of Shares purchased in connection with the Shareholder
Interest acquired by such Person. No additional Shareholders (or substitute
Shareholders) shall be entitled to any retroactive allocation of losses, income
or expense deductions incurred by the Company. The Board of Managers may, at the
time of Shareholder is admitted, close the Company books (as though the
Company's tax year had ended) or make pro rata allocations of loss, income, and
expense deductions to a new Shareholder for that portion of the Company's tax
year in which a Shareholder was admitted in accordance with the provisions of
706(d) of the Code and the Treasury Regulations promulgated thereunder.
ARTICLE 14
DISSOLUTION AND TERMINATION
Section 14.1 Dissolution.
(a) The Company shall be dissolved upon the occurrence of any of the
following events:
(i) by the vote or written consent of Shareholders holding at least a
majority of the Shares; or
(ii) the sale of all or substantially all of the Company's assets and
the collection of all proceeds therefrom; or
(iii) notwithstanding the above, the Company shall dissolve, at the
latest, at the time specified in Section 1.5.
(b) If the Company is continued after the occurrence of an Event of
Dissolution pursuant to this Section, any successor in interest of the
Shareholder as to whom the Event of Dissolution occurred shall become an
Economic Interest Owner but shall not be admitted as a Shareholder except in
accordance with Article 14 hereof.
(c) A Shareholder shall not voluntarily withdraw from the Company or take
any other voluntary action which causes an Event of Dissolution. A Shareholder
shall have no right to withdraw from the Company.
(d) Unless otherwise approved by Shareholders holding at least a majority
of the Shares held by the other Shareholders, a Shareholder who suffers or
incurs an Event of Dissolution or whose status as a Shareholder is otherwise
terminated (a "Withdrawing Shareholder)", regardless of whether such termination
was the result of a voluntary act by such Withdrawing Shareholder, shall not be
entitled to receive the fair value of his Membership Interest, and such
Withdrawing Shareholder shall become an Economic Interest Owner.
<PAGE>
(e) Damages for breach of Section 14.1(C) shall be monetary damages only
(and not specific performance), and such damages may be offset against
distributions by the Company to which the Withdrawing Shareholder would
otherwise be entitled.
Section 14.2 Effective of Dissolution. Upon dissolution, if the business of
the Company is not continued, the Company shall commence to wind up its affairs
and shall file a statement of commencement of winding up, and publish the notice
permitted by the Nevada Act.
Section 14.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution, an accounting shall be made by the company's
independent accountants of the accounts of the Company and of the Company's
assets, liabilities, and operations, from the date of the last previous
accounting until the date of dissolution. The Manager(s) shall then immediately
begin to wind up the affairs of the Company consistent with maximization of
realization as the company's assets. All Shareholders acknowledge that final
collection of such indebtedness and distribution with respect thereto may extend
over a period of years and that winding up will proceed consistently with the
foregoing.
(b) If the Company is dissolved and its affairs are to be wound up, the
Board of Managers shall:
(i) Sell or otherwise liquidate all of the Company's assets consistent
with realization of full value of such assets and collection of any assets
outstanding (except to the extent the Manager(s) may determine to
distribute any assets to Shareholders and Economic Interest Holders in
kind),
(ii) Allocate any profit or loss resulting from such sales to
Shareholders in accordance with Section 10 hereof,
(iii) Discharge all liabilities of the Company, including liabilities
to Shareholders who are creditors, to the extent otherwise permitted by
law, other than liabilities to Shareholders for distributions, and
establish such Reserves as may be reasonably necessary to provide for
contingent or liabilities of the Company.
(iv) The remaining assets shall be distributed to Shareholders and
Economic Interest Holders, either in cash or in kind, as determined by the
Board of Managers, with any assets distributed in kind being valued for
this purpose at their fair market value, in accordance with the positive
balance (if any) in each Shareholder's or Economic Interest Holder's
Capital Account (as determined after taking account all Capital Account
adjustments for the Company's taxable year during which the liquidation
occurs) with the balance, if any, being distributed pro rata to the
Shareholders and Economic Interest Holders in accordance with the Economic
Interests held by such holders. Any such distributions in respect of their
Capital Accounts shall be made in accordance with the time requirements set
forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
(v) If any assets of the Company are to be distributed in kind, the
net fair market value of such assets as of the date of dissolutions has be
determined by independent appraisal or by the Board of Managers.Such assets
<PAGE>
shall be deemed to have been sold as of the date of dissolution for their
fair market value, and the Capital Accounts of Shareholders shall be
adjusted pursuant to the provisions of this Operating Agreement to reflect
such deemed sale.
(c) Notwithstanding anything to the contrary in this Operating Agreement,
upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Treasury Regulations, if any Shareholder or Economic Interest Holder has a
deficit Capital Account (after giving effective to all contributions,
distributions, allocations, and other Capital Account adjustments for all
taxable years, including the year during which such liquidation occurs), such
Shareholder or Economic Interest Holder shall nave no obligation to make a
Capital Contribution sufficient to eliminate the negative balance of such
Shareholder's Capital Account.
(d) Upon completion of the winding up, liquidation, and distribution of the
assets, the Company shall be deemed terminated.
Section 14.4 Certificate of Termination. When all debts, liabilities, and
obligation have been paid and discharged or adequate provisions have been made
therefor and all of the remaining property and assets have been distributed to
Shareholders and Economic Interest Holders, the Company shall file the Articles
of Dissolution in accordance with Nevada Revised Statutes.
Section 14.5 Return of Contribution Nonrecourse to Other Shareholders. Upon
dissolution, each Shareholder and Economic Interest Holder shall look solely to
the assets of the Company for the return of such Shareholder's Capital Account.
If the Company property remaining after the payment or discharge of the debts
and liabilities of the Company is insufficient to return the Capital Account of
one or more Shareholder or Economic interest Holder, including, without
limitation, all or any part of that Capital Account attributable to Capital
Contributions, then such Shareholders shall have no recourse against the
Company, any Manager, or any other Shareholder.
ARTICLE 15
MISCELLANEOUS PROVISIONS
Section 15.1 Application of Nevada Law. This Operating Agreement, and the
application of interpretation hereof, shall be governed exclusively by its terms
and by the laws of the State of Nevada, and specifically the Nevada Act.
Section 15.2 No Action for Partition. No Shareholder or Economic Interest
Holder has any right to maintain any action for partition with respect to the
property of the Company.
Section 15.3 Execution of Additional Instruments. Each Shareholder hereby
agrees to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
Section 15.4 Construction. Whenever the singular number is used in this
Operating Agreement and when required by the context, the same shall include the
plural and vice versa, and the masculine gender shall include the feminine and
neuter genders and vice versa.
Section 15.5 Headings. The headings in this Operating Agreement are
inserted for convenience only and are in no way intended to describe, interpret,
define, or limit the scope, extent or intent of this Operating Agreement or any
provision hereof.
<PAGE>
Section 15.6 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any covenant or
condition of this Operating Agreement shall not prevent a subsequent act, which
would have originally constituted a violation, from having the effect of an
original violation.
Section 15.7 Rights and Remedies Cumulative. The rights and remedies
provided by this Operating Agreement are cumulative and the use of any one right
or remedy by any party shall not preclude or waive the right not use any or all
other remedies. Such rights and remedies are given in addition to any other
rights the parties may have by law, statue, ordinance, or otherwise.
Section 15.8 Severability. If any provision of this Operating Agreement or
the application thereof to any person or circumstance shall be invalid, illegal
or unenforceable to any extent, the remainder of this Operating Agreement and
the application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
Section 15.9 Heirs, Successors and Assigns. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
insure to the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, successors,
and assigns.
Section 15.10 Creditors. None of the provision of this Operating Agreement
shall be for the benefit of or enforceable by any creditor of the Company.
Section 15.11 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
Section 15.12 Federal Income Tax Elections; Tax Matters Partner. All
elections required or permitted to be made by the Company under the Code shall
be made by the Board of Managers as determined in their sole discretion. For all
purposes permitted or required by the Code, the Shareholders constitute and
appoint _____________________ as Tax Matters Partner or, if
_____________________ is no longer a Manager, then such other Shareholder as
shall be designated by the Shareholders holding a majority of the Shares. The
provisions on limitations of liability of the Shareholders and Managers
contained herein and indemnification in Section 4.11 hereof shall be fully
applicable to the Tax Matters Partner in his or her capacity as such. The Tax
Matters Partner may resign at any time by giving written notice to the Company
and each of the other Shareholders. Upon the resignation of the Tax Matters
Partner, a new Tax Matters Partner shall be elected by Majority Consent of the
Members.
Section 15.13 Certification of Non-Foreign Status. In order to comply with
1445 of the Code and the applicable Treasury Regulations thereunder, in the
event of the disposition by the Company of a United States real property
interest as defined in the Code and Treasury Regulations, each Shareholder shall
provide to the Company, an affidavit stating, under penalties of perjury, (a)
the Shareholder's address, (b) United States taxpayer identification number, and
(c) that the Shareholder is not a foreign person as that term is defined in the
Code and Treasury Regulations. Failure by any Shareholder to provide such
affidavit by the date of such disposition shall authorize the Board of Managers
to withhold ten percent (10%) of each such Shareholder's distributive Share of
the amount realized by the Company on the disposition.
<PAGE>
Section 15.14 Notices. Any and all notices, offers, demands, or elections
required or permitted to be made under this Agreement ("Notices") shall be in
writing, signed by the party giving such Notice, and shall be deemed given and
effective (a) when hand-delivered (either in person by the party giving such
notice, or by its designated agent, or by commercial courier) or (b) on the
third (3rd) business day (which term means a day when the United States Postal
Service, or its legal successor ("Postal Service") is making regular deliveries
of mail on all of its regularly appointed week-day rounds in Reno, Nevada)
following the day (as evidenced by proof of mailing) upon which such notice is
deposited, postage pre-paid, certified mail, return receipt requested, with the
Postal Service, and
(a) If to the Company
Genomic Actives Research
& Development, A Limited Liability Company
100 W. Liberty Street, Suite 800
P.O. Box 2838
Reno, Nevada 89505
American Medical Research,
A Limited Liability Company
100 W. Liberty Street, Suite 800
P.O. Box 2838
Reno, Nevada 89505
DJH Holdings
100 W. Liberty Street, Suite 800
P.O. Box 2838
Reno, Nevada 89505
with a copy (which shall not constitute notice) to:
John K. Gallagher, Esq.
Guild, Russell, Gallagher & Fuller, Ltd.
100 W. Liberty Street, Suite 800
P.O. Box 2838
Reno, Nevada 89505
(b) if to a Shareholder or Economic Interest Holder, to the Shareholder's
or Economic Interest Holder's address as reflected in the Share ownership
records of the Company or as the Shareholders shall designate to the Company in
writing.
Section 15.15 Amendments. Any amendment to this Operating Agreement shall
be made in writing and signed by Shareholders holding at least two-thirds
(66.67%) of the Shares held by Shareholders.
Section 15.16 Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and the Agreement shall be construed in all respects as if such invalid
<PAGE>
or unenforceable provision were omitted. If any particular provision herein is
construed to be in conflict with the provisions of the Nevada Act or other law,
the provision so this Operating Agreement shall control to the fullest extent
permitted by law. The invalidity or unenforceability of any provision hereof
under applicable law shall not affect or invalidate the other provisions hereof,
and this Agreement shall be construed in all respects as if such invalid
provisions were omitted.
Section 15.17 Captions. Titles and captions are inserted for convenience
only and in no way define, limit, extend, or describe the scope of intent of
this Agreement or any of its provisions and in no way are to be construed to
affect the meaning or construction of this Agreement or any of its provisions.
Section 15.18 Banking. All funds of the Company shall be deposited in its
name in an account or accounts as shall be designated from time to time by the
Board of Managers. All funds of the Company shall be used solely for the
business of the Company. All withdrawals form the Company bank accounts shall be
authorized by Officers or by such other persons as the Board of Managers may
designate from time to time.
Section 15.19 Arbitration. Any dispute, controversy, or claim arising out
of or in connection with, or relating to, this Agreement or any breach or
alleged breach hereof shall, upon the request of any party involved, be
submitted to, and settled by, arbitration in the City of Reno, State of Nevada,
pursuant to the commercial arbitration rules then in effect of the American
Arbitration Association (or at any time or at any other place or under any other
form or arbitration at the sole discretion of the Board of Managers). Any award
rendered shall be final and conclusive upon the parties and a judgment thereon
may be entered in the highest court of the forum, state or federal, having
jurisdiction. The expenses of the arbitration shall be borne equally by the
parties to the arbitration, provided that each party shall pay for and bear the
cost of its own experts, evidence and counsel's fees, except that in the
discretion of the arbitrator, any award may include the cost of party's counsel
if the arbitrator expressly determines that the party against whom such award is
entered has caused the dispute, controversy or claim to be submitted to
arbitration as a dilatory tactic.
Section 15.20 Determination of Matters Not Provided For In This Agreement.
The Board of Managers shall decide any questions arising with respect to
the Company and this Agreement which are not specifically or expressly provided
for in this Agreement.
Section 15.21 Further Assurances. Each Shareholder agrees to cooperate, and
to execute and deliver in a timely fashion any and all additional documents
necessary to effectuate the purposes of the Company and this Operating
Agreement.
Section 15.22 Legends. Any certificate evidencing Share shall bear the
following legends:
On the face of the certificate:
"TRANSFER OF SHARES EVIDENCED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE
WITH CONDITIONS PRINTED ON THE REVERSE OF THIS CERTIFICATE."
<PAGE>
On the reverse:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES LAW OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND TRANSFERABLE ONLY
IN ACCORDANCE WITH THAT CERTAIN OPERATING AGREEMENT OF BOSTON MEDICAL MARKETS A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY IN RENO, NEVADA.
NO TRANSFER OR PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN
ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID AGREEMENT. BY ACCEPTANCE
OF THIS CERTIFICATE, ANY HOLDER, TRANSFEREE OR PLEDGE HEREOF AGREES TO BE BOUND
BY ALL OF THE PROVISIONS OF SAID AGREEMENT."
"SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT PURPOSES ONLY AND NOT FOR RESALE, TRANSFER OR DISTRIBUTION, HAVE BEEN
ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF APPLICABLE
STATE AND FEDERAL SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED OTHER THAN PURSUANT TO EFFECTIVE REGISTRATION UNDER SUCH LAWS, OR IN
TRANSACTIONS OTHERWISE IN COMPLIANCE WITH SUCH LAWS, AND UPON EVIDENCE
SATISFACTORY TO THE COMPANY OF COMPLIANCE WITH SUCH LAWS, AS TO WHICH THE
COMPANY MAY RELY UPON ANY OPINION OF COUNSEL SATISFACTORY TO THE COMPANY."
Each Shareholder shall promptly surrender the certificate representing
Shares to the Company so that the Company may affix the foregoing legends
thereto. A copy of this Agreement shall be kept on file in the principal office
of the Company in Reno, Nevada. Upon termination of all applicable restrictions
set forth herein and upon tender to the Company of the appropriate stock
certificates, the Company shall reissue to the holder of such certificates new
certificate which shall contain only the second paragraph of the restrictive
legend set forth above. This legend may be modified form time to time by the
Board of Managers of the Company to conform to such statutes or to this
Operating Agreement.
Section 15.23 Investment Representation. In addition to the restrictions on
transfer set forth above, each Shareholder understands that Shareholder must
bear the economic risk of this investment for an indefinite period of time
because the Share are not registered under the Securities Act of 1933, as
amended (the "1933 Act") or the securities laws of any state of other
jurisdiction. Shareholder has been advised that there is no public market for
the shares and that eh Shares are not being registered under the 1933 Act upon
the basis that the transactions involving its sale are exempt from such
registration requirements, and that reliance by the Company on such exemption is
predicated in part on the Shareholder's representations set forth in this
Agreement. Each Shareholder acknowledges that no representations of any kind
concerning the future intent or ability to offer or sell the Share in public
offering or otherwise have been made to the Shareholder by the Company or any
other person or entity. The Shareholder understands that the Company makes no
covenant, representation or warranty with respect to the registration of
securities under the Securities Exchange Act of 1934, as amended, or its
dissemination to the public of any current financial or other information
concerning the Company. Accordingly, the Shareholder acknowledges that there is
<PAGE>
no assurance that there will ever be any public market for the Share, and that
the Shareholder may not be able to publicly offer or sell any thereof.
Each Shareholder represents and warrants that the Shareholder is able to
bear the economic risk of losing Shareholder's entire investment in the Company,
which investment is not disproportionate to Shareholder's net worth, and that eh
Shareholder has adequate means of providing for Shareholder's current needs and
personal contingencies without regard to the investment in the Company. The
Shareholder acknowledges that an investment in the Company involves a high
degree of risk. The Shareholder acknowledges that Shareholder and Shareholder's
advisors have had an opportunity to ask questions of and to receive answ3ers
from the officers of the Company and to obtain additional information in writing
to the extent that the Company possesses such information or could acquire it
without unreasonable effort or expense: (I) relative tot eh Company and the
Shares; and (ii) necessary to verify the accuracy of any information, documents,
books and records furnished. Each Shareholder represents, warrants and covenants
to the Transferor and the Company that the Shareholder is a resident of the
state shown on Schedule 1 hereto and will be the sole party in interest as to
the Shares acquired hereunder and is acquiring the Shares for the Shareholder's
own account, for investment only, and not with a view toward the resale or
distribution thereof.
Each Shareholder agrees that the Shareholder will not attempt to pledge,
transfer, convey or otherwise dispose of the Shares except in a transaction that
is the subject of either (I) an effective registration statement under the 1933
Act and any applicable state securities laws, or (ii) an opinion of counsel,
which opinion of counsel shall be satisfactory to the Company, to the effect
that such registration is not required. The Company may rely on such an opinion
of Shareholder's counsel in making such determination. Each Shareholder consents
to the placement of legends on any certificates or documents representing any of
the Share stating that the Shares have not been registered under the 1933 Act or
any applicable state securities laws and setting froth or referring to the
restrictions on transferability and sale thereof. The Shareholder is aware that
the Company will make a notation in its appropriate records, and notify its
transfer agent, with respect to the restrictions on the transferability of the
Shares.
Each Shareholder represents that the Shareholder has consulted with the
Shareholder's attorneys, financial advisors and other regarding all financial,
securities and tax aspects of the proposed investment in the Company and that
such advisors have reviewed this Agreement and all documents relating to this
Operating Agreement on Shareholder's behalf. Shareholder and the Shareholder's
advisors have sufficient knowledge and experience in business and financial
matters to evaluate the Company, to evaluate the risks and merits of an
investment in the Company, to make an informed investment decision with respect
to investment in the Company, and to protect the investors' interest in
connection with the investor's acquisition of shares in the Company without the
need for additional informed which would be required to be included in a
complete registration statement effective under the 1993 Act.
Section 15.24 Partnership not Intended for Non-Tax Purposes. The
Shareholders have formed this Company under the Act, and expressly disavow any
intention to form a partnership under Nevada's Uniform Partnership Act or the
Partnership Act or laws of any other state. The Shareholders do not intend to be
partners one to another or partners as to any third party. TO the extent any
Shareholder, by word or action, represents to another person that any other
Shareholder is a partner of that the Company is a partnership, the Shareholder
making such wrongful representation shall be liable to any other Shareholder who
incurs personal liability by reason of such wrongful representation.
IN WITNESS WHEREOF, the undersigned have set their hands and seals
effective as of April, 1997. [SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
SIGNATURE PAGE TO OPERATING AGREEMENT
FOR BOSTON MEDICAL MARKETING
Daniel J. Hoyng for DJH Holding
Signature
Daniel J. Hoyng
Name (Printed)
EIN # 04-3362717
Social Security or
Federal Tax Identification Number
<PAGE>
SIGNATURE PAGE TO OPERATING AGREEMENT
FOR BOSTON MEDICAL MARKETING
Daniel J. Hoyng
Signature
Daniel J. Hoyng
Name (Printed)
###-##-####
Social Security or
Federal Tax Identification Number
<PAGE>
SIGNATURE PAGE TO OPERATING AGREEMENT
FOR BOSTON MEDICAL MARKETING
Cecilia C. Hoyng
Signature
Cecilia Hoyng
Name (Printed)
###-##-####
Social Security or
Federal Tax Identification Number
<PAGE>
<TABLE>
<CAPTION>
OPERATING AGREEMENT
<S> <C>
Shareholder's Name and Address Shares Owned
DJH Holdings, LLC 2,500,000
43 Taunton Green Street, Suite 3
Taunton, Massachusetts 02780
American Medical Research 2,250,000
205 North Orange Avenue,. Suite "2-N"
Sarasota, Florida 34236
Genomic Actives Research & Development 250,000 B Shares
205 North Orange Avenue, Suite "2-N" x 20
Sarasota, Florida 34236 5,000,000
</TABLE>
EXHIBIT 10.18
NATIONAL BOSTON MEDICAL, INC.
43 TAUNTON GREEN STREET-SUITE 3-TAUNTON, MASSACHUSETTS 02780
Friday, November 07, 1997
EXCLUSIVITY AGREEMENT
This exclusivity agreement exists between National Boston Medical, Inc. and
South Atlantic Industries, Inc.
1. National Boston Medical, Inc. has the exclusive and sole right to
market ViraShield and the ViraShield Formula, make-up and composition
worldwide.
2. The rights granted exist for a period of 100 years, renewable at the
option of National Boston Medical, Inc. providing They meet the
minimum requirements described herein.
3. The rights for ViraShield exist in present form until January 2, 1998.
Beginning on January 2, 1998 and each quarter thereafter for the
length of this contract National Boston Medical, Inc. agrees to
purchase a minimum of $7,500 in bag-in-the-box unit of ViraShield
product each quarter.
4. South Atlantic Industries, Inc. agrees to withhold disclosure of all
National Boston Medical, Inc. customers to all parties other than
officers of National Boston Medical, Inc.
5. South Atlantic Industries, Inc. agrees not to sell or market the
ViraShiled product to nay entity other than National Boston Medical,
Inc.
6. No additional restrictions or encumbrances exist to this agreement.
/s/ Bruce D. Randall /s/ Roger Perry
- ----------------------- ---------------------
Bruce D. Randall Roger Perry
National Boston Medical South Atlantic Industries
<PAGE>
AFFIDAVIT
STATUS OF ALLEGED NON-COMPETE AGREEMENT
I, Roger Perry, Gregory Perry and Garrick Perry of South Atlantic Industries of
Greenville, South Carlina, under the pains and penalties of perjury herewith
declare:
A. That the so rumored non-compete agreement in question is
between Bill Coury or any Affiliation thereof and Roger
Perry, his sons, or any affiliation thereof.
B. That there are no non-compete agreements, nor have there
ever been any non-compete agreements between South Atlantic
Industries, Roger Perry or his sons Garrick Perry or
Gregory Perry, and Bill Coury, Genomic Actives, American
Medical Research, or any affiliations of Bill Coury and or
any company that he is affiliated with in any fashion.
C. That there has never been a non-compete agreement between
South Atlantic Industries, or any owner or manager of South
Atlantic Industries, and any other person or entity for the
product now known as VIRUSHIELD, formerly Virashield, or
any part product of the same formulation or chemical
composition as VIRUSHIELD or ViraShield.
D. That I, we, certify South Atlantic Industries has the
unencumbered right to manufacture the VIRUSHIELD (formally
ViraShield) formula, composition and make-up.
E. That I, we, South Atlantic Industries, are not violating
any legal parameters in manufacturing of VIRUSHIELD
(formally ViraShield).
F. That I, we, fully agree to the above statements in their
entirety under the pains and penalties of perjury.
/s/ Roger Perry /s/ Garrick Perry /s/ Gregory Perry
- ------------------ ----------------- ------------------
Roger Perry Garrick Perry Gregory Perry
3-3-98 3-3-98 3-2-98
Date Date Date
<PAGE>
AGREEMENT
ASSIGNMENT OF RIGHTS
PARTIES: NATIONAL BOSTON MEDICAL INC.
TAUNTON, MA 02780
ROGER GWINN PERRY AND SOUTH ATLANTIC
INDUSTRIES INC. (SAI INC)
GREENVILLE, SOUTH CAROLINA
SUBJECT: VIRUSHIELD PRODUCT ANTI-MICROBIAL CREAM
Now come the above parties and agree to the following:
In consideration of the total purchases of $259,710.24 of the subject cream
"product" and in consideration of the purchase of pre-existing current inventory
of barrier cream "product" (bag in the box) of 8,760 units @ $8.00 per unit by
National Boston Medical Inc., South Atlantic Industries Inc. and Roger Gwinn
Perry, herewith agrees to assign, transfer, grant, provide, any and all rights
that South Atlantic Industries Inc. and Roger Gwinn Perry have in the above
product including, but not limited to, patent rights, applications,
(App.#09/022,241 filed 2-11-98 anti-microbial barrier composition, preliminary
class: 424) formulations, methods of compilation, etc...to National Boston
Medical, Inc.
It is agreed between the parties that National Boston Medical Inc. has made
prior purchases of "product" totaling $92,130.24. National Boston Medical Inc.
has agreed to the purchase of the 8760 units @ $8.00 per unit totaling
$70,080.00 in product of which ________________________
<PAGE>
ASSIGNMENT
South Atlantic Industries Inc. and Roger Gwinn Perry herewith assign any
and all proprietary rights, including formulas and formulations thereof that
they have in the "product" known as Virushield and more particularly described
as an antimicrobial barrier composition. Included in said assignment is all
rights of South Atlantic Industries Inc. and Roger Gwinn Perry to the patent of
the "product" (App.#09/022,241 filed 2-11-98 anti-microbial barrier composition,
preliminary class: 424).
South Atlantic Industries Inc. and Roger Gwinn Perry herewith certify that
they have sole and exclusive right to the above "product".
All of the above is herewith assigned to National Boston Medical Inc.
without conditions. South Atlantic Industries Inc. and Roger Gwinn Perry, by
their actions and the actions of their officers and individually, certify that
they have taken all necessary legal steps to so assign. No prior assignments or
liens pre-exist this assignment to National Boston Medical Inc.
South Atlantic Industries Inc.
/s/ By: /s/ Roger G. Perry, President
Witness to All
/s/ Roger Gwinn Perry
Roger Gwinn Perry
<PAGE>
SOUTH ATLANTIC INDUSTRIES, INC.
52 PELHAM DAVIS CIRCLE
GREENVILLE, SC 29615
(864) 458-8001 Fax (864) 458-7418
National Boston Medical Inc.
43 Taunton Green St.
Suite 3
Taunton, MA 02780
Gentlemen:
National Boston Medical, Inc. has the exclusive and sole right to sell and
market ViraShield in the world wide market.
Also South Atlantic Industries, Inc. guarantees that it has the right to
manufacture and sell ViraShield.
Yours very truly,
/s/ Roger Perry
- -----------------
Roger Perry
President
EXHIBIT 10.19
Contract between Webfoot Marketing, Inc. and National Boston
Medical, Inc.
This contract of February 25, 1999 is between Webfoot Marketing, Inc. 127 West
Fairbanks, Ave. Suite 241 Winter Park, FL. 32789 and National Boston Medical,
Inc. P.O. Box 1161, 43 Taunton Green, Suite 5 Taunton, MA 02780. This agereement
is for one year from date of signing. Either party may cancel the contract at
anytime with a 30 day cancellation notice from either party.
Webfoot Marketing, Inc. will provide in good faith:
1. Website re-design for National Boston Medical, Inc. which will focus on the
following sections:
Investor
Chat room
OTC Products
Bontempi
Flex Marketing
2. Submission of web site to major search engines (Lycos, Infoseek, Altavista,
Excite, Webcrawler, HotBot)
3. Submission to indexes (Yellow Pages, city listings)
4. Banner ad design and campaign for 15,000 impressions on a major search
engine 11. Monthly newsgroup posting 12. Assist with integration of current
marketing with online marketing. 13. Monthly web site traffic report
including web site pageviews and hits
National Boston Medical, Inc. will provide in good faith:
1. 40,000 share of free trading stock due within one week of signing contract
and 144 stock equivalent to $11,000.00 at .08 with piggy back registration
right or the 144 will be exchanged for free trading stock in the future if
the company can file an S-8
2. 10,000.00 in cash or free-trading stock equivalent if the company can do an
S-8 of 144 with piggy back registration at the beginning of each quarter
for the remaining 3 quarters\
3. All pertinent information for web site design work (ie: Production
information, product and corporate logos, Investor content)
4. Cover all hosting and Internic registration fees for any new domain names
/s/ Robert Wilson Date:2/25/99
- ----------------------
Robert Wilson
President, Webfoot Marketing, Inc.
/s/ Daniel J Hoyng Date:2/25/99
- ----------------------
Daniel Hoyng
CEO/President, National Boston Medical, Inc.
EXHIBIT 10.20
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement is entered into this 19th day of June,
1998 by and between DermaGuard, Inc., a Louisiana corporation ("DermaGuard"),
with its principal place of business at 3500 St. Charles Avenue, New Orleans, LA
70115, represented herein by Egbert L. Ming, its President, duly authorized by
corporate resolution dated June 18, 1998 attached hereto, and National Boston
Medical, Inc., a Delaware corporation ("NBM"), with its principal place of
business at 43 Taunton Green, Taunton, Massachusetts, 02780, represented herein
by Daniel J. Hoyng, its President, duly authorized by corporate resolution dated
June 18, 1998 attached hereto.
WHEREAS, NBM desires to acquire ten percent (10%) or 700 shares of
the 7,000 issued and outstanding voting shares of stock of DermaGuard, Inc. and
DermaGuard desires to acquire three percent (3%) or 150,000 shares of the
5,000,000 issued and outstanding voting shares of stock of NBM;
NOW THEREFORE, in consideration of the mutual covenants and
agreements set froth herein, and other good and valuable consideration, the
parties agree as follows:
1. NBM shall issue 150,000 shares of its voting common stock to
DermaGuard and in exchange thereof, DermaGuard shall issue 700 shares of its
voting common stock to NBM.
2. NBM hereby represents and warrants that the 150,000 shares issued
to DermaGuard pursuant to paragraph 1 above constitutes three percent (3%) of
all of its issued and outstanding shares as of June 18, 1998.
3. DermaGuard hereby represents and warrants that the 700 shares
issued to NBM pursuant to paragraph 1 above constitutes ten percent (10%) of all
DermaGuard's issued and outstanding shares as of June 18, 1998.
4. Pursuant to the above, NBM hereby agrees to transfer to
DermaGuard, Inc. 150,000 shares of NBM's stock and DermaGuard hereby agrees to
transfer to NBM 700 shares of DermaGuard's stock within seven days of the date
of execution of this agreement.
5. Each party hereto represents and warrants that the shares acquired
by said party are being acquired for said party's own account for investment,
with no view to public distribution or resale thereof. Neither party will offer
or sell any such shares received pursuant to this agreement in violation of the
provisions of the Securities Act of 1933 and applicable State Blue Sky Laws.
6. Each party hereto represents and warrants that the shares issued
by it to the other party will be duly authorized, validly issued, fully paid and
non-assessable.
7. This agreement shall be governed by the laws of the State of
Louisiana.
8. If, at any time, NBM proposes to file a registration statement
under the Securities Act of 1933 with respect to an offering by NBM for its own
accounts or for the account of any security holders of NBM shares of stock, NBM
shall give written notice of such proposed filing to DermaGuard at least thirty
(30) days before the date of anticipated filing with the Securities Exchange
Commission. In said notice NBM shall offer to DermaGuard the opportunity, to
register such number of shares as DermaGuard may request in writing (hereinafter
referred to as "Piggyback Registration"). In connection with any Piggyback
Registration, NBM shall be responsible for all registration expenses but
<PAGE>
not for any fees and expenses of counsel to DermaGuard.
IN WITNESS WHEREOF the parties executed this agreement this 19 day of June,
1998. WITNESSES:
NATIONAL BOSTON MEDICAL, INC.
/s/Micheal A. Laynd
- --------------------
/s/ Robert V. Alen By: /s/Daniel J. Hoyng
- -------------------- ------------------------
Daniel J. Hoyng, President
DERMAGUARD, INC.
/s/Mercedes Perez
- -------------------
/s/ Trae Miller By: /s/Egbert L. Ming
- ------------------- -----------------------
Egbert L. Ming, President
A C K N O W L E D G E M E N T
STATE OF MASSACHUSETTS
COUNTY OF BRISTOL
BEFORE ME, Shabha Kunar, a Notary in and for the said state and parish,
this day personally appeared: DANIEL J. HOYNG appearing herein in his capacity
as President of National Boston Medical, Inc. to me personally known to be the
identical person whose name is subscribed to the foregoing Manufacturing,
Distribution and Assignment Agreement as representing National Boston Medical,
Inc., and acknowledged to me in the presence of the undersigned witnesses that
he executed the same on the date hereof on behalf of said corporation, and that
it was executed for the uses, purposes and considerations therein expressed by
authority of the Board of Directors of said corporation, as the free act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunto signed this acknowledgment with
the said appearer and the two competent witnesses at Taunton , Massachusetts, on
the 23rd day of June, 1998, after due reading of the whole.
WITNESSES:
/s/Micheal A. Laynd
- -------------------------
/s/ Robert V. Alen By: /s/Daniel J. Hoyng
- ------------------------- ------------------------
Daniel J. Hoyng, President
/s/ Shaliha Kumar
---------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES AUGUST 9, 2002
<PAGE>
A C K N O W L E D G E M E N T
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, A.T. Ferrouillet, a Notary in and for the said state and parish,
this day personally appeared: EGBERT L. MING appearing herein in his capacity as
President of DermaGuard, Inc. to me personally known to be the identical person
whose name is subscribed to the foregoing Manufacturing, Distribution and
Assignment Agreement as representing DermaGuard, Inc., and acknowledged to me in
the presence of the undersigned witnesses that he executed the same on the date
hereof on behalf of said corporation, and that it was executed for the uses,
purposes and considerations therein expressed by authority of the Board of
Directors of said corporation, as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto signed this acknowledgment with
the said appearer and the two competent witnesses at New Orleans, Louisiana, on
the 18th day of June, 1998, after due reading of the whole.
WITNESSES:
/s/Mercedes Perez
- ---------------------
/s/ Trae Miller By: /s/Egbert L. Ming
- --------------------- -----------------------
Egbert L. Ming, President
/s/Alvany Ferroviller, Jr.
----------------------------
NOTARY PUBLIC
EXHIBIT 10.21
MANUFACTURING, DISTRIBUTION AND ASSIGNMENT AGREEMENT
This Agreement is made effective the 19 day of June, 1998 by and
between National Boston Medical, Inc., hereafter call "NBM," a Delaware
corporation, with its principal place of business at 43 Taunton Green Street,
Taunton, Massachusetts, 02780, represented by Daniel J. Hoyng, its President,
duly authorized by corporate resolution dated June 18, 1998 attached hereto and
DermaGuard, Inc., hereafter called "DermaGuard", a Louisiana corporation with
its principal place of business at 3500 St. Charles Avenue, Suite 2091, New
Orleans, Louisiana 70115, represented by Egbert L. Ming, its President, duly
authorized by corporate resolution dated June 18, 1998 attached hereto.
1. Appointment and Acceptance
Subject to the terms and conditions contained herein, NBM appoints
DermaGuard, and DermaGuard hereby accepts said appointment, as a manufacturer,
distributor and seller of products, now or in the future, owned, secured,
distributed and/or marketed by or on behalf of NBM, hereinafter sometimes
referred to collectively as "Products" including, though not limited to,
ViruShield. Pursuant hereto, DermaGuard shall enjoy a right of first refusal on
any new Product offerings by NBM that are within the scope of "the Products" as
hereinabove defined and under the terms and conditions otherwise contained
herein.
2. Distribution Rights
DermaGuard shall have the exclusive right to manufacture, distribute
and sell the Products to or for the following customers: (1) any and all local,
state and federal governmental agencies and/or institutions, including
municipalities, state governments and the United States of America, its/their
political subdivisions, departments and/or agencies, and (2) all quasi-public
and/or controlled entities, including but not limited to hospitals, schools,
military facilities/installations, and any and all other public oriented and/or
publicly supported officers and/or agencies (all of the foregoing customers
being hereinafter collectively referred to as the "Exclusive Customers").
Nothing herein shall limit DermaGuard's right to accept any orders for Products
and handle any business related to the Products including sale of the Products
to customers in addition to the Exclusive Customers; it being further agreed
DermaGuard shall have the non-exclusive right to manufacture, distribute and
sell the Products to or for any and all other customers in addition to the
Exclusive Customers. Nothing herein shall prevent NBM form accepting any orders
for the Products or handling business related to the Products directly and/or
through other distributors appointed by the company for the customers other than
Exclusive Customers.
3. NBM's Representations, Warranties and Covenants NBM represents,
warrants and covenants as follows:
A. NBM shall, at its sole cost and expense, supply DermaGuard with
reasonable quantities of catalogs, brochures and samples of the Products as
requested by DermaGuard from time to time; except that, NBM shall be allowed to
charge to DermaGuard the actual cost to NBM of printing DermaGuard's catalogs,
brochures and product samples, including those costs incidental to said cost.
B. NBM representatives and direct factory sales personnel shall, when
requested by DermaGuard, (i) train DermaGuard's sales staff in Product line
features, and (ii) accompany DermaGuard sales representatives on sales calls on
DermaGuard customers;
C. NBM shall refer all inquiries and purchase order form the
Exclusive Customers to DermaGuard and shall refer to DermaGuard all such other
inquiries and purchase orders from any other customers within the State of
Louisiana; except that, nothing herein shall be inferred as limiting the right
of NBM to market, sell, distribute and/or contract directly with national
end-user accounts.
<PAGE>
D. NBM shall secure any and all FDA registrations for Products and
all such other licensing and permits necessary for the manufacture, distribution
and sale of the Products by DermaGuard.
E. NBM shall conduct periodic on-site inspections (not less than 1
(one) time per year) of DermaGuard's manufacturing and distribution facilities
and provide written recommendations to enhance quality control of the Products
manufactured, distributed or sold by DermaGuard.
F. NBM shall at its sole cost and expense provide to DermaGuard, all
Product labels, Product brochures, artwork and design for advertising and
marketing on the Products by DermaGuard, except as is otherwise set forth
herein.
G. DermaGuard hereby agrees to use NBM as its exclusive sales agent
and representative for the purpose of securing the manufacturing of DermaGuard's
products.
4. DermaGuard Representations and Covenants
A. DermaGuard shall withing three (3) days of execution of this
Agreement make an initial purchase of beginning inventory of the Product
ViruShield at a cost of not less than $75,000.00. NBM hereby represents and
warrants that the unit cost of any Products sold to DermaGuard shall not exceed
the lowest unit cost of identical Products sold or distributed to any other
manufacturer, distributor or retailer of the respective Products.
B. DermaGuard shall actively promote the sale of the Products through
direct selling activities.
C. DermaGuard shall permit NBM to review its inventory at a regular
intervals (but no more than 4 (four) times per year) on thirty (30) days prior
written notice, provided such review shall not adversely affect any business
operations of DermaGuard.
D. DermaGuard shall upon request of NBM, provide NBM with quarterly
updates of DermaGuard's Product sales reports for the previous fiscal year,
provided that NBM shall not disclose said sales reports or any portion thereof
to any third parties and shall maintain the confidentiality of such reports.
5. Promotional Campaign
A. DermaGuard shall conduct such promotional campaigns of the
Products as it determines in its sole and absolute direction, and DermaGuard
shall have the right to participate in any Product promotional campaigns or
programs conducted by or on behalf of NBM. NBM shall have the right to
contribute a portion of the costs of any promotional campaigns or programs
conducted by DermaGuard provided however such contribution shall not entitle NBM
to direct or control the content or quality of said promotional campaign or
program.
B. NBM shall continually promote the Products through trade show
participation, and such other marketing efforts and promotional methods designed
to enhance sale of the Products
6. Warranty
NBM's responsibility with respect to any claimed defect in the
Products is limited to replacement of the claimed defective Products and NBM
shall not be liable to DermaGuard for any indirect, special or consequential
damages of any kind whatsoever with respect to any such defects.
<PAGE>
Without in any way limiting the foregoing, in no case shall the liability of NBM
under any warranty, expressed or implied, of or for any reason arising out of a
Product sold to DermaGuard, exceed the value of the Product sold. NBM makes no
warranties regarding Products manufactured by it or by others, including without
limitation, warranties as to merchantability, or fitness for a particular
purpose, either expressed or implied, except as provided herein.
7. Returns
A. Products may be returned to NBM for Product defects, shipment
errors or as provided in Section 8 below, and all such returns must have a
Return Material Authorization number ("RMA") obtained from the NBM customer
service department prominently displayed on the outside of all packing materials
containing returned products. The RMA shall also be included on any
correspondence and documents accompanying any such return shipments.
B. NBM shall, unless otherwise requested by DermaGuard, credit
DermaGuard for the full cost to DermaGuard of all Products returned. Upon
request of DermaGuard, NBM shall, upon receipt of the Products returned, deliver
to DermaGuard a cash refund equal to the full cost to DermaGuard of the Products
returned.
8. Stock Adjustment
DermaGuard shall have the option of adjusting its inventory once per
calendar year by returning to NBM an amount of Products up to a maximum of five
percent (5%) of the prior calendar year's sales. Any such inventory adjustment
must be conducted during the second quarter of the calendar year. All Product
returns made pursuant to this section shall be returned in original stock
packages and consist solely of Products received by DermaGuard within twelve
(12) months of the date of return.
9. Pricing/Ordering Terms
A. NBM shall confirm receipt of all Product order from DermaGuard
within three (3) business days of NBM's receipt. No Product order shall be
binding on NBM until received and confirmed by NBM.
B. All Product orders shall be subject to a minimum cost of $300.00.
C. Products shall be shipped F.O.B. Factory, Tamarac, Massachusetts
collect. Products shall be shipped by the best and most economical means
available. All air shipments must be requested in writing and shall be at the
sole cost and expense of DermaGuard.
D. Payment terms are ne 30-days; except that, payment in full shall
accompany DermaGuard's initial order and any orders requiring delivery to a
foreign port (outside the United States of America and/or its controlled
territories); and, excepting further, any orders over One Hundred Thousand
Dollars ($100,000.00) placed by DermaGuard shall require fifty percent (50%) of
the purchase price to accompany said orders.
E. On each Product order made by DermaGuard where the cost of such
Products is $5,000.00 or more, DermaGuard shall receive a credit equal to one
percent (1%) of the total amount of such order, which credit may be used to
purchase additional Products from NBM.
10. Duration and Termination
<PAGE>
This Agreement shall be for a primary term of three (3) years,
commencing on the date of execution hereof. This agreement shall be
automatically renewable for successive three (3) year periods, subject to
mutually agreed upon annual performance requirements. Should the parties hereto
fail to agree on annual performance requirements for any extended term of this
contract, the same shall be established by binding arbitration within the State
of Louisiana or in such other manner as is mutually agreeable to the parties.
DermaGuard shall place orders for ViruShield totaling Two Hundred
Fifty Thousand Dollars ($250,000.00) in the first year of this agreement
(including the initial order); One Million Dollars ($1,000,000.00) in the second
year; and, Two Million Dollars ($2,000,000.00) in the third year. Orders for
ViruShield under DermaGuard's private label shall constitute orders for
ViruShield under this agreement.
This agreement shall become effective on the date first written above
and shall continue in full force and effect unless terminated by either party
for cause upon ninety (90) days prior written notice, any such termination
notices shall be pursuant to material breaches of one or more obligations as set
forth herein by either party. DermaGuard's failure to comply with its
performance requirements under this section shall constitute a material breach
of this contract.
11. Review
Notwithstanding anything herein written to the contrary, the parties
hereto agree, once every six (6) months, to meet to review the reasonableness,
adequacy and sufficiency of the performance quotas as specified herein/or
subsequent hereto, and to amend by mutual agreement said requirements as needed.
However, the failure of said parties to so meet and/or agree to proposed
amendments to this agreement, shall not in any way affect the validity of this
agreement.
12. Notices
All notices permitted or required herein shall be made in writing by
certified mail, return receipt requested as follows:
If to DermaGuard: DermaGuard, Inc.
350 St. Charles Avenue
Suite 209
New Orleans, Louisiana 70115
Attn: Mr. Alvarez Ferrouillet
If to NBM: National Boston Medical, Inc.
43 Taunton Green Street
Third Floor
P.O. Box 1161
Taunton, MA 02780
Attn: Mr. Daniel Hoyng
Either party may change its address for notices by ten (10) days prior
written notice to the other party.
13. Assignment of Patent Rights
<PAGE>
A. NBM does hereby assign, transfer, convey and deliver to Dermaguard
the exclusive right and the ability to use all rights, statements or claims made
by, for or on behalf of VIRUSHIELD as evidenced by and pursuant to NBM's patent
or patent-pending (Application No.______________), including, though not limited
to, the trademarks and service marks associated therewith. Further, this
assignment shall automatically extend and apply to any further patents,
patent-pending applications or related rights obtained by NBM relative to any of
its Products including, though not limited to, VIRUSHIELD.
B. NBM hereby represents, warrants and covenants that it has executed
no other or prior assignment or transfer of said Patent or Patent-Pending Rights
or any portion thereof for any rights associated therewith.
14. Private Labeling
DermaGuard shall have the right to manufacture, distribute, market
and sell any and all of the Products under a DermaGuard private label, including
the right to identify and name or change the name, including the trade name of
any and all such Products as DermaGuard in its sole discretion elects. NBM
agrees not to execute any further agreements to private label its products,
including though not limited to, VIRUSHIELD, so long as this agreement remains
in full force and effect; except that, nothing herein shall prevent NBM from
establishing private label agreements relative to any or all of its Products,
including VIRUSHIELD, for:
(1) the private limited benefit of its national accounts
and/or venders, including direct marketing companies, which
use or sell said Product(s) within their respective
establishments or to their respective direct marketing
audiences; and,
(2) distributors which access to limited or specified
market groups who solely or usually, within their normal
course of business, market to said groups only Products
bearing their (distributor's) private label;
it being the express intent of the parties hereto, that no entity, other than
DermaGuard, shall be granted the right to compete generally with NBM utilizing
NBM Private labeled Products or derivatives thereof.
15. Board of Directors Appointment
The President of NBM or his/her designee may, at the pleasure of the
Board of Directors of DermaGuard, be allowed to serve on said Board of
Directors.
16. Entire Agreement
This Agreement sets forth the entire agreement and understanding
between the parties relating to the subject matter contained herein and
supersedes all prior agreements, oral and written, heretofore made between the
parties; and this Agreement shall be construed in accordance with the laws of
the State of Louisiana. No modification hereof shall be valid unless in writing
and duly signed by an officer of NBM officer of NBM and DermaGuard. The captions
herein are for convenience only and shall not be construed as part of the
agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have cause this Agreement to be
executed effective the day and year first written above.
<PAGE>
WITNESSES: NATIONAL BOSTON MEDICAL, INC.
/s/Micheal A. Laynd
- -----------------------
/s/ Robert V. Alen By: /s/Daniel J. Hoyng
- ----------------------- -------------------------
Daniel J. Hoyng, President
DERMAGUARD, INC.
/s/Mercedes Perez
- -----------------------
/s/ Trae Miller By: /s/Egbert L. Ming
- ----------------------- -------------------------
Egbert L. Ming, President
<PAGE>
A C K N O W L E D G E M E N T
STATE OF MASSACHUSETTS
COUNTY OF BRISTOL
BEFORE ME, Shabha Kunar, a Notary in and for the said state and parish,
this day personally appeared: DANIEL J. HOYNG appearing herein in his capacity
as President of National Boston Medical, Inc. to me personally known to be the
identical person whose name is subscribed to the foregoing Manufacturing,
Distribution and Assignment Agreement as representing National Boston Medical,
Inc., and acknowledged to me in the presence of the undersigned witnesses that
he executed the same on the date hereof on behalf of said corporation, and that
it was executed for the uses, purposes and considerations therein expressed by
authority of the Board of Directors of said corporation, as the free act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunto signed this acknowledgment with the
said appearer and the two competent witnesses at Taunton , Massachusetts, on the
23rd day of June, 1998, after due reading of the whole.
WITNESSES:
/s/Micheal A. Laynd
- -----------------------
/s/ Robert V. Alen By: /s/Daniel J. Hoyng
- ----------------------- -------------------------
/s/ Shaliha Kumar
----------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES AUGUST 9, 2002
A C K N O W L E D G E M E N T
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, A.T. Ferrouillet, a Notary in and for the said state and parish,
this day personally appeared: EGBERT L. MING appearing herein in his capacity as
President of DermaGuard, Inc. to me personally known to be the identical person
whose name is subscribed to the foregoing Manufacturing, Distribution and
Assignment Agreement as representing DermaGuard, Inc., and acknowledged to me in
the presence of the undersigned witnesses that he executed the same on the date
hereof on behalf of said corporation, and that it was executed for the uses,
purposes and considerations therein expressed by authority of the Board of
Directors of said corporation, as the free act and deed of said corporation.
<PAGE>
IN WITNESS WHEREOF, I have hereunto signed this acknowledgment with the
said appearer and the two competent witnesses at New Orleans, Louisiana, on the
18th day of June, 1998, after due reading of the whole.
WITNESSES:
/s/Mercedes Perez
- -----------------------
/s/ Trae Miller By: /s/Egbert L. Ming
- ----------------------- -------------------------
/s/Alvany Ferroviller, Jr.
------------------------------
NOTARY PUBLIC
EXHIBIT 10.22
FIRST AMENDMENT TO MANUFACTURING,
DISTRIBUTION AND ASSIGNMENT AGREEMENT
This First Amendment to Manufacturing, Distribution and Assignment
Agreement is entered into on the dates set forth below but effective the 19th
day of June, 1998 by and between National Boston Medical, Inc., hereafter called
"NBM" and DermaGuard, Inc. hereinafter called "DermaGuard".
WHEREAS, NBM and DermaGuard have entered into that certain Manufacturing,
Distribution and Assignment Agreement made effective the 19th day of June, 1998
(hereinafter the "Agreement");
WHEREAS, the parties hereto desire to amend the Agreement as set forth
below.
NOW, THEREFORE, in consideration of the premises and the mutual obligations
set forth herein, the parties do hereby agree to amend the Agreement as follows:
1. The first sentence of the first paragraph of Article 10 of the Agreement is
hereby amended to read as follows:
"This Agreement shall be for a primary term commencing effective the
19th day of June, 1998 and terminating on the date of expiration of
the patent presently pending on the Product presently known as
'VIRUSHIELD'."
2. Article 3G is amended to delete the last word "products" and to insert the
word "Products", in lieu thereof.
3. Article 13 is hereby amended to read as follows:
"NBM does hereby assign, transfer, convey and deliver to DermaGuard
the exclusive right and the ability to use all rights, statements and
claims made by, for, or on behalf of VIRUSHIELD as evidenced by and
pursuant to NBM's patent or patent pending (Application No.
), including, although not limited to, the trademarks and service
marks associated therewith. Further, this assignment shall
automatically extend and apply to and include any further patents,
patent pending applications or related rights obtained by NBM
relative to any of its Products including, although not limited to,
VIRUSHIELD. NBM hereby represents, warrants and covenants that it has
executed no other or prior assignment or transfer of said patents,
patent pending applications or related rights or any portion thereof
or any rights associated therewith. This assignment, transfer,
conveyance and delivery to DermaGuard of the exclusive right and the
ability to use all rights, statements and claims made by, for or on
behalf of the Product, VIRUSHIELD shall include such rights,
statements and claims made by, for or on behalf of the Product
presently known as VIRUSHIELD, whether or not said Product presently
known as VIRUSHIELD is manufactured, marketed or distributed under
the name VIRUSHIELD or any other trade name whatsoever."
4. A new Article 17 is added to the Agreement as follows:
17. Default. In the event either party is in default of any of its
obligations herein, the other party may, after having given written
notice of the specific default complained of and the defaulting party
failing to cure the default complained of within thirty (30) days
after receipt of said written notice, (a) terminate this Agreement by
written notice to the defaulting party and recover any and all
damages including attorneys fees, costs and expenses caused by or
incurred
<PAGE>
as a result of said defaults, (b) enforce specific performance of the
defaulting party's obligations, (c) sue for and recover any and all
damages sustained by said party as a result of the defaults
complained of without terminating this Agreement, (d) obtain a
temporary restraining order to restrain the defaulting party from
continuing the actions complained of, it being hereby acknowledged
that any default under this Agreement by either party shall cause
irreparable harm to the other party thereby entitling the movant to a
temporary restraining order without the necessity of proving
irreparable harm, (e) perform such obligation on behalf of the
defaulting party, who shall immediately reimburse the other party for
the full cost of performing such obligation, of (f) have recourse to
any other remedy to which it may be entitled by law. Notwithstanding
anything herein to the contrary, if any default by either party
herein cannot reasonably be remedied within thirty (30) days after
written notice of default, then such party shall have such additional
time as shall be reasonably necessary to remedy such default before
any remedies of default may be enforced. The prevailing party in any
litigation herein shall be entitled to recover the full amount of its
attorneys fees, costs and expenses incurred in order to enforce and
protect its rights."
5. The last three lines of Article 14 are deleted and the following inserted
in lieu thereof:
"it being the express intent of the parties hereto, that no entity,
other than DermaGuard, shall be granted the right by NBM to compete
with NBM utilizing private labeled Products of NBM or any derivatives
thereof. Nothing in this Article 14 shall be construed as limiting,
modifying or an exception to the exclusive rights granted to
DermaGuard set forth in Article 2 above. It being further agreed and
understood that any private label agreements established by NBM
pursuant to this Article 14 shall expressly prohibit said national
accounts and/or vendors, including direct marketing companies and
distributors with access to limited or specified market groups from
sale of any of the Products including those marketed under any
private label agreements to any Exclusive Customers.
6. All of the terms, covenants, conditions and obligations set forth in the
Agreement except as specifically hereby amended are hereby ratified and
confirmed.
WITNESSES: DERMAGUARD, INC.
/s/illegible By: /s/ Egbert L. Ming
- -------------------- ----------------------------
/s/Alverz Ferrovilles President
- ----------------------
NATIONAL BOSTON MEDICAL, INC.
/s/ Karen E Rogers
- --------------------
/s/ Amy L. Kristurns By: /s/Daniel J. Hoyng
- -------------------- -----------------------------
President
EXHIBIT 10.23
SECOND AMENDED & RESTATED
MANUFACTURING, DISTRIBUTION AND ASSIGNMENT
AGREEMENT
This Amended and Restated Agreement is made effective the 3rd day of
February, 1999 and incorporates the original agreement executed on that date as
well as the first amendment thereto made effective on that date, by and between
National Boston Medical, Inc., hereafter call "NBM," a Delaware corporation,
with its principal place of business at 43 Taunton Green Street, Taunton,
Massachusetts, 02780, represented by Daniel J. Hoyng, it CO-CEO, duly authorized
by corporate resolution dated June 18, 1998 and reconfirmed on this 3rd day of
February, 1999, attached hereto and DermaGuard, Inc., hereafter called
________________, a Louisiana corporation with its principal place of business
at 3600 St. Charles Avenue, Suite 201, New Orleans, Louisiana 70115, represented
by Egbert L. Ming, its President, duly authorized by corporate resolution dated
June 18, 1998 and reconfirmed on this 3rd day of February, 1999, attached
hereto.
I. Appointment and Acceptance
Subject to the terms and conditions contained herein, (including the
performance requirements regarding volume commitments as hereafter set forth)
NBM appoints DermaGuard, and DermaGuard hereby accepts said appointment, as a
manufacturer, distributor and seller of products herein below defined. Pursuant
hereto, DermaGuard shall enjoy a right of first refusal on any new Product
offerings by NBM that are within the scope of said Products as defined herein
and under the terms and conditions otherwise contained herein. The Products
covered by this Agreement are: (1) any and all germicidal, antiviral,
antibacterial, antimicrobial based items, solutions and formulations and any
Products which are derivatives thereof or used in connection therewith; (2) any
solutions or formulations which are cosmetics, barrier creams, lotions,
moisturizers and/or skin conditioners, except the product presently produced and
sold under the name Allergyguard (to be marketed by NBM as a accompainment to
its Bontempi line of instruments); and, (3) SafeShield, whether now or in the
future, owned, secured, distributed and/or marketed by or on behalf of NBM, the
foregoing being collectively or individually referred to herein as the
"Products."
II. Manufacturing Rights
A. DermaGuard shall have the exclusive rights worldwide to manufacture,
make, have made, use, market, advertise, sell, test and have tested or sold, the
Products of NBM including, though not limited to, SafeShield. DermaGuard shall
furthermore have the exclusive right to appoint any and all vendors, brokers,
distributors or others who wish to use, distribute, market, advertise, sell,
have sold or test said Product(s) including the right to use the trademarks,
trade names and service marks associated therewith; except that, NBM shall have
the right to approve the use of any trademarks, trade names and/or service marks
used or to be used by any appointee/s/assignees pursuant hereto.
B. For purposes of Section X of this Agreement, the following customers
shall be the "Former Exclusive Customers" of DermaGuard.
(1) Any and all local, state and federal governmental agencies and/or
institutions, including municipalities, state governments and the United
States of America, its/their political subdivisions, departments and/or
agencies;
(2) Any and all quasi-public and/or controlled entities, including but
not limited to hospitals, schools, military facilities/installations, and
<PAGE>
any and all other public oriented and/or publicly supported officers and/or
agencies; and
(3) Any and all entities, which make up or service the food and/or
hospitality industry.
III. Appointment as Master Distributor
Subject to the terms and conditions herein including, but not limited to,
certain performance requirements regarding volume commitments as hereinafter set
forth, NBM appoints DermaGuard and DermaGuard accepts said appointment as Master
Distributor of the Products. In said capacity, DermaGuard shall at its own
expense be responsible for generating and coordinating all orders of the
Products, arranging all shipping and handling of the Products, fulfilling all
orders, providing and maintaining customer support, producing promotional and
related materials, and generally performing the functions necessary and/or
peculiar to the effective and efficient distribution of the Products, including
the development and implementation of a comprehensive marketing plan targeting
any and all domestic and international markets/customers. Notwithstanding
anything herein to the contrary, all Product orders shall be placed through
DermaGuard.
IV. NBM's Representations, Warranties and Covenants
A. NBM shall serve as DermaGuard's contract manufacturer and agent for the
purpose of producing and/or securing the production of the SafeShield product at
one or more FDA approved manufacturing facilities.
B. NBM shall refer all inquires and purchase orders on Products from any
and all customers to DermaGuard or DermaGuard's assignees.
C. NBM shall secure or assist DermaGuard in securing any and all FDA
registrations for Products and all such other licensing and permits necessary
for the manufacture and distribution of the Products by DermaGuard.
D. NBM represents and warrants that it is the sole and lawful owner of all
rights to the formulation and know-how of the Product known as SafeShield, and
that it shall prosecute and/or defend at its sole expense, said rights whenever
and wherever necessary.
E. NBM shall, from time to time as needed advance all costs associated with
product testing of SafeShield as may be required or deemed advisable by
DermaGuard and approved by NBM, which approval shall not be unreasonably
withheld.
F. NBM shall assist DermaGuard, Inc. in any way reasonable to fulfill its
obligations hereunder.
G. NBM warrants that it has not entered into any agreement with any other
parties that will or may affect its ability to enter into this Agreement except
as have been fully disclosed to DermaGuard.
V. DermaGuard Representations and Covenants
A. DermaGuard has paid to NBM and NBM acknowledges the deposit of Seventy
Five Thousand, Eighty Three and 88/100 ($75,083.88) DOLLARS more or less,
towards an initial purchase order of SafeShield, the receipt by NBM of which is
hereby acknowledged.
<PAGE>
B. DermaGuard shall actively promote the sale of the Products through
direct and indirect selling activities.
C. DermaGuard shall permit NBM to review its inventory at regular intervals
at NBM's direction (but no more than four (4) times per year) on thirty (30)
days prior written notice.
D. DermaGuard shall provide NBM with quarterly projections, operating plans
and financial statements, together with updates of DermaGuard's Product sales
reports for the previous fiscal quarter.
VI. Promotional Campaign
A. DermaGuard shall conduct such promotional campaigns of the Products as
it determines desirable or necessary in its sole and absolute direction. NBM
shall have the right to participate in said promotional campaigns by
contributing a portion of the costs of any promotional campaigns or programs
conducted by or on behalf of DermaGuard provided however such contribution shall
not entitle NBM to direct or control the content or quality of said promotional
campaign or program. The above notwithstanding, NBM reserves the right to review
all DermaGuard marketing materials.
B. NBM shall allocate and pay to DermaGuard a minimum of $25,000.00 per
annum to promote the Products, which shall include, though not be limited to,
organizational membership dues, advertising costs, brochures, catalogs and
product sales, as DermaGuard determines in its sole discretion to be desirable.
C. Further, NBM shall allocate and pay to DermaGuard an amount equal to 3%
of the gross revenue from the Products sold by DermaGuard, for DermaGuard's use
in promoting the sale of the Products as per "B" above, except that, any amounts
expended by NBM under "B" above, shall be credited against this obligation.
D. The payments referred to in "B" and "C" above, shall be made to
DermaGuard by NBM, by DermaGuard's crediting and offsetting said amount(s) from
any invoice(s) outstanding with NBM or from any other amounts owed to NBM by
DermaGuard.
E. DermaGuard shall at the end of each quarter, substantiate all costs
incurred in promoting the Products.
VII. Product Warranty
NBM's responsibility to DermaGuard, pursuant to Section IV(A) hereof, with
respect to any claimed defect in the Products is limited to replacement of the
claimed defective Products and NBM shall not be liable to DermaGuard for any
indirect, special or consequential damages of any kind whatsoever with respect
to any such defects. Without in any way limiting the foregoing, in no case shall
the liability of NBM under any warranty, expressed or implied, of or for any
reason arising out of a Product sold to DermaGuard, exceed the value of the
Product sold.
VIII. Turnkey Pricing/Ordering Terms
A. NBM shall confirm receipt of all Product order from DermaGuard within
five (5) business days of NBM's receipt. No Product order shall be binding on
NBM until received and confirmed by NBM.
B. All Product orders shall be subject to a minimum cost of $50,000.00.
<PAGE>
C. Products shall be shipped F.O.B. Factory, South Atlantic Industries, 52
Pelbaro Davis Circle, Greenville, SC, 29615 or F.O.B. Current Factory at time of
order. Products shall be shipped by the best and most economical means
available. All air shipments must be requested in writing and shall be at the
sole cost and expense of DermaGuard.
D. Payment terms are ne 30-days after receipt of order, except that on the
initial order submitted herewith, payment terms are ne 90-days after receipt of
order.
IX. Duration and Termination
A. This Agreement shall be for a primary term of three (3) years,
commencing on the 3rd day of February, 1999 and terminating on the 3rd day of
February, 2002. This agreement shall be automatically renewable for successive
three (3) year periods; subject to mutually agreed upon annual performance
requirements. Should the parties hereto fail to agree on annual performance
requirements for any extended term of this contract, said annual performance
requirements shall be established at successive ten percent (10%) per annum
increases, until the same is otherwise mutually agreed upon or until a decision
of an arbitrator appointed to decide said matter is received.
B. In the event of breach of this agreement by either party, the offending
party shall have thirty (30) days from the date of written notice from the
offended party to remedy the alleged breach.
X. Performance
A. As to DermaGuard's "Former Exclusive Customers," DermaGuard shall
generate yearly sales to its distributors and/or users for the Product
SafeShield as follows:
(1) Six Hundred Thousand and no/100 ($600,000.00) DOLLARS in the first
year of this agreement (including the initial order);
(2) One Million ($1,000,000.00) DOLLARS in the second year; and
(3) Two Million ($2,000,000.00) DOLLARS in the third year.
B. As to all of DermaGuard's customers including, through not limited to,
those specifically identified in this Section under "A" above, DermaGuard shall
generate yearly sales to its distributors and/or end users for the Product
SafeShield as follows:
(1) Five Million and No/100 ($5,000,000.00) DOLLARS in the first year of
this agreement (including the initial order),
(2) Seven Million Five Hundred Thousand and no/100 ($7,500,000.00) DOLLARS
in the second year, and
(3) Eight Million Five Hundred Thousand and no/100 ($8,500,000.00) DOLLARS
in the third year.
C. DermaGuard shall be considered in compliance with its performance
requirements as set forth in "A" above, retaining all exclusive rights granted
thereunder, if:
(a) DermaGuard is in compliance under "A" above, or
<PAGE>
(b) DermaGuard is in compliance under "B" above.
XI. Breach of Performance
A. Notwithstanding anything herein stated to the contrary, DermaGuard shall
be evaluated on its performance at every six (6) month interval, at which time
it is expected that DermaGuard will have satisfied one-half (1/2) of its annual
performance requirement as set forth in Section X above. Should DermaGuard at
such time fail to be in compliance, DermaGuard shall be placed on notice of such
failure by NBM and DermaGuard shall thereafter have an additional ninety- (90)
days to bring its performance into compliance (curative period). DermaGuard's
failure to so comply during its curative period shall be considered a material
breach and default of this contract; provided however, the sole remedy of NBM
for such failure shall be the forfeiture by DermaGuard of its exclusive rights
granted herein, as may be applicable.
B. Should DermaGuard become insolvent or be found guilty of criminal
activity which adversely affects the good name of the SafeShield product in the
market place or DermaGuard's ability to comply with the requisites established
herein, DermaGuard shall be considered in Default of this Agreement.
XII. Default
A. Except as otherwise set forth in this agreement, in the event either
party is in default of any of its obligations herein, the other party may, after
having given written notice on the specific default complained of and the
defaulting party failing to cure the default complained of within thirty (30)
days after receipt of said written notice, (a) terminate this Agreement by
written notice to the defaulting party and recover any and all damages including
attorneys fees, costs and expenses caused by or incurred as a result of said
defaults, (b) enforce specific performance of the defaulting party's
obligations, (c) sue for and recover any and all damages sustained by said party
as a result of the defaults complained of without terminating this Agreement,
(d) perform such obligation on behalf o the defaulting party, who shall
immediately reimburse the other party for the full cost of performing such
obligation, or (e) have recourse to any other remedy to which it may be entitled
by law; it being hereby acknowledged that any default under this Agreement by
either party shall cause irreparable harm to the other party. Notwithstanding
anything herein to the contrary, if any default by either party herein cannot
reasonably be remedied within thirty (30) days after written notice of default,
then such party shall have such additional time as shall be reasonably necessary
to remedy such default before any remedies or default may be enforced. The
prevailing party in any litigation herein shall be entitled to recover the full
amount of its attorneys fees, costs and expenses incurred in order to enforce
and protect its rights.
B. Notwithstanding anything herein above stated to the contrary, the
parties hereto reserve the right unto themselves to demand of each other, that
all matters of disagreement pursuant to this Agreement be immediately submitted
to binding arbitration in a mutually agreeable forum.
XIII. Notices
All notices permitted or required herein shall be made in writing by
certified mail, return receipt requested as follows:
<PAGE>
If to DermaGuard: DermaGuard, Inc.
3600 St. Charles Avenue
Suite 201
New Orleans, Louisiana 70115
Attn: President or Chief Executive Officer
If to NBM: National Boston Medical, Inc.
43 Taunton Green Street
Third Floor
P.O. Box 1161
Taunton, MA 0280
Attn: President or Chief Executive Officer
Either party may change its address for notices by ten (10) days prior
written notice to the other party.
XIV. Conveyance of Rights Under Patent
NBM does hereby convey and deliver to DermaGuard the right and ability to
use all rights, statements or claims made by, for or on behalf of the Products,
particularly SafeShield, as evidenced by and pursuant to NBM's patent or
patent-pending rights (U.S. Application NO. 09/022.241 filed 2/11/98) including,
though not limited to, the trademarks, trad names and service marks associated
therewith. Further, this conveyance of rights shall automatically extend and
apply to any further patents, patent-pending applications, continuations,
continuations in part, divisional and subdivisional, reissues, reexaminations,
extension applications, or related rights obtained by NMB relative to any of its
Products including, though not limited to, SafeShield.
XV. Defense of Rights
A. In the event that NBM receives notice or knowledge of a cause of action
or claim or threatened cause of action or claim, arising out of or in any way
pertaining to the patent or patent pending rights made the subject hereof, NBM
shall immediately notify DermaGuard of said cause of action or claim.
B. Further, in the event of any action or decision adverse or favorable
from the Food & Drug Administration, Office of Patent & Trademarks or any other
government or regulatory entity relating to the Products, including SafeShield,
NBM shall immediately notify DermaGuard of such action or decision.
C. Should DermaGuard determine in its sole and uncontrolled discretion,
that its rights or any of them hereunder are in jeopardy for any reason,
including though not limited to, the institution or threat of institution of
suit against NBM, Gulf Atlantic Industries, Inc., Gulf Atlantic Labs, Inc. or
any of their affiliates, successors or assigns or any of their respective
principals, officers or Directors, in their capacity as principal, officer or
Director of any of said entities or by reason of any of said entities declaring
bankruptcy, or being placed in receivership or being assigned for any reason a
Trustee to surprise it affairs or a significant portion of its assets, or if any
assignment is made for the benefit of creditors or once NBM is afforded notice
of any claim of patent infringement and fails to act timely to protect
DermaGuard's interest herein, them DermaGuard shall have the right, after
notifying NBM in writing, to take any action it deems appropriate, including the
right to name and retain counsel, in its name and/or in the name of NBM,
(whether or not advanced by DermaGuard) the cost of said action to be borne by
NBM. However, nothing herein is intended to limit or mitigate NBM's duty and
<PAGE>
obligation to prosecute and/or defend its rights, and the rights granted herein
to DermaGuard, as set forth in Section IV(D) herein or otherwise.
D. Notwithstanding the above, in the event that NBM declares bankruptcy or
if a receiver or trustee is appointed over a significant portion of its assets,
or if any assignment of NBM assets is made of the benefit of creditors, then
this contract shall, ipso facto, convert to a sale of all rights by NBM of the
SafeShield product to DermaGuard, including but not limited to, all of NBM's
patent, patent- pending or related rights, title and interest in and to the
formulation, technology and know-how associated therewith. In consideration of
said sale, DermaGuard hereby agrees to pay to or on behalf of NBM or into
escrow, as appropriate, an amount equal to the net cost per ounce of manufacture
of the SafeShield product. This said amount shall be payable in perpetuity and
shall be in addition to the actual manufacturing cost expended by DermaGuard.
Additionally, DermaGuard shall be required to adhere to the performance
requirement as set forth in Section X hereof and to the minimum annual
incremental performance requirements as set forth under Section IX(A) hereof.
E. Should "D" above be determined unenforceable for any reason, in whole or
in part, DermaGuard shall, in the alternative, have the immediate right to
continue in the exercise of its rights hereunder by paying to or on behalf of
NBM the amount of compensation as agreed to elsewhere herein and no adverse
action taken against NBM by third parties or otherwise shall void or otherwise
affect this agreement.
XVI. Right of First Refusal
In the event of NBM's sale of its rights in and to the SafeShield product,
whether voluntarily or involuntarily, DermaGuard shall in addition to the rights
otherwise herein granted, have the right of first refusal and the ability to
match within sixty- (60) days, the terms and conditions of any offer made to or
accepted by or on behalf of NBM pertaining to said sale. This right shall apply
to each proposed sale and/or renegotiate sale and to any and all offers made
and/or accepted during the term of this Agreement.
XVII. Reserved Rights
Except as expressly set forth herein, the parties hereto retain any and all
rights which they have or may have and place no other restrictions or conditions
whatsoever upon each other.
XVIII. Private Labeling
A. DermaGuard shall have the right to manufacture, distribute, market and
sell any and all of the Products under a DermaGuard private label, including the
right to identify and name or change the name, including the trade name of any
and all such Products as DermaGuard in its sole discretion elects.
B. It is stipulated and agreed that at no time will any multi-level
marketing group, discount marketer or similar marketing organization, individual
or entity be allowed to sell a product bearing the SafeShield name and/or
trademark and any product so marketed must vary from the existing SafeShield
formulation in at least color and scent and be otherwise obviously
distinguishable. Further, no such entity shall be allowed to use or refer to any
test data, which specifically relates to SafeShield, whether said tests were
conducted under the SafeShield product name or any prior or subsequent name.
XIX. Consideration
<PAGE>
A. In consideration of the manufacturing rights conveyed herein by NBM to
DermaGuard, and pursuant to Section IV(A) hereof, DermaGuard shall pay to NBM a
royalty amount fixed at a price equal to the actual manufacturing cost of the
Product, SafeShield. Should NBM, pursuant to its duties and/or obligations
hereunder, advance the costs of manufacturing the said Product for or on behalf
of DermaGuard, DermaGuard shall be obligated to reimburse NBM for any and all
amounts to expended. Further, in the performance of its duties hereunder, should
NBM experience any reasonable and customary price increase from any contract
manufacturer of SafeShield, NBM shall notify DermaGuard of such increase sixty-
(60) days in advance of such increase.
B. In respect hereof, DermaGuard shall submit, in conjunction with the
execution of this Agreement, a Purchase Order #1123, dated 1/26/99 for products
(in ounces) totaling Six Hundred Seven Thousand, Six Hundred Eight and No/100
($607,680.00) DOLLARS (see attached purchase order), including Five Hundred One
Thousand, Nine Hundred Fifty Two and No/100 ($501,952.00) DOLLARS for 1,140,800
ounces of SafeShield at $0.44 per ounce (including NBM's royalty) and total
packaging costs of One Hundred Five thousand, Seven Hundred Twenty Eight and
No./100 ($105,728.00) DOLLARS. In conjunction with the said Purchase Order
#1123, NBM agrees to advance the cost of and invoice DermaGuard separately for
the associated costs of manufacturing and packaging said product for market on
DermaGuard's behalf (pursuant to Section IV(A) hereof), including packaging,
filing, printing and container costs.
C. As additional security and consideration for NBM, DermaGuard agrees that
it will within five (5) days of the execution hereof, provide a irrevocable
letter of credit in favor of NBM in the aggregate amount of One Hundred Fifty
Thousand and No/100 ($150,000.00) DOLLARS payable ninety- (90) days from the
receipt of the SafeShield product pursuant to the attached purchase order.
D. As additional consideration to DermaGuard, NBM agrees to and does hereby
grant to DermaGuard an incentive option and right to purchase an aggregate of
one million (1,000,000) share of restricted common stock of NBM with
registration rights. NBM shall issue one warrant within thirty-days of the date
of execution hereof for one million (1,000,000) shares to appear in form and
substance as per SPECIMEN WARRANT attached hereto as made a part hereof for all
purposes. (See attached Exhibit "A".)
E. In order to exercise the said warrant and a the point of exercise,
DermaGuard shall not be in default of this Agreement and additionally, must
have, prior to said exercise, met the following minimum criteria:
Requirements For Exercise of Warrant
5. Confirmed gross sales by DermaGuard to its distributors
and/or end users of not less than five million and no/100
($5,000,000.00) DOLLARS with actual payment having been
tendered to and received by NBM for Product associated
therewith; and,
6. The establishment and sale of Product to at least one
confirmed account opened that is a national retail chain
operator; and,
7. the establishment and sale of Product to at least one
confirmed account opened that is a national food service or
hospitality chain operator; and,
8. The establishment and sale of Product to at least one
confirmed account opened that is a national purchasing
group for the health and/or hospital industry; and,
<PAGE>
9. The establishment and sale of Product to at least one
confirmed account opened with a department of the United
States of America; and,
10. The establishment and maintenance, of a national broker
and/or distributor system for SafeShield covering all of
the United States and its territories.
For purposes of this subpart "D," the above six (6) criteria relate solely
to the product SafeShield.
F. In lieu of "E" above, DermaGuard may exercise its warrant by confirming
total annual sales of not less than Seven Million Five Hundred Thousand
($7,500,000.00) DOLLARS.
XX. Miscellaneous
A. NBM expressly warrants that upon the execution hereof any and all
discussions or negotiations presently underway with any distributors, brokers,
or end users, concerning or in any way relating to the sale or distribution of
the Products shall cease and be referred to DermaGuard for further handling.
B. It is further stipulated that NBM has not entered into any agreement,
directly or indirectly, with any parties which can or may adversely affect this
Agreement.
C. NBM specifically warrants that it has not entered into any agreement,
effective beyond the date hereof, with Creative Resources, L.L.C. of Lake Ozark,
MO, Creative Resources II or any related entity or affiliate, director or
principal thereof, it being the express intent of the parties hereto that any
and all agreements with said entity/entities shall fall within the scope of this
Agreement and within the exclusive rights granted herein by NBM to DermaGuard.
XXI. Rights Excepted
A. Specifically excepted from this Agreement is NBM's right to contract
with, and only with, the entity known as Sheffield Resource Network (SRN) of
Tampa, Arizona. It is hereby agreed that NBM reserves the right to contract with
Sheffield for the limited purpose of Sheffield's marketing a certain variation
of the SafeShield product to, and only to, multi-level marketing entities
(MLM's). Any such Agreement must however, incorporate the above restriction, be
non-assignable and be approved and endorsed by DermaGuard as to form and
substance, which endorsement and/or approval may not be unreasonably withheld.
Upon termination of said agreement, NBM shall retain no further rights pursuant
to this Section.
B. In consideration of this exception, NBM agrees to pay to DermaGuard
Twenty Five (25) percent of the gross margin received by NBM pursuant to any
sales of Product made by, on behalf of or with the assistance of Sheffield
pursuant to Sheffield's Agreement with NBM as herein authorized.
XXII. Entire Agreement
This Agreement sets forth the entire agreement and understanding between
the parties relating to the subject matter contained herein and incorporates and
supersedes all prior agreements, orall and written, heretofore made between the
parties; and this Agreement shall be construed in accordance with the laws of
the State of Louisiana. No modification hereof shall be valid unless in writing
and duly signed by an officer of NBM officer of NBM and DermaGuard. The captions
herein are for convenience only and shall not be construed as part of the
agreement between the parties hereto.
<PAGE>
B. The parties hereto hereby agree to secure resolutions from their
respective Boards of Directors ratifying this Agreement within five (5) days
form the date of execution hereof.
IN WITNESS WHEREOF, the parties have cause this Agreement to be executed
this 3rd day of Feb., 1999 and made effective the day and year first above
written.
WITNESSES: NATIONAL BOSTON MEDICAL, INC.
/s/ Karen E Rogers
- -----------------------
/s/ Amy L. Kristurns By: /s/Daniel J. Hoyng
- ----------------------- -------------------------
DANIEL J. HOYNG, President
DERMAGUARD, INC.
/s/illegible By: /s/ Egbert L. Ming
- ------------------- --------------------------
President
/s/Alverz Ferrovilles
- ------------------------
<PAGE>
EXHIBIT "A"
SPECIMEN WARRANT
Warrant No.:______________ Right to purchase 1,000,000 Shares
National Boston Medical, Inc.
Warrant to purchase Common Stock
Registered Owner: DermaGuard, Inc.
For value received, National Boston Medical, Inc., a Delaware corporation, (the
"Corporation") grants the following rights to the registered owner of this
Warrant:
(a) Issue. Upon tender to the Corporation (as defined in paragraph (e) hereof),
the Corporation shall issue to the registered owner hereof the number of shares
specified in paragraph (b) hereof of fully paid and nonassessable shares of
Common Stock of the Corporation that the registered owner is otherwise entitled
to purchase.
(b) Number of shares. The number of shares of Common Stock of the Corporation
that the registered owner of this Warrant is entitled to receive upon exercise
of this Warrant is 1,000,000 shares. The corporation shall at all times reserve
and hold available sufficient shares of Common Stock to satisfy all conversion
and purchase rights represented by outstanding convertible securities, options
and warrants, including this Warrant. The corporation covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of this Warrant
shall, upon issuance, be duly and validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the purchase and the
issuance of the shares.
(c) Exercise price. The exercise price of this Warrant, the price at which the
shares of stock purchasable upon exercise of this Warrant may be purchased, is
One Dollar ($1.00) per share.
(d) Exercise period. This Warrant may only be exercised on or after June 1,
1999, and on or before January 31, 2000 ("Exercise Period"). If not exercised
during this period, this Warrant and all rights granted under this Warrant shall
expire and lapse.
(e) Tender. The exercise of this Warrant must be accomplished by actual delivery
of the Exercise Price in cash, certified check, or official bank draft in lawful
money of the United States of America, and by actual delivery of a duly executed
exercise form, a copy of which is attached to this Warrant as Exhibit "1,"
properly executed by the registered owner of this Warrant, and by surrender of
this Warrant. The payment and exercise form must be delivered, personally or by
mail, to the offices of the Corporation at Taunton, Massachusetts. Documents
sent by mail shall be deemed to be delivered when they are received by the
Corporation.
EXHIBIT 10.24
BONTEMPI MEDICAL CORPORATION/NATIONAL BOSTON MEDICAL, INC.
AND GERMIPHENE CORPORATION
DISTRIBUTION AGREEMENT
This document is an agreement, entered into on June 29th, 1998 by and between:
BONTEMPI MEDICAL CORPORATION -AND- NATIONAL BOSTON MEDICAL, INC.
9251 - 8 YONGE ST., SUITE 139 43 TAUNTON GREEN
RICHMOND HILL, ONTARIO L4C 9T3 TAUNTON, MA 02780
-AND-
GERMIPHENE CORPORATION
HIGHWAY # 2 EAST
P.O. BOX 1748
BRANTFORD, ONTARIO N3T 5V7
WITNESSETH
Whereas, Germiphene wishes to market is PRODUCTS through the use of a
distributor in United States and the Middle East; and
Whereas, Bontempi Medical Corporation/National Boston Medical, Inc. desires to
purchase Germiphene's PRODUCTS under their private label and distribute and
resale said product in the United States market and the Middle East market which
includes United Arab Emirates, Saudi Arabia, Kuwait, Lebanon, Oman, Syria,
Qatar, Yenen, Bahrain and Egypt; and
Whereas, the above two parties wish to enter into a distributorship agreement
governing their relationship;
Now, Therefore, in consideration of the mutual terms and conditions set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Distribution and Territory
1.1 Germiphene hereby grants to Bontempi Medical Corporation/National Boston
Medical, Inc. and Bontempi Medical Corporation/National Boston Medical, Inc.
accepts, the sole exclusive distribution right, and privilege to sell,
distribute and market the specific private label product(s) set forth in
schedule 1 for the term of and pursuant to the conditions set out in this
Agreement. Germiphene warrants that it has not granted to any other person, firm
or corporation any right, privilege or ability to package, sell, or distribute
any product outlined in this agreement or within the defined territory as
outlined in section 1.2.
1.2 The territory that Bontempi Medical Corporation/National Boston Medical,
Inc. has exclusives right to sell, market and distribute to, shall be the United
States and the Middle East.
1.3 Bontempi Medical Corporation/National Boston Medical, Inc. agrees to
purchase all Germiphene private label brand products from Germiphene Corporation
during the life of this agreement.
<PAGE>
2. Product
2.1 The products which are covered in this agreement are set forth and attached
hereto in Schedule 1. Both parties agree that Schedule 1 may be amended time to
time by mutual written consent of both parties.
2.2 In addition, any new or improved product introduced in the marketplace by
Germiphene that is a replacement or a product line extension of the product(s)
outlined in schedule 1 shall be made available to Bontempi Medical
Corporation/National Boston Medical, Inc. for resale, or on the same basis as
the product covered in schedule 1.
3. Pricing
3.1 The price at which Germiphene shall sell the product to Bontempi Medical
Corporation/ National Boston Medical, Inc. shall be set forth and attached
hereto in Schedule 2.
3.2 Prices set forth in schedule 2 are subject to change upon the anniversary
date of the signed agreement. Volatility of the raw material cost incurred by
Germiphene will be sufficient cause to adjust agreed upon pricing prior to a
yearly basis.
4. Payment Terms
4.1 Germiphene's required payment terms and prepayment in United States dollars.
5. Shipping Terms
5.1 Shipping costs on all product orders shall be the responsibility of Bontempi
Medical Corporation/ National Boston Medical, Inc.
6. Enforcement of the Rights and Trademark
6.1 Germiphene warrants, that to the best of its knowledge, it has the sole and
exclusive right to use trademarks, emblems, designs, and other intellectual and
industrial property associated with the products set forth in Sche3dule 1.
Bontempi Medical Corporation/National Boston Medical, Inc.
acknowledges ownership of such property by the supplier.
7. Term and Termination
7.1 The term of this agreement shall be for a period of one (1) year commencing
on the date of execution by both parties of this Agreement. Thereafter, this
agreement shall continue for successive term of one (1) year each, unless and
until terminated as set forth in section 7.2.
7.2 Notwithstanding the foregoing, this agreement may be terminated for cause at
any time as follows:
A) In the event of default or material breach of the terms outlined in this
agreement by either party, written notice may be given to the defaulting party.
Thereafter, the defaulting party shall have thirty (30) days to clear up said
breach. In the event that said breach has not been cured within said thirty (30)
day period, this agreement shall terminate on the thirtieth (30th) day following
the notice of default.
B) In the event of nationalization, expropriation, liquidation or bankruptcy of,
or an assignment for the benefit of creditors of, or a declaration of insolvency
by, either party.
<PAGE>
8. Procedures on Termination
8.1 On the termination of this agreement, for whatever reason, Germiphene will
continue to honor Bontempi Medical Corporation/National Boston Medical, Inc.
existing order which are in the process of production and have been prepaid.
8.2 Within sixty (60) days of the cancelling of this agreement, Bontempi Medical
Corporation/ National Boston Medical, Inc. will agree to purchase all product
which is outlined in Schedule 1, that covers all orders which currently in the
possession of Germiphene Corporation, unless otherwise requested by Germiphene.
9. Warranties
9.1 Germiphene warrants that the product(s) outlined in schedule 1 will conform
in the specification set forth on the label and as approved by HPB Canada (if
applicable). Bontempi Medical Corporation/National Boston Medical, Inc. shall
indemnify, exonerate and save harmless the supplier, its officers, agents
judgments or recoveries resulting Bontempi Medical Corporation/National Boston
Medical, Inc. to users of the products.
10. Private Label
10.1 Germiphene agrees to offer Bontempi Medical Corporation/National Boston
Medical Inc. a private packaging program which will cover all products outlined
under Schedule 1 for the exclusive distributorship in the United States and the
Middle East.
11. Miscellaneous
11.1 Notices
Any notice required or permitted to be given under the terms of this agreement
shall be in writing, shall be given manually or by mail or fax and shall be
deemed sufficiently given if and when received by the party to be notified at
its address set forth above.
11.2 Entire Agreement
This agreement, including exhibits, constitutes the entire agreement between the
two parties and cancels and supersedes all prior agreements and understandings,
whether written or oral, between the parties with respect to such subject
matter.
12. Governing Laws
12.1 This agreement shall be governed by and construed in accordance with the
laws of the providence of Ontario.
In witness whereof, the parties have executed this agreement by their duly
authorized signature.
BONTEMPI MEDICAL CORPORATION/ GERMIPHENE CORPORATION
NATIONAL BOSTON MEDICAL, INC.
BY: /s/ Victorio Bianchi BY: /s/ Leslie Drake
- --------------------------- ---------------------------
TITLE: President TITLE: _____________________
DATE: June 30, 1998 DATE: ______________________
<PAGE>
Schedule 1
Germiphene Corporation Catalogue
Schedule 2
To Follow
<PAGE>
<TABLE>
<CAPTION>
GERMIPHENE PRODUCTS WITH FDA APPROVAL
<S> <C>
ZAP TOPICAL ANESTHETIC GEL (with Benzocaine & Tetracine)
Pina Colada 061508-0530-1
Bubblegum 061508-0533-1
Cool Mint 061508-0706-1
Strawberry Ice 061508-0709-1
FLOAM NEUTRAL FOAM FLUORIDE
Apple Pie 061508-1121
Strawberry 061508-1114
60 SECOND GEL
Apple Cinnamon 061508-0161
Bubblegum 061508-0163
Grape 061508-0165
Mint 061508-0166
Orange Cream 061508-0167
Gelstan 061508-0001
OroClense 0.12% CHX Oral Rinse 061508-0010
HemaSeal-T 061508-0250
Dye Spy 061508-0090
Smile Medium Grit - Cherry 061508-0424-1
Vapophene Chemical Autocalve Sol K9162879
Vortex Odyssey I Dental Water Unit K964796
ORONAF
Bubblegum 061508-0293
Cherry 061508-0294
Ice Mint 061508-0296
ORNAF WEEKLY CHERRY
Cherry 061508-0514
RINSE KITS
AquaStan -Redberry 061508-0038-1
-Bubblegum 061508-0033-1
-Mint 061508-0036-1
AquaFlur -Redberry 061508-0028-1
-Bubblegum 061508-0023-1
-Mint 061508-0026-1
</TABLE>
PROCUTS BEING SOLD IN THE US WHICH DO NOT REQUIRE FDA APPROVAL
Gobble Evacuation System Cleaner
<PAGE>
Gzyme Ultrasonic Cleaner
Gleam II Ulrasonic Cleaner
Perlident Prophy Jet Power
Geltrays
Marly Skin Guard
Genie Plus
<TABLE>
<CAPTION>
PRODUCTS WHICH ARE CURRENTLY IN SUBMISSION FOR FDA APPROVAL
<S> <C>
FLOAM TOPICAL FOAM FLUORIDE
Bublegum 061508-1118
Orange Cream 061508-1116
FLOAM NEUTRAL FOAM FLUORIDE
Cherry 061508-1125
Gluterate 2% Glutaraldehyde
Glutxact 2% Glutaraldehyde
FLUORON
Bubblegum 061508-0143-1
Cream Soda 061508-0140-1
Mint 061508-0146-1
Orange Cream 061508-0147-1
Raspberry 061508-0148-1
Strawberry 061508-0149-1
Vanilla Pudding 061508-0145-1
SMILE PROPHY PASTE
Fine Spearmint 061508-0436-1
Medium Spearmint 061508-0426-1
Coarse Spearmint 061508-0416-1
Fine Bubblegum 061508-0433-1
</TABLE>
PRODUCTS UNDER CONSIDERATION FOR FDA SUBMISSION
Swipes Disinfecting Towellettes (70% Ethanol)
Germx Surface Disinfectant (70% Ethanol)
G-Nol Concentrate Dual Synthetic Phenol Solution
WonderJuice
FLOAM TOPICAL FOAM FLUORIDE
Bubblegum
Orange Cream
FLOAM NEUTRAL FOAM FLUORIDE
Cherry
Grape
EXHIBIT 10.25
August 5, 1998
Mr. Dan Hoyng
President
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
Re: Allergy Guard/Distribution Agreement
Dear Dan:
This will confirm the terms and conditions of the distribution agreement reached
by and between National Boston Medical, Inc., (hereinafter "Distributor") and
Virasept Pharmaceuticals, Inc., (hereinafter "Virasept"):
1. Subject to the terms and conditions set forth herein, Virasept hereby
appoints Distributor, and Distributor hereby accepts appointment, as the
exclusive distributor of Allergy Guard(TM) for the United States in the medical,
dental and consumer markets;
2. Nothing herein is intended or shall be construed to grant Distributor any
distribution or other rights in any other territories or markets. In this
regard, Distributor hereby acknowledges that it is not granted any rights of any
kind in any foreign countries or markets, except to the extent that Distributor
timely exercises the option set forth in Paragraph 9 hereof and otherwise fully
and timely complies with the terms and conditions set forth in Paragraph 9 of
this Agreement.
3. Distributor further acknowledges that it is not granted any distribution or
other rights in the United States in the "governmental market" or the
"industrial market". For purposes of this Agreement, the "governmental market"
means any federal, state or local governmental or quasi-governmental agency,
department or instrumentality, including by way of illustration only, the United
States armed services, the Veterans Administration, the Public Health Service,
state, county and local police department, fire departments, ambulance corps and
emergency and rescue squads. For purposes of this Agreement, the "industrial
market" means any companies or industries that utilize latex or other gloves in
the manufacturing, preparation or processing of their end products, including by
way of illustration only, the cosmetic, automotive, airline manufacturing and
food processing industries.
4. Distributor hereby agrees that it shall pay Virasept One Hundred Thousand
Dollars ($100,000) as follows for the exclusive distribution rights set forth in
Paragraph 1 hereof: Fifty Thousand Dollars ($50,000.00) concurrently with the
execution of this Agreement; and Fifty Thousand Dollars ($50,000.000) within
Ninety (90) days of the date hereof. This is a one (1) time payment;
5. Distributor further agrees that concurrently with the execution of this
Agreement, it shall place a firm, irrevocable purchase order with Virasept for
no less than Twenty Thousand (20,000) "units" of Allergy Guard. For purposes of
this Agreement, a "unit" means One (1) two ounce (2 oz.) Tube of Allergy Guard,
Ten (10) unit doses of Allergy Guard or One-Third (1/3) of a sixteen ounce (16
oz.) Tube of Allergy Guard or any combination thereof. Thereafter, Distributor
hereby agrees that it will timely place with Virasept the following minimum
purchase orders of Allergy Guard during the term hereof.
<PAGE>
<TABLE>
<CAPTION>
DATE/TIME PERIOD MINIMUM ORDER
<S> <C>
I. FIRST YEAR
1st quarter (September 1, 1998 - November 30, 1998) 25,000 units
2nd quarter (December 1, 1998 - February 28, 1999) 50,000 units
3rd quarter (March 1, 1999 - May 30, 1999) 75,000 units
4th quarter (June 1, 1999 - August 31, 1999) 100,000 units
II. SECOND YEAR
1st quarter (September 1, 1999 - November 30, 1999) 105,000 units
2nd quarter (December 1, 1999 - February 28, 2000) 110,000 units
3rd quarter (March 1, 2000 - May 30, 2000) 115,000 units
4th quarter (June 1, 2000 - August 31, 2000) 120,000 units
</TABLE>
6. The initial purchase price shall be as follows of the unit dose, two ounce (2
oz.) And sixteen ounce (16 oz.) Tubes of Allergy Guard and are based on the
following minimum size run for each type of packaging:
<TABLE>
<CAPTION>
PACKAGING MINIMUM RUN PURCHASE PRICE
<S> <C> <C>
1. Unit Dose 100,000 or more $.032 for each unit dose
250,000 or more individual consideration
2. 2 ounce tube 10,000 or more $2.95
2. 16 ounce tube 5,000 or more $11.25
10,000 or more $11.15
</TABLE>
Distributor hereby acknowledges that the initial price of Two Dollars and
Ninety-Five Cents ($2.95) a tube for the two ounce (2 oz.) Tube already
represents a substantial discount from the initial price that Distributor was to
pay for the two ounce (2 oz.) Tube of Allergy Guard and that Distributor shall
not receive any further discount based on increases in the minimum run size of
the two ounce (2 oz.) Tubes of Allergy Guard. However, the parties have agreed
that Distributor will receive a credit within Thirty (30) days of the end of
each contract year for any two ounce (2 oz.) Tubes that Distributor has
purchased in excess of its minimum purchase requirements for the year. The
amount of the credit will be a s follows: Twenty-Five Cents ($.25) a tube for
each two ounce (2 oz.) tube that Distributor has purchased beyond its minimum
purchase requirements for the year; and to the extent that Distributor has
purchased in any contract year more than One Hundred and Twenty-Five Percent
(125%) of its minimum purchase requirements for the year, Thirty-Five Cents
($.35) a tube for each two ounce (2 oz.) tube that Distributor has purchased in
excess of One Hundred and Twenty-Five Percent (125%) of its minimum purchase
requirements for the year.
<PAGE>
All prices set forth herein are FOB Elsmford, New York or such other place in
the Northeast that Virasept may designate from time to time if such goods are
manufactured or packaged at a place other than in Elmsford, New York
(hereinafter "Shipping Point"). Distributor shall be responsible for all
loading, shipping, forwarding and handling charges, insurance, taxes, storage
and all other charges after Virasept delivers the goods to the Shipping Point.
The prices set forth herein may be adjusted from time to time by Virasept upon
Forty-Five (45) days notice to reflect any increase incurred by Virasept for raw
materials, packaging, manufacturing or labor; Provided, however, that such
increase shall be presented and to the extent necessary reasonably supporting
documentation provided;
7. The initial order of Allergy Guard shall be paid as follows: One-Half (1/2)
concurrently with the execution of this Agreement and One-Half (1/2) within
Thirty (30) days of the delivery of the initial order to Distributor. All future
orders placed on Distributor shall be paid within Thirty (30) days of delivery;
Provided, however, that if any order is for more than Twenty Thousand (20,000)
units the order shall be paid as follows: One-Half (1/2) at the time the order
is placed and One-Half (1/2) within thirty (30) days of delivery; and Provided,
further that if the purchase order is for more than Forty Thousand (40,000)
units the order shall be paid pursuant to an irrevocable letter of credit or
according to such credit terms as may be established by Virasept from time to
time. In the event that Distributor fails to timely or fully pay for any order
Virasept may, as long as any payment is outstanding, require all future orders
to be paid in full at the time such order is placed or in such other manner of
payment acceptable to Virasept;
8. Distributor hereby agrees on a quarterly basis beginning with the second
(2nd) quarter to provide Virasept with a written market report which shall
include information as to the total sales of Allergy Guard during the quarter, a
breakdown of sales between the medical, dental and consumer markets during the
quarter, a summary of promotional and related activities undertaken by
Distributor during the quarter, an outline of the Distributor's plans for sales
promotion and anticipated sales for the next quarter and such other information
as Virasept may reasonably request from time to time;
9. Virasept hereby grants Distributor an exclusive option for a period of One
Hundred and Twenty (120) days from the date hereof to become the exclusive
distributor of Allergy Guard in the following additional territories: South
America, China, Canada and the Middle East (hereinafter "Additional
Territories"); Provided, however, that in consideration of such option,
Distributor agrees, at its own expense, to diligently pursue regulatory approval
for Allergy Guard in the Additional Territories wher3e such regulatory approval
is required and to keep Virasept fully and timely informed of the status of its
efforts. In order to exercise its option for one or more of the Additional
Territories, Distributor shall provide Virasept with written notification for
each of the Additional Territories it intends to exercise its option for and to
remit with such written notification the monies set forth below for such
territories:
South America $25,000
China $25,000
Canada $15,000
Middle East $10,000
In the event that Distributor shall elect to exercise its option for one or more
of the Additional Territories, the minimum number of units that Distributor
shall be required to purchase as set forth in Paragraph 5 hereof shall be
increased as follows beginning the third (3rd) quarter of this Agreement Five
Percent (5%) for the Middle East, Ten Percent (10%) for Canada, Fifteen Percent
(15%) for South
<PAGE>
America and Fifteen Percent (15%) for China. Distributor's option shall
automatically and without further notice terminate if Distributor shall fail to
timely exercise its option or to fully and timely remit the monies set forth
above for each of the Additional Territories;
10. Virasept hereby acknowledges that Distributor is interested in possibly
securing distribution rights to other products of Virasept that are currently
under development, including an anti-bacterial and an anti-microbial, and
Virasept hereby is willing to attempt to negotiate with Distributor the terms of
Distributor's agreement for such products as soon as practicable following the
execution of this Agreement, subject to the understanding that any such
agreement shall provide for substantially increased upfront payments and minimum
purchase orders and possibly milestone payments at agreed upon stages of the
development and testing of these products. In the event that the parties are
unable to negotiate an acceptable agreement within Sixty (60) days of the date
hereof, either party may upon written notice to the other party terminate such
negotiations for these other products, at which time Virasept shall be free to
negotiate with any other party for distribution or other rights for such
products;
11. The parties hereto agree that they have or in the future will receive
information from each other that is confidential or proprietary and they each
covenant and agree to hold such information in confidence and not to divulge or
use any information for any purpose other than its reasonably required to
further the purposes of this Agreement. The provisions of this Paragraph shall
survive the termination or expiration of this Agreement;
12. Distributor hereby agrees to submit all marketing, promotional and
advertising materials to Virasept for its approval, which approval shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, nothing herein
is intended or shall be construed to relieve Distributor of any liability
relative to its marketing, promotion, distribution or sale of Allergy Guard and
Distributor hereby agrees to indemnify, defend and hold Virasept and its
officers, directors, shareholder, employees, representatives and agents harmless
from and against any and all claims, demands, obligations, liabilities, suits
and costs and expenses of any kind or nature whatsoever, including reasonable
attorneys' fees and costs, that arise out of or result from Distributor's
marketing, promotion, distribution or sale of Allergy Guard. Virasept hereby
agrees to maintain during the term hereof and any renewal thereof product
liability insurance with limits of no less than One Million Dollars ($1,000,000)
per occurrence and Three Million Dollars ($3,000,000) in the aggregate. The
provisions of this Paragraph shall survive the termination or expiration of this
Agreement;
13. The term of this Agreement is for the Two (2) year period beginning
September 1, 1998 and ending August 30, 2000. Distributor shall have the option
to renew this Agreement for continuous Two (2) year periods provided that
Distributor shall have fully and timely satisfied its obligations under the
Agreement, including the minimum purchase requirements set forth in Paragraph 5
hereof. In the event Distributor elects to renew this Agreement, all the terms
and conditions set forth herein shall remain the same except the minimum
purchase requirements set forth in Paragraph 5 hereof shall be increased by
Twenty Percent (20%) over the preceding year's last quarter's minimum purchase
requirements.
14. (a) This Agreement may be terminated immediately by Virasept upon the
happening of any of the following events: (i) if Distributor fails to timely
place the minimum orders or fails to timely pay for the same and such breach is
not cured within Thirty (30) days after notice; (ii) upon a breach or threatened
breach of the confidentiality provision set forth in Paragraph 11 hereof; (iii)
upon any purported assignment or delegation by Distributor of its rights or
obligations under this Agreement; (iv) upon Distributor's failure to comply with
all applicable federal, state, local or international laws governing the
marketing, promotion, distribution or sale of Allergy Guard; or (v) upon any
other breach of the terms or conditions of this Agreement by Distributor if such
breach is not cured to the reasonable satisfaction of Virasept within Thirty
(30) days after notice;
<PAGE>
(b) This Agreement may be terminated immediately by Distributor upon the
happening of any of the following events: (i) Virasept fails to timely fill any
orders of Distributor for Allergy and such failure is not cured within Thirty
(30) days after notice, unless such breach is excused by a force majeur event;
(ii) upon a breach or threatened breach by Virasept of the confidentiality
provisions set forth in Paragraph 11 hereof; or (iii) upon any other breach of
the terms or conditions of the Agreement by Virasept if such breach is not cured
to the reasonable satisfaction of Distributor within Thirty (30) days;
(c) This Agreement may also be terminated by Distributor at any time without
cause upon One Hundred and Twenty (120) days prior written notice to Virasept;
Provided, however, that in the event that Distributor terminates this Agreement
pursuant to the terms of this subparagraph, Distributor and its officers,
directors, shareholders, contractors and employees shall not engage, directly or
indirectly, in the design, manufacture, marketing, promotion, distribution or
sale of any "competing product" for a period of One (1) year following
Distributor's termination of this Agreement. For purposes of this Agreement,
"competing product" means any barrier cream, skin protectant or other hand-cream
or lotion that is designed or promoted, in whole or in part, to be used with
latex or other gloves or to reduce the symptoms associated with latex allergy or
contact dermatitis; Provided, however, that nothing herein is intended or shall
be construed to prohibit Distributor from distributing any other barrier cream,
skin protectant or hand-cream or lotion that Distributor can establish it was
distributing as of the date of this Agreement;
15. The parties hereto are independent contracting parties. Nothing herein is
intended or shall be construed to create a joint venture, partnership,
employment or agency relationship between the parties. Distributor shall be
fully responsible for complying, at its own cost, with all applicable federal,
state, local and international laws regarding the marketing, promotion,
distribution or sale of Allergy Guard and for all costs and expenses incurred by
Distributor in the marketing, promotion, distribution or sale of Allergy Guard;
16. Any notices required or permitted to be given hereunder shall be deeme3d
given when delivered by overnight mail by a nationally recognized overnight
courier service with signed receipt or three (3) days after mailing by certified
mail, postage prepaid, with return receipt requested, to the other party at its
principal place of business of such other places as that party may designate by
like notice to the other party;
17. This Agreement shall be binding upon the parties hereto and their successors
and permitted assigns. Distributor may not delegate its duties or assign its
rights hereunder, in whole or part, without the express written consent of
Virasept and any purported delegation or assignment of this Agreement shall be
null and void and shall constitute immediate grounds for the termination of this
Agreement by Virasept; Provided, however, that Distributor may assign its rights
hereunder to a related party in which Distributor is a majority shareholder;
18. This Agreement constitutes the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
prior discussions, understandings and agreements, whether written or oral,
between the parties. This Agreement may not be modified, amended or changed
except by a subsequent agreement executed by both the parties hereto; and
19. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Distributor hereby consents to the jurisdiction
of any state or federal court within the State of New York in any dispute
arising out of or relating to the interpretation or enforcement of this
Agreement.
If this Agreement accurately reflects the agreement we reached and is acceptable
<PAGE>
to you, please acknowledge by signing on the space provided below and by
returning a fully signed copy of our agreement to me for my records. Thank you.
Very truly yours,
/s/ Carlo Micceri
- -----------------
Carlo Micceri
President
AGREED TO AND ACCEPTED BY:
NATIONAL BOSTON MEDICAL, INC.
/s/ Daniel J. Hoyng
- --------------------
By:
Its:
EXHIBIT 10.26
AGREEMENT
THIS AGREEMENT is made and entered into by and between D.V. Back Products, Inc.,
a General Partner of Backstroke, Ltd. (Hereinafter called "Backstroke, Ltd.")
and having its principal place of business at, 158 N. Main Street, Columbiana,
Ohio 44408 and Dr. David Vitko, individually and Flex Marketing, inc.
(Hereinafter called "FMI") , or its assigns, having an address of 2955 Canfield
Road, Youngstown, Ohio 44511.
WHEREAS Vitko has a patent, number 5,352,188, for a "Back Massager"
(hereinafter referred to as the "Backstroke") and is/has requested FMI to market
and to further promote the Backstroke; and
WHEREAS, D.V. Back Products, Inc. is the General Partner of Backstroke,
Ltd.; an Ohio Limited Partnership; and
WHEREAS, Dr. David Vitko has granted Backstroke, Ltd. the right and license
for the use of his patent number 5,352,188 for the (Backstroke); and
WHEREAS FMI will have the licensing and marketing of the patent and
product; and
WHEREAS FMI wishes to manufacture and sell the Backstroke, and wishes to
use the patent; and
WHEREAS Backstroke, Ltd. wishes to utilize the knowledge and marketing
technic of FMI.
WHEREAS Backstroke, Ltd. solely owns the patent; and
WHEREAS Backstroke, Ltd. and FMI wish to be bound by the terms and
conditions of this agreement, now therefor, in considerations of the promises
and mutual covenants hereinafter contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree with each other as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement, the term 'KNOW-HOW" shall mean
engineering drawings, charts, technical reports, photographs and other technical
information exclusively developed for and pertaining to the "Backstroke."
ARTICLE II
PATENT RIGHTS AND ASSIGNED
1) Backstroke, Ltd. hereby grants to FMI all marketing rights, title and
interest in and to the "Backstroke" which he may have in any country and agrees
to execute any and all documents effecting transfer of such rights.
2) FMI agrees to place applicable trademark and patent notices on all
product, packaging and collateral material.
3) FMI further agrees to submit 4 samples of said product, its cartons,
containers and packaging materials to Backstroke, Ltd. of whcih FMI agrees that
Backstroke products will be produc4ed and distributed in accordance with
federal, state and local laws.
<PAGE>
4) No further changes in product can be made without further approval by
Backstroke, Ltd., by and through its General Partner, D.V. Back Products, Inc.
5) If FMI does product advancements that involve patent update and/or
changes, Backstroke, Ltd. will be responsible for patent costs. FMI will pay for
trademarks and drawing costs with respect to the Backstroke products.
ARTICLE III
LIQUIDATION OF INVENTORY AND MACHINERY
1) FMI, warrants that it will not further produce any products covered by
this agreement if and when FMI should stop marketing said Backstroke without
written consent from Backstroke, Ltd. FMI will sell all remaining inventory if
any. Backstroke, Ltd. will purchase the inventory at FMI's cost until it is
depleted before any further products are manufactured.
ARTICLE IV
TRANSFER OF PRODUCTION TOOLING
It is agreed that Backstroke, Ltd will make available to FMI any current
production tooling, fixtures and manufacturers used by Backstroke, Ltd to
manufacture the Backstroke covered by this agreement. And FMI agrees to be
responsible for the maintenance of all tooling of Backstroke, Ltd's that is used
in the production of product.
ARTICLE V
HOLD HARMLESS
Backstroke, Ltd agrees to hold FMI harmless for any product claims made by
third parties against Backstroke, Ltd and/or FMI concerning products (Backstroke
and Backstroke Sport) which were manufactured by Backstroke, Ltd or otherwise
under previous licensing agreements or sales in effect prior to the date of this
Agreement.
ARTICLE VI
ASSIGNABILITY
This agreement shall be binding upon Backstroke, Ltd, his successors and
assigns and other interested Partners and shall inure to the benefit of FMI, its
successors and assigns.
ARTICLE VII
TERMS
1) FMI will provide a consulting position for Dr. David Vitko, to act
solely in an advisory position to talk about and promote the Backstroke. For
this consulting service Dr. David Vitko will be compensated for expenses
associated with and will receive a set fee of $1,000.00 per day for his
appearance at trade shows and/or other promotional events. FMI will give Dr.
David Vitko a 30 day advanced notice for such trade shows and/or promotional
events. If FMI gives less than a 30 day notice, Dr. David Vitko has the right to
refuse to attend.
2) Dr. David Vitko will be directed by FMI to help promote the Backstroke
line. Dr. David Vitko will make no other appearances or agreements without
specifically being directed by FMI.
<PAGE>
3) FMI will set the price of the Backstroke in order to standardize its
product line. With regards to sales Backstroke, Ltd may have pending and/or in
progress at the time of this Agreement. Backstroke, Ltd will pay wholesale
prices for the Backstroke and sell it as retail as established by FMI.
4) FMI will negotiate all deals upon the signing of this agreement.
ARTICLE X
DEFAULTS
If FMI fails to abide by the obligations of this Agreement Backstroke, Ltd.
shall have the option to cancel this Agreement by providing 45 day(s) written
notice to FMI. FMI shall have the option of preventing the termination of this
Agreement, if corrective action is taken prior to the end of the 45 day time
period. If the default causes a termination of this agreement then ARTICLE XV
will apply.
1) FMI agrees to obtain, at its own expense, liability insurance for a
least 1 million dollars. As proof of such insurance, FMI will submit to
Backstroke, Ltd. a fully paid certificate of insurance naming Backstroke, Ltd.
as an additional insured party.
2) the submission of insurance must be in place before any licensed product
is distributed or sold after this Agreement.
ARTICLE XI
ARBITRATION
All disputes under this Agreement that cannot be resolved by the parties
shall be submitted to arbitration under the rules and regulations of the
American Arbitration Association. Either party may invoke this paragraph after
providing 30 days' written notice to the other party. All costs of arbitration
shall be paid by the loosing party.
ARTICLE XII
TRANSFER OF RIGHTS
This Agreement shall be binding on any assigns or successors of the
parties.
ARTICLE XIII
SEVERABILITY
If any provision of this Agreement shall be held to be invalid or
unenforceable for any reason, the remaining provisions shall continue to be
valid and enforceable. If a court finds that any provision of this Agreement is
invalid or unenforceable, but that by limiting such provision it would become
valid or enforceable, then such provision shall be deemed to be written,
construed, and enforced as so limited.
ARTICLE XIV
WAIVER OF CONTRACTUAL RIGHT
The failure of either party to enforce any provision of this Agreement
shall not be construed as a waiver of limitation of the party's right to
subsequently enforce and compel strict compliance with every provision of this
Agreement.
<PAGE>
ARTICLE XV
TERMINATION OF AGREEMENT BY FMI
If FMI terminates this Agreement to sell the Backstroke, due to lack of
"Product Appeal", FMI must provide Backstroke, Ltd with a 30 day advanced notice
prior to terminating FMI's representation of the Backstroke as one of its
product lines.
Since there is no designated termination date to this agreement, this
agreement can be terminated only by FMI. FMI will be deemed to have assigned,
transferred and conveyed to Backstroke, Ltd. all trade rights, good will, titles
or other rights in and to licensed product which may have been obtained by FMI
from Dr. Vitko and/or Backstroke, Ltd. originally. Any such transfer of tangible
items will be at cost of specified equipment to be valved at time of termination
minus depreciation, except for the molds, their value will be calculated at cost
less usage.
ARTICLE XVI
MISCELLANEOUS
1) Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Ohio.
2) This Agreement set forth the entire agreement and an understanding
between the parties as to the subject matter thereof and merges all prior
discussions between them.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their behalf, by their respective officers thereunto duly
authorized, to be effective on the last date shown below.
Backstroke, Ltd.
WITNESS: /s/Claudia Krill By /s/ Dr. David Vitko
- ------------------------- ---------------------------
Dr. David Vitko, President
D.V. Back Products, Inc.
General Partner
Date: 3/10/97
WITNESS: /s/Claudia Krill By /s/ Remon Hayek
- ------------------------- -------------------------
Remon Hayek, President
THG Construction Management, Inc.
Date: 3/10/97
DBA Flex Marketing, Inc.
Attachment A of this Agreement still under draft form, will be used to finalize
all pending issues of this Agreement.
<PAGE>
<TABLE>
<CAPTION>
Inventory Shipped April 14, 1997 from New Springfield to
Esterle Mold and Machine Co., Inc. in Stow Ohio.
<S> <C>
Quantity Description
1 Full gaylord of 4-ball sport shafts with 2 ball centers
1 1/2 full gaylord of 4-ball sport shafts with on center balls
1 3/4 full gaylord of 4-ball long bacstroke shafts, center balls
1 1/2 full gaylord of 4-ball long backstroke shafts, no center balls
1 Full gaylord of 4-ball sport shafts with no center balls
1 Full galords of sport unit complete unboxed
9 gaylords of Drilled Frames for the Backstroke, as follows:
43, 56, 46, 62, 86, 82, 60, 95, 61, 74 for total of 583 frames
9 gaylords of undrilled frames for the Backstroke, as follows:
84, 88, 85, 86, 82, 88, 86, 69, 48 for a total of 716 frames
6 Pallets of Boxed Sports 91/pallet = 546 Boxed units
11 Boxes of Palnuts end caps for the shafts 20,000/Box = 220,000
2 Boxes of wheels for the Backstroke unit ? on total number
6 Boxes of ABS Sport Strips 975 total
3 Pallest of metal rods made up of 16", 13", 6" and 5-7/8"
1 Pallet of boxes as follows:
200 Boxes for the Backstroke
950 Boxes for the Sport
18 Boxes plain 16-9/16 x 8-13/16 x 35-3/8 20
Boxes plain 16 x 2-1/2 x 34
2 Sets of Printing Plates for the Backstroke and Sport Sets
2 of Box Dies for both the Backstroke and Sport Pallet of
1 plain cardboard insert for the Video and Neck roller 2,000
1 Pallet of Sports that need cleaned and reboxed 84 total
1 Pallet of Neck roller pieces as follows:
616 - total complete and assembled 843 - Left
ABS single supports 843 - Right ABS single
supports
1 Pallet mixed labels, instruction booklets, warranty cards
1 and videos Pallet of vinyl tubes as follows:
17boxes - 14-3/8 tubes x 1,800/box =30,600 used for
Backstroke 3 boxes - 5 x 1,500/box =4,500 used for
neck rollers 2-1/4 boxes - 12 x 1,800/box = 3,600
+200 = 3,800 tubes presently used for the sport model.
We can cut these down and use them for the neck roller assembly.
</TABLE>
<PAGE>
Inventory Shipped April 11, 1997 from New Springfield to
Esterle Mold and Machine Co., Inc. in Stow Ohio.
Quantity Description
16 bags 1/2in foam pads used for the Backstroke 200/bag total 3,200
27 Pallets of Backstroke Sports Boxed 91/pallet x 27 = 2,457
7 Pallets of Backstrokes Boxed 39/pallet x 7 = 273 minus 1 = 272
<PAGE>
Inventory Shipped April 15, 1997 from New Springfield to
Esterle Mold and Machine Co., Inc. in Stow Ohio.
<TABLE>
<CAPTION>
Quantity Description
<S> <C>
1 Drill press and bits complete air or electric
3 Boxes of drill press parts and miscellaneous tools 2 air chisels
1 Complete push rod unit for vinyl tubes into rubber balls with
additional air cylinder
1 Stand assembly for mounting shafts into frames
65 Boxes for Backstroke Labeled
1 3/4 full drum of Armorall used to wash completed units
1 Wash tub used in washing units
12 Backstrokes that need repaired
2 Backstroke frames, one broken
11 Other miscellaneous wooden dies used in the assembly process
</TABLE>
<PAGE>
Attachment A
March 10, 1997
1. Flex Marketing, Inc. will indemnify Dr. David Vitko against the finders fee
and/or commissions that are due to George Landis and others for the
Introduction, as per the following understanding. Dr. David Vitko agreed to pay
George Landis and others a finder fee and/or commission of 10% of what Dr. David
Vitko was to receive as a royalty from Flex Marketing, Inc. for a two year
period starting March 10, 1997. It is agreed that George Landis was to continue
to promote the Backstroke in order to earn this finders fee and/or commission.
Dr. David Vitko understands that Flex Marketing, inc. has agreements with George
Landis on other matters and will settle this finders fee and/or commission
directly with George Landis and others.
2. Backstroke inventory as listed in Attachment B includes the Backstroke Sport.
3. Transfer of Dr. Vitko's 800# for the Backstroke to Flex Marketing.
4. Forward the PO Box to Flex Marketing's PO Box for the Backstroke/Backstroke
Sport.
5. Transfer of sales contracts and possibly sales leads of the
Backstroke/Backstroke Sport.
6. Assigned letter of liability by Dr. Vitko stating any claims and/or expenses
filed against the Backstroke/Backstroke Sport that can be classified as
liabilities on the Backstroke/Backstroke Sport.
7. Dr. Vitko may use his affiliation with the Backstroke for the benefit of his
practice.
8. A separate letter of a license transfer right from Dr. Vitko to Flex
Marketing for the Backstroke/Backstroke Sport.
Date: 3/10/97 Date: 3-10-97
Accepted By: /s/ Remon Hayek Accepted by: /s/ Dr. David Vitko
- ----------------------------- ----------------------------------
Remon Hayek, President Dr. David Vitko, President
THG Construction Management, Inc. D.V. Back Products, Inc.
DBA: Flex Marketing, Inc. General Partner
EXHIBIT 10.27
RELEASE AND SETTLEMENT AGREEMENT
This Agreement made this 13th day of January, 1999, effective as of
the day of December, 1998, by and between DAVID M. VITKO, both individually and
as President of D.V. BACK PRODUCTS, INC. General Partner of BACKSTROKE, LTD. an
Ohio Limited Partnership, of 158 North Main Street, Columbiana, Ohio 44408,
hereinafter collectively referred to as 'BACK PRODUCTS" or "Back Products" and
THG CONSTRUCTION MANAGEMENT, INC., FLEX MARKETING, INC., ERNEST ZAVORAL, and
REMON HAYEK; all of whom have various addresses within the State of Ohio, but
who for purposes of this Agreement shall collectively be hereinafter referred to
as 'FLEX MARKETING" or "FMI", witnesseth:
Whereas, Back Products has commenced a law suit naming FMI as
Defendant(s), being known as Case No. 98 CV 349, Court of Common Pleas,
Columbiana County, Ohio, hereinafter the "Suit". The claims raised in the suit
include Count One for Fraudulent Inducement, Count Two for Anticipatory Breach
of Contract, Count Three for Breach of Contract, and Count Four for Injunctive
Relief; and
Whereas, all of such claims derive from a certain contractual
agreement previously entered into between all of the parties, with such Contract
being dated March 10, 1997. The subject matter of such contract involved certain
patent ownership, licensing, trade mark, manufacturing, and marketing and
distribution rights concerning a certain home health care/fitness devise which
may be more specifically referred to as a "back massager" and known as "The
Backstroke" or "Backstroke"; and
Whereas, following the filing of the suit by Back Products, hearing
was scheduled on Back Product's Motion for Injunctive Relief, with an agreement
being reached at the scheduled hearing which resulted in the filing of an Agreed
Judgment Entry as to certain matters raised in the request for injunctive
relief; and
Whereas, these parties desire to settle the suit and buy their peace
in a manner which would not constitute an admission of liability, culpability or
responsibility on the part of either Back Products or FMI; and
Whereas, these parties agree and understand that any and all actions
undertaken by these parties are in full settlement and in satisfaction of any
and all claims which have been raised in the Complaint of Back Products as set
forth in the suit, as well as those which could be raised by FMI in any Counter
Claim filed in the suit or which could possibly be raised in the future, in
connection with or arising from or out of the licensing contract, including, but
not limited to, all discussions concerning the a licensing contract, whether
such discussions occurred prior to or subsequent to the execution of the
licensing contract, and also including the relationship between these parties
which arose following the execution of the licensing contract.
NOW THEREFORE, in consideration of the mutual promises and
obligations agreed to be undertaken and as are contained herein it is hereby
agreed by these parties as follows:
1. SALE AND TRANSFER OF PATENT RIGHTS.
1.1 Sale and Transfer of the Patent. David M. VITKO and Back Products
shall transfer and convey all of their right title and interest in and to Patent
No. 5,352,188 to FMI, subject to the royalty rights of David M. Vitko and Back
Products to receive the Royalties as set forth in Paragraph 3, hereof, all as
their interests may appear. FMI shall be the exclusive owner of the Patent No.
5,352,188 and possess all rights commonly associated with such status, with
regard to Patent No.
<PAGE>
5,352,188, subject only to the royalty rights of Back Products, as hereinafter
set forth.
1.2 Enforcement of Rights on Infringement by Third Parties. Should
BACK PRODUCTS discover that FMI's right under the Patent is being, or has been,
infringed upon, he or it shall communicate the details to FMI, and FMI shall
thereupon have the right, but not the obligation, to take whatever action it
deems necessary, including the filing of lawsuits, to protect the rights of the
parties to the Agreement and to terminate such infringement. BACK PRODUCTS shall
cooperate with FMI if FMI takes any such action, but all expenses of FMI shall
be borne by FMI, if FMI recovers any damages or compensation for any action it
takes hereunder, FMI shall retain 100% of such damages. If FMI does not wish to
take any action hereunder, BACK PRODUCTS shall also have the right, but not the
obligation, to take any such action, in which case FMI shall cooperate with BACK
PRODUCTS, but all of BACK PRODUCTS' expenses shall be borne by BACK PRODUCTS.
BACK PRODUCTS shall receive 75% of any damages or compensation it recovers for
any such infringement and shall pay 25% of such damages or compensation to FMI,
after deducting its costs, including attorney fees.
1.3 Assignment by FMI. The rights of FMI under this Agreement shall
be freely assignable or otherwise transferrable, in whole or in part, by FMI,
and shall vest FMI'S assigns or transferees with the same rights and obligations
as were held by FMI; provided, however, that any assignee of the Patent shall be
bound by the terms of this Agreement.
2. CONSIDERATION FOR TRANSFER OF THE BACKSTROKE
2.1 National City Bank Debt. As consideration for its purchase of the
Patent, FMI agrees to pay in full the debt owed by Back Products to National
City Bank, up to an including the current balance owed, not to exceed the amount
of $265,754.00 (the "NCB Note"). If in the event FMI fails to make full payment
on the NCB Note on or before January 31, 1999, then FMI shall make all monthly
payments of principal and interest on the NCB Note which shall hereafter become
due and owing on such debt. Said promise to pay the NCB Note shall be secured by
a mechanism acceptable to NCB, but limited in value to $265,754.00.
2.2 Cash Payments. In addition to the foregoing, FMI shall pay
directly to David M. Vitko calendar year 1998 payment on the NCB Note, not to
exceed the total sum of Twelve Thousand Five Hundred Ninety-One and 15/100
Dollars ($12,591.15) ("cash payment").
3. ROYALTIES.
3.1 Primary Royalty. Back Products shall receive a royalty of 3%
based upon the "net factory sales price" of the Backstroke Back Massager payable
for the life of the product, defined as the time period during which sales of
the Backstroke Back Massager are taking place, in any location and upon any
terms. The term "not factory sales price" shall be defined as the gross selling
price of the Backstroke Back Massager, or the U.S. Importer's gross selling
price, if this product is being manufactured abroad, less usual trade discounts
actually allowed, but not including advertising allowances or fees or
commissions paid to employees or agents of FMI. The net factory sales price
shall not include 1) packaging costs, 2) import and export taxes, excise and
other sales taxes, and customs duties, and 3) costs of insurance and
transportation, is separately billed from the place of manufacture if in the
U.S., or from the place of importation if manufactured abroad, to customer's
premises or next point of distribution or sale. Bona Fide returns may, of
course, be deducted from the units shipped in computing the royalty payable
after such returns are made. This right to royalties granted to Back Products
shall be binding upon any and all successors in interest to or assigns of FMI;
and shall follow the patent, (follow the ownership of or licensing rights with
regard to the patent), such patent bearing Patent No. 5,352,188.
<PAGE>
3.2 Up-Sell Rights. Back Products shall receive a royalty of 2% based
upon the sale of all "up-sell" and "back-end" items ("item") marketed by FMI,
unless otherwise agreed to by the parties in a writing executed in a manner
consistent with paragraph 5.5 hereof, based upon the "net factory sales price"
of the item. The term "net factory sales price" shall be defined as the gross
selling price of the item, or the U.S. Importer's gross selling price, if the
item is being manufactured abroad, less usual trade discounts actually allowed,
but not including advertising allowances or fees or commissions paid to
employees or agents of FMI. The net factory sales price shall not include 1)
packaging costs, 2) import and export taxes, excise and other sales taxes, and
customs duties, and 3) costs of insurance and transportation, if separately
billed from the place of manufacture if in the U.S., or from the place of
importation if manufactured abroad, to customer's premises or next point of
distribution or sale.
3.3 Payment Dates. All royalty payments to be made by FMI or its
successors or assigns, shall be paid quarterly, with the actual payments being
due and payable on fifteenth day of the second month of the next succeeding
quarter immediately following the end of the preceding quarter.
3.4 Late Payments. Any payments due from FMI, which is not timely
paid (as set forth in sub-paragraph 3.3 hereof), shall bear interest at an
annual percentage rate of 7%, compounded monthly, until such payment has been
made in full.
4. FMI's Right of First Refusal to Related Products. In the event that David M.
Vitko, the developer of the Backstroke, shall, in the future, introduce any new
products for which a new or additional patent has been obtained, or for which an
application for a new or additional patent is to be filed and which new or
additional patent is or will be owned by David M. Vitko and which patent or
patent application shall be directly or indirectly related to the Backstroke,
then FMI shall be afforded the first right of refusal with regard to such patent
or patent application, as follows:
4.1 Procedure for Notice and Exercise of FMI's Right of First
Refusal. Back Product's grant of right of first refusal to FMI shall provide
that FMI shall possess a period of sixty (60) days, commencing upon its actual
receipt of a written notification from David M. Vitko with regard to the new
patent, or application therefor, to complete any marketing survey or due
diligence study of FMI's choosing (the "due diligence period"). In the event
that on or before the sixtieth (60th) day of such due diligence period, FMI
shall notify David M. Vitko, in writing, of its decision to purchase or license
certain rights involving such patent, which may include licensing and/or
ownership, upon terms mutually agreeable to FMI and Back Products then Back
Products shall, upon payment of the sums then agreed upon by FMI, immediately
transfer such rights, as have been agreed upon, to FMI through an appropriate
Agreement to be prepared, at the sole expense of FMI.
If, at any time, on or before the 60th day of the due diligence
period provided for herein, Back Products shall receive any bonafide offer from
an third party unrelated to Back Products for the purchase or license of any new
patented product (the "competing offer"), then Back products shall, within 72
hours, provide FMI with a copy of said competing offer, for its review and
consideration, and the presentment of any such competing offer shall, upon
receipt of same by FMI, afford FMI to declare and begin a new due diligence
period, as defined above. Upon the completion of its due diligence, FMI shall
then be afforded the opportunity to match the terms of the competing offer. If
in the event, however, that FMI shall not match such competing offer or elect
not to make any offer to purchase such patent rights as are being offered; then
upon the expiration of the 60th day of the due diligence period, Back products
shall be free to sell such patent rights to offering party at the price which
was presented to FMI by that third party.
4.2 Cooperation with FMI. David M. VITKO shall make himself available
to FMI, its successors and/or assigns, upon reasonable notice, for purposes of
providing FMI with information concerning communication which may have occurred
with other persons who are not a party to the suit.
<PAGE>
In addition, if subpoenaed, David M. VITKO agrees to appear for purposes of
providing testimony, either by way of deposition or otherwise, in any legal
proceedings which may hereafter be filed; all in connection with or arising from
claims relating to the Backstroke Back Massager.
4.3 Indemnification of David M. Vitko. FMI shall represent, defend
and indemnify Back Products in the event that any law suit shall be filed
against any of them in connection with or arising out of this agreement to
cooperate with FMI, as set forth in the preceding paragraph. To the extent
feasible, FMI shall name David M. Vitko as an additional insured on FMI's
product liability policy.
4.4 Back Products Covenant Not to Compete.
4.4.1 Representations and Warranties. David M. Vitko,for himself and
for D.V. Back Products, Ltd., represents and warrants that no assignment,
license or other transfer or conveyance of any property rights to the Backstroke
Back Massager, or rights to use or sell the Backstroke Back Massager, have been
granted or issued to any third parties, except that certain transfer and
conveyance to FMI, and/or its shareholders as set forth in that certain document
executed by Back Products and FMI and/or its shareholders, dated March 10, 1997,
a copy of which is attached hereto as Exhibit "B".
David M. Vitko, for himself and for D.V. Back Products, Ltd. further
represents and warrants that it has not licensed the Backstroke Back Massager to
any third party, the right to market the Backstroke Back Massager in any country
outside the territorial limits of the United States of America.
FMI represents and warrants that, to the best of their knowledge,
Exhibit A, attached hereto, is intended to and believes that it will be an
exhibit to the agreement between FMI and the ISSUER as identified therein.
4.4.2 Non-Competition. Notwithstanding any provision of this Agreement
to the contrary, Back Products represents and warrants that it, or they, as the
case may be, shall not and will not compete, directly or indirectly, with FMI in
the marketing of the Backstroke, or any other such device which provides for
back massage, for a period of seven (7) years anywhere in the world. It is
further agreed by Back Products that the duration of time and the geographical
limits of this covenant are necessary and reasonable to effect the intent of the
parties to this Agreement. To that end, Back Products expressly waives any and
all claims and challenges, which they may now have or in the future possess, of
or to the reasonableness of this covenant not to compete.
5. RELEASE
5.1 Release by the Parties. In consideration of the foregoing
payments which have been agree to be made and the additional consideration
agreed to in this Agreement; both Back Products and FMI will forever release and
discharge the other, their successors, legal representatives, and assigns from
all debts, demands, actions, causes of action, charges, complaints, judgments,
suits, contracts, and obligations existing at the time of this agreement, or
arising hereafter, in connection with the Backstroke Back Massager and the
Contract dated March 10, 1997, but reserving any and all right to enforce the
provisions of this Agreement, including the right to seek and obtain injunctive
and other equitable relief, notwithstanding, and in addition to, any claim for
damages arising out of a parties breach of this Agreement, or any
misrepresentations or breach of any warranties set forth in this Agreement.
5.2 Representation and Assignment of Claims. In making and executing
this Agreement, each of the parties hereto represents and warrants as follows:
1. Back Products has received independent legal advise from its
legal counsel, Mark A. Hutson, concerning its respective rights
<PAGE>
and concerning the advisability of executing this Agreement.
2. FMI has received independent legal advice from its legal counsel,
David F. Aggers, concerning its respective rights and concerning
the advisability of executing this Agreement.
3. Neither party hereto has assigned, transferred or attempted to
assign or transfer any claim release herein.
5.3 Non-Disclosure. Except as may be required by law, neither Back
Products nor FMI nor their respective counsel shall disclose to any other person
any facts or information relating in any manner to the Suit or the existence of
and/or terms of this Agreement except that this matter has been settled.
5.4 Rectification. In case of any mistake in this Agreement,
including any error, ambiguity, illegality, contradiction or omission, this
Agreement shall be interpreted as if such mistake were rectified in a manner
which implements the intent of the parties as nearly as possible as effects
substantial fairness, considering all pertinent circumstances.
5.5 Entire Agreement. This Agreement constitutes the entire agreement
between these parties, and supersedes all prior written and oral agreements
between any of the parties hereto. There are no other agreements, whether
written or oral, expressed or implied between the parties except as have been
set forth herein. Any modification of this Agreement shall be void unless said
modification is evidenced in a writing signed by all of the parties hereto.
5.6 Construction. This Agreement shall be construed according to
the laws of the State of Ohio.
The undersigned have read the foregoing Release and Settlement
Agreement and fully understand it.
Signed, sealed and delivered this 12th day of January, 1999 by such
persons who are the duly authorized representatives of the parties to the Suit
and who by their signatures intend to bind all of the parties to the Suit.
WITNESSES: D.V. BACK PRODUCTS
/s/ Gail E. Constance By: /s/ David M. Vitko
- ---------------------- -------------------------
/s/Claudia J. Krill DAVID M. VITKO, President
- ----------------------
DAVID M. VITKO
/s/ Gail E. Constance By: /s/ David M. Vitko
- ----------------------- -------------------------
/s/Claudia J. Krill DAVID M. VITKO, Individually
- ----------------------
FLEX MARKETING, INC.
/s/Sharyn R. Staffrey By /s/ Ernest Zavoral
- ---------------------- -----------------------------
ERNEST ZAVORAL, President
<PAGE>
REMON P. HAYEK
/s/ Delua H. Castor By /s/Remon P. Hayek
- --------------------- -----------------------------
/s/ Lisa M. Avila REMON P. HAYEK, individually
- --------------------
ERNEST ZAVORAL
/s/Sharyn R. Staffrey By /s/ Ernest Zavoral
- ---------------------- -----------------------------
ERNEST ZAVORAL, Individually
THG CONSTRUCTION MANAGEMENT, INC.
//s/ Delua H. Castor By /s/Remon P. Hayek
- ----------------------- ------------------------------
/s/ Lisa M. Avila REMON P. HAYEK, President
- ---------------------
STATE OF OHIO )
)SS.
COUNTY OF COLUMBIANA)
BE IT REMEMBERED, That on the 12th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came David M.
VITKO, President of D.V. Back Products, Inc., who executed the foregoing
instrument and acknowledged the signing thereof to be his voluntary act, for the
uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto affixed by official signature
and affixed my Notary Seal, on the 12th day of January, 1999.
/s/ Cheryl A. Bruderly
------------------------
NOTARY PUBLIC
BE IT REMEMBERED, That on the 12th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came David M.
VITKO, individually, who executed the foregoing instrument and acknowledged the
signing thereof to be his voluntary act, for the uses and purposes therein
mentioned.
IN TESTIMONY WHEREOF, I have hereunto affixed by official signature
and affixed my Notary Seal, on the 12th day of January, 1999.
/s/ Cheryl A. Bruderly
------------------------
NOTARY PUBLIC
STATE OF OHIO )
)ss.
COUNTY OF MAHONING )
BE IT REMEMBERED, That on the 19th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came Flex
Marketing, Inc., by and through its President, Ernest Zavoral, who executed the
foregoing instrument and acknowledged the signing thereof to be his voluntary
<PAGE>
act, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto affixed by official signature
and affixed my Notary Seal, on the 19th day of January, 1999.
/s/Sharyn R. Staffrey
-------------------------
NOTARY PUBLIC
STATE OF OHIO )
)ss.
COUNTY OF MAHONING )
BE IT REMEMBERED, That on the 13th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came Remon P.
Hayek, who executed the foregoing instrument and acknowledged the signing
thereof to be his voluntary act, for the uses and purposes therein mentioned.
/s/ Louann Basista
----------------------
NOTARY PUBLIC
STATE OF OHIO )
)ss.
COUNTY OF MAHONING )
BE IT REMEMBERED, That on the 14th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came Ernest
Zavoral, who executed the foregoing instrument and acknowledged the signing
thereof to be his voluntary act, for the uses and purposes therein mentioned.
/s/Sharyn R. Staffrey
-------------------------
NOTARY PUBLIC
STATE OF OHIO )
)ss.
COUNTY OF MAHONING )
BE IT REMEMBERED, That on the 13th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came THG
Construction Management, Inc., by and through its president, Remon P. Hayek, who
executed the foregoing instrument and acknowledged the signing thereof to be his
voluntary act, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto affixed by official signature
and affixed my Notary Seal, on the 19th day of January, 1999.
/s/ Louann Basista
----------------------
NOTARY PUBLIC
<PAGE>
ADDITIONAL OBLIGATIONS TO VITKO - EXHIBIT "E"
1. David M. Vitko agrees to settle and dismiss that certain lawsuit filed by
Vitko and other against FLEX and other (Case No. 98-CV-349, in the Court of
Common Pleas for the County of Columbia, Ohio) for a total settlement amount of
$275,000.00 plus interest thereon at the rate of Percent ( %) per annum; such
sum shall be payable by FLEX in equal monthly installments in the amount of $
. foregoing consideration, David M. Vitko agrees to transfer, sell
and assign to FLEX ISSUER, or their designees, all right, title and interest in
and to Patent No. 5,352,188 (the "Patent") along with the first option to
purchase or license any and all patents of David M. Vitko relating to the
Backstroke, whether said products or patents are now in existence or are
developed in the future by David M. Vitko, subject to certain specified royalty
payments otherwise required herein.
2. Vitko agrees to transfer, sell and assign to FLEX, ISSUER, or its designee,
all the right, title and interest in and to the Patent, and further agrees to
execute any and all documents requested by FLEX or ISSUER to secure any and all
claims to ownership of the Patent at any time in the future FLEX or ISSUER may
so request.
3. FLEX shall pay royalties on the Patent in the total amount of two percent
(3%) to Vitko (the "Royalty"). If after 30 days of receipt of written
notification of failure to pay the Royalty, FLEX fails to pay the Royalty, all
right, title and interest in and to the Patent shall revert back to Vitko, Hayek
and Zavoral, as their interests may then be.
VITKO FLEX
/s/ David M. Vitko /s/ Ernest Zavoral
- -------------------- ----------------------
David M. Vitko Flex Marketing, inc.
By: Ernest Zavoral
Its President
D.V. BACK PRODUCTS, INC.
/s/ David M. Vitko
- -------------------
By: David M. Vitko
ITS: President
EXHIBIT A
EXHIBIT 10.28
MODIFICATION OF VARIABLE RATE
COMMERCIAL REVOLVING OR DRAW NOTE
WHEREAS, heretofore and under date of May 30, 1997, Flex Marketing, Inc.
(hereinafter called "Borrower"), made, executed and delivered to THE CORTLAND
SAVINGS & BANKING COMPANY, (hereinafter "Bank") a Variable Rate Commercial
Revolving or Draw Note (hereinafter "Note"), in the original principal amount of
$150,000.00.
WHEREAS, it is mutually desirable, beneficial and agreeable to the parties
hereto that the terms of the note be modified as hereinafter set out;
NOW THEREFORE, in consideration of the mutual benefits inuring to each
other, it is understood and agreed, by and between the parties hereto, that the
terms and conditions of the Note, are hereby modified as follows:
the Bank and the Borrower do hereby acknowledge that the loan number for
Note #613001001 has been changed to #113010297. The Borrower does also
acknowledg3e that the Bank will mark Note #613001001 as paid in full on the
Bank's accounting records, and to transfer all amounts now owing on Note
#613001001 to Note #113010297.
MATURITY DATE: The maturity date on this Note shall be November 1, 1998.
REPAYMENT: In 2 equal installments of principal and interest, each in the
amount of $1,659.14 beginning September 1, 1998, and continuing on the same day
of each successive month thereafter, with a final payment of all unpaid
principal and accrued interest on November 1, 1998 said payments to include both
principal and interest at the above stated rate. The Bank reserves the right to
adjust the monthly principal and interest installment amount, from time to time,
in order to avoid negative amortization.
It is further understood and agreed that all other terms, conditions and
covenants of the Note, not otherwise modified hereby, shall be and remain the
same, and that this Agreement, when executed by the parties hereto, shall be
attached to and become a part of the original Note.
IN WITNESS WHEREOF, this Agreement is executed by the undersigned parties
as of the 28 day of July, 1998.
Flex Marketing, Inc.
/s/ Ernest Zavoral /s/ Remon Hayek
-------------------------- -------------------------
Ernest Zavoral, President/Secretary Remon Hayek, CEO/Treasurer
ACCEPTED BY: THE CORTLAND SAVINGS & BANKING COMPANY
By: /s/ Mark J. Mediate
Mark J. Mediate
Assistant Vice President
The undersigned endorsers, guarantors and/or sureties on the above
described Note hereby join in and consent to the above Modification Agreement.
Dated this 28th day of July, 1998.
/s/Ernest Zavoral /s/ Kim Zavoral /s/ Remon Hayek
- ----------------- --------------- ------------------
Ernest Zavoral Kim Zavoral Remon Hayek
<PAGE>
LOAN AGREEMENT
MAY 30, 1997
BORROWER: FLEX MARKETING, INC.
BORROWER ADDRESS: 2955 CANFIELD ROAD
YOUNGSTOWN, OH 44511
BANK: The Cortland Savings and Banking Company
BANK ADDRESS: 194 W.Main Street, P.O.Box 98, Cortland, Ohio 44410
Bank has this date agreed to extend credit to Borrower, subject to the following
terms and conditions:
FACILITY DATE: MAY 30, 1997
FACILITY: VARIABLE RATE COMMERCIAL REVOLVING OR DRAW NOTE
('NOTE'), THE TERMS AND CONDITIONS OF WHICH, AS
AMENDED FORM TIME TO TIME, ARE INCORPORATED
HEREIN BY REFERENCE.
INTEREST RATE: (If not stated in the Note)
FEES: $750.00 LOAN FEE PLUS ALL OUT OF POCKET EXPENSES
REPAYMENT: (If not stated in the Note)
SPECIAL CONDITIONS OF LENDING:
PURPOSE: TO FUND NEW PRODUCT DEVELOPMENT
BORROWER FINANCIAL STATEMENT DATE: APRIL 17, 1997
REPRESENTATIONS AND WARRANTIES
Collateral Ownership and Warranties. The Borrower warrants that the Collateral
is owned free and clear of all liens and encumbrances except as disclosed to the
Bank and set forth on Schedule A which is attached to this Agreement. The
Borrower will execute and deliver any and all mortgages, security agreements,
financing statements or like documents which the Bank, in its sole judgment and
from time to time, may deem necessary or useful in order to perfect its security
interest in the Collateral.
No Defaults. The Borrower further warrants that there exists no condition of
default with respect to any loan, agreement or other obligation which the
Borrower may have with any other person or lender, and that all federal, state
and local tax returns have been filed and all taxes have been paid, as required.
Use of Proceeds. The Borrower agrees to use the proceeds of this loan only for
purposes indicated above.
Financial Statements. In making this commitment, the Bank has relied on
financial statements dated as shown above, prepared by or on behalf of, the
borrower. The Borrower warrants that the financial conditions and supporting
schedules are true and correct and that the conditions reflected by them have
not materially changed between that date and the date of this Agreement.
<PAGE>
AFFIRMATIVE COVENANTS
Until such time as all indebtedness under this Agreement or the Note(s) has been
repaid to the bank, the Borrower will:
1. Provide such statements and other supporting information concerning the
Borrower's financial condition as the Bank may periodically request;
including but not limited to (only the items checked apply):
xx CPA Compiled Financial Statements to be provided within 60 DAYS OF
COMPLETION
___ CPA Reviewed Financial Statements to be provided within __________
___ Personal Tax Returns to be provided annually within thirty
(30) days of completion.
xx Corporate Tax Returns to be provided annually within thirty (30)
days of completion.
___ Updated Personal Financial Statements within ______________
2. Pay all federal, state, and local taxes, license fees or similar charges as
such become due;
3. Maintain the Collateral in good order and condition.
4. Allow the Bank to inspect the borrower's premises, books, records and
property to verify furnished statements and the condition of Borrower's
physical assets;
5. Pay, when due, all accounts payable;
6. Maintain compensating balances satisfactory to the Bank; and
Guarantor(s) will annually provide the Bank with (only the items check apply):
xx CPA Compiled Financial Statements to be provided within 60 DAYS OF
COMPLETION
___ CPA Reviewed Financial Statements to be provided within _________
xx Personal Tax Returns to be provided annually within thirty (30)
days of completion.
xx Corporate Tax Returns to be provided annually within thirty (30)
days of completion.
xx Updated Personal Financial Statements within 60 DAYS OF
FISCAL YEAR END
Additional Affirmative Covenants:
NONE.
NEGATIVE COVENANTS
Borrower further agrees that, as long as any indebtedness under this Agreement
or the Note(s) is
<PAGE>
outstanding, the Borrower will not, without the Bank's prior written consent:
1. Except normal trade accounts or for reasonable personal, family and
household purposes, incur any indebtedness or lease obligation other than
as contemplated by this Agreement;
2. Guaranty, or otherwise become liable with respect to the obligations of any
other person, firm or corporation or increase liability on any existing
guaranty or obligations;
3. Sell or transfer, except in the ordinary course of business, all or any
substantial part of the Borrower's property;
4. Alter or expand by consolidation, merger, acquisition or otherwise, the
nature or scope of the Borrower's business, or increase the number of
locations at which such business is conducted;
5. Additional Negative Covenants: NONE.
OTHER ITEMS
Prepayment. The Borrower or any Guarantor shall have the right to prepay,
without penalty, all or any part of an outstanding indebtedness, provided only
that interest to the date of prepayment shall be paid prior to any reduction of
principal.
Mutual Acknowledgment. By signing below, the Bank and the Borrower acknowledge
as of the date of this Agreement:
(A) Familiarity with the terms of this Agreement;
(B) Willingness to be bound by the provisions of this Agreement;
(C) From time to time, there may exist other documents or agreements between
the parties relating to this loan transaction, the terms and conditions of
which, unless expressly inconsistent herewith, shall be binding on the
parties hereto and shall be construed with this Agreement;
(D) That, except with respect to legal unenforceability, no amendment,
modification, or subsequent agreement will be effective to vary the terms
of this Agreement, unless it makes specific reference to this Agreement and
is in writing and signed by both the Bank and Borrower;
(E) That, if the facility described above is secured by real estate, the Bank
is under no obligation to distribute any funds from the note until such
time as Bank has received an appraisal acceptable to Bank in its sole
discretion.
(F) Receipt of a copy of the Agreement.
RENEWAL OPTION. THE BANK IS UNDER NO OBLIGATION TO RENEW OR EXTEND THIS
AGREEMENT OR THE NOTE(S) OR TO PROVIDE OTHER FINANCING. THE BANK'S DECISION WITH
RESPECT TO ANY SUCH RENEWALS OR EXTENSIONS OR ADDITIONAL FINANCING WILL BE A
SEPARATE, INDEPENDENT DECISION AND MAY INVOLVE FACTORS OTHER THAN, OR IN
ADDITION TO, THE BORROWER'S CREDIT WORTHINESS OR PRIOR RELATIONSHIP WITH THE
BANK.
RELEASE OF BANK: BORROWER AND ANY GUARANTORS EXECUTING THIS
<PAGE>
AGREEMENT ACKNOWLEDGE AND STIPULATE THAT IN CONSIDERATION OF BANK'S AGREEMENT TO
EXTEND THE ABOVE REFERENCED LOAN AGREEMENT THAT THE EXECUTION OF THIS AGREEMENT
REPRESENTS A COMPLETE RELEASE OF ALL CLAIMS, ASSERTED OR UNASSERTED, KNOWN OR
UNKNOWN, CONTINGENT OR EXISTING AS BORROWER AND/OR ANY SUCH GUARANTORS MAY HAVE
AGAINST BANK, ITS OFFICERS, EMPLOYEES AND AGENTS, ARISING OUT OF THE CONDUCT AND
RELATIONSHIP OF THE PARTIES AND THE DOCUMENTS GIVEN IN CONNECTION THEREWITH FROM
THE INCEPTION OF THE RELATIONSHIP BETWEEN BANK AND BORROWER THROUGH THE DATE OF
THIS AGREEMENT.
AGREEMENT DATE:
BANK: BORROWER:
The Cortland Savings and Banking Company FLEX MARKETING, INC.
By:/s/ Mark Mediate By:/s/ Earnest Zavoral
- ---------------------- ------------------------
MARK MEDIATE ERNEST ZAVORAL
Its: ASSISTANT VICE PRESIDENT Its: PRESIDENT/SECRETARY
PARTNERSHIP/CORPORATE GUARANTOR(S):
By:/s/ Remon Hayek
---------------------
REMON HAYEK
THG CONSTRUCTION MANAGEMENT, INC. Its: CEO/TREASURER
By:/s/ Remon Hayek By:______________________
- -----------------------
REMON HAYEK
Its: PRESIDENT Its:______________________
INDIVIDUAL BORROWERS/GUARANTORS
/s/ Earnest Zavoral
- ---------------------
ERNEST ZAVORAL
GUARANTOR
/s/ Kim Zavoral
- --------------------
KIM ZAVORAL
GUARANTOR
/s/ Remon Hayek
- --------------------
REMON HAYEK
GUARANTOR
<PAGE>
MODIFICATION OF VARIABLE RATE
COMMERCIAL REVOLVING OR DRAW NOTE
WHEREAS, heretofore and under date of May 30, 1997, Flex Marketing, Inc.
(hereinafter called "Borrower"), made, executed and delivered to THE CORTLAND
SAVINGS & BANKING COMPANY, (hereinafter "Bank") a Variable Rate Commercial
Revolving or Draw Note (hereinafter "Note"), in the original principal amount of
$150,000.00.
WHEREAS, it is mutually desirable, beneficial and agreeable to the parties
hereto that the terms of the note be modified as hereinafter set out;
NOW THEREFORE, in consideration of the mutual benefits inuring to each
other, it is understood and agreed, by and between the parties hereto, that the
terms and conditions of the Note, are hereby modified as follows:
the Bank and the Borrower do hereby acknowledge that the loan number for
Note #613001001 has been changed to #113010297. The Borrower does also
acknowledg3e that the Bank will mark Note #613001001 as paid in full on the
Bank's accounting records, and to transfer all amounts now owing on Note
#613001001 to Note #113010297.
MATURITY DATE: The maturity date on this Note shall be September 1, 1999.
REPAYMENT: In 3 equal installments of principal and interest, each in the
amount of $ 2,462.72 beginning June 1, 1999, and continuing on the same day of
each successive month thereafter, with a final payment of all unpaid principal
and accrued interest on September 1, 1998 said payments to include both
principal and interest at the above stated rate. The Bank reserves the right to
adjust the monthly principal and interest installment amount, from time to time,
in order to avoid negative amortization.
It is further understood and agreed that all other terms, conditions and
covenants of the Note, not otherwise modified hereby, shall be and remain the
same, and that this Agreement, when executed by the parties hereto, shall be
attached to and become a part of the original Note.
IN WITNESS WHEREOF, this Agreement is executed by the undersigned
parties as of the 1 day of June, 1999.
Flex Marketing, Inc.
/s/ Ernest Zavoral /s/ Remon Hayek
-------------------------- -------------------------
Ernest Zavoral, President/Secretary Remon Hayek, CEO/Treasurer
ACCEPTED BY: THE CORTLAND SAVINGS & BANKING COMPANY
By: /s/ Mark J. Mediate
Mark J. Mediate
Assistant Vice President
The undersigned endorsers, guarantors and/or sureties on the above
described Note hereby join in and consent to the above Modification Agreement.
Dated this 1st day of June, 1999.
/s/Ernest Zavoral /s/ Kim Zavoral /s/ Remon Hayek
- ----------------- --------------- ------------------
Ernest Zavoral Kim Zavoral Remon Hayek
<PAGE>
NATIONAL BOSTON MEDICAL, INC.
P.O.BOX 1161 * 43 TAUTON GREEN, SUITE 5 * TAUTON, MASSACHUSETTS 02780
Fax (509) 880-5208 * Toll Free (800) 807-2259 * E-mail: NBMEDICAL.COM
LETTER
OF
GUARANTEE
IT IS HEREBY UNDERSTOOD THAT NATIONAL BOSTON MEDICAL, INC. WILL HEREBY
STAND BEHIND THE PROMISORY NOTE BETWEEN FLEX MARKETING INC. AND THE
COURTLAND SAVINGS & BANKING COMPANY. THE MATURITY DATE ON THE
PROMISSORY NOTE FROM THE CORTLAND SAVINGS & BANKING COMPANY IS NOTED
ON THE ORIGINAL NOTE IS SEPTEMBER 1, 1999.
DATED THIS 14TH DAY OF JUNE 15, 1999.
/s/ Daniel J. Hoyng
- ---------------------
DANIEL J. HOYNG
CEO/PRESIDENT
NATIONAL BOSTON MEDICAL, INC.
EXHIBIT 10.29
PRODUCTION AGREEMENT
This agreement is made September 22, 1998 by and between Flex Marketing, an Ohio
corporation located at 2955 Canfield Road, Youngstown, OH 44511, and Banyan
Productions, a Pennsylvania corporation located at 225 Arch Street,
Philadelphia, PA 19106.
Banyan will produce an infomercial for the product currently known as the
Backstroke Back Massager (The Product) for National Boston Medical, Inc. Banyan
will deliver a finished master of approximately 28:30 in length to National
Boston Medical, Inc. of the infomercial on broadcast digital videotape, Superred
and superless split audio. As discussed, National Boston Medical, Inc. will be
responsible for any tags and customization (blue screens $ 800 #'s). Banyan
agrees to completely produce the infomercial for $49,940. For this fee Banyan
will also help to write all telemarketing scripts for said product. Banyan is
not responsible for payment of fees, expenses or royalties to any major talent
use in connection with the infomercial. Banyan is also not responsible for any
legal fees associated with said infomercial. All legal fees shall be paid by
Flex Marketing.
Payment by Flex Marketing/National Boston Medical, Inc. to Banyan Productions
shall be as follows:
a. 30% of the budget upon signing of this agreement (Receipt of which is
acknowledged by Banyan on 9/21/98)
b. 30% upon the start of principal photography
c. 30% upon delivery of the first rough cut.
d. 10% upon delivery of the final show.
Additionally, Banyan will receive 3% percent of Adjusted Gross Revenues on all
sales of the product with no exclusions. The royalty will be on the sales price
($59.95) minus Cost of goods (approx.
$12.50.) (AGR definition attached).
Royalties shall be paid monthly, within 30 days following the end of each
calendar month. Payment shall be accompanied by an accounting of sales and
shipments. Banyan Productions shall have the right to review telemarketing and
fulfillment company sales reports twice per year.
The term of this contract is for 5 years from the date of signing.
Banyan shall not be entitled to receive any royalty resulting from the sale of
the Product through the airing of any infomercial, or any commercial produced
from material contained in the infomercial, beyond that date which is six (6)
months subsequent to the Termination Date of this Production Agreement, as
herein above defined.
Flex Marketing agrees that it shall supply Banyan Productions with reasonable
reports that are industry standard, of all media time purchased for running of
the infomercial. These reports shall be supplied every 60 days.
If Flex Marketing shall transfer ownership of the infomercial or any material
contained therein, it will ensure that all obligations assumed under this
Agreement are passed along as well.
Non-Competition/Confidentiality
(a) Once production agreement(s) between Flex Marketing have been executed for
a particular product Banyan shall not perform services for, endorse,
promote, sell or otherwise distribute via any means any product(s) that are
<PAGE>
substantially similar and competitive in form or function to the product(s)
being marketed in any media for a term of 2 years.
(b) Banyan acknowledges and agrees to treat as confidential information any and
all information regarding the client, product, or its operations that is
disclosed to Banyan in conjunction with this Agreement, and any information
regarding the sale and promotion of the Product(s) by the client or any
third party. Banyan further acknowledges, and agrees that they shall not
disclose any such confidential information to any third party at any time
during the term of this agreement and thereafter and shall not use any such
confidential information for any purposes other than for purposes
contemplated by this Agreement. Notwithstanding anything herein to the
contrary, however, confidential information shall not be deemed to include
information which, (i) is public knowledge or becomes generally available
to the public other than as a result of disclosure by Banyan or its agents
and representatives; (ii) becomes available to Banyan on a non-confidential
basis, from a source (other than Banyan or its agents and representatives)
who is not bound by a confidentiality agreement with THE CLIENT or (iii) is
in the possession of Banyan or its agents and representatives prior to
disclosure by THE CLIENT, provided that the source was not bound by a
confidentiality agreement with THE CLIENT.
Indemnification
(a) Banyan hereby agrees to release, protect, defend, hold harmless and
indemnify THE CLIENT and its designee, affiliates and licensees, and each
of their respective employees, agents, officers and directors, and each of
them, from and against any and all claims, actions, suits, costs.
liability, damages and expenses (including, but not limited to, attorneys'
fees and court costs) arising out of or resulting from (i) the breach by
Banyan of any representation, warranty, covenant or agreement provided in
this Agreement.
(b) THE CLIENT hereby agrees to indemnify, protect, defend and hold harmless
Banyan from and against any and all claims, actions, suits, costs,
liability, damages and expenses (including, but not limited to, reasonable
attorneys' fees and court costs) arising out of or resulting from (i)
allegations of deceptive or misleading advertising or promotion associated
with the promotion of the Product(s) by THE CLIENT, (ii) any product
liability claims relating to the Product(s), and (iii) any other claims
relating to the Commercial(s) and/or the Product(s) other than those
relating to any breach by Banyan of any representation, warranty, covenant
or agreement provided in this Agreement.
(c) Flex Marketing shall furnish or cause to be furnished to Banyan information
regarding the Product's attributes and capabilities that are promoted in
the infomercial ("Product Information"). Flex Marketing will provide or
cause to be provided Product samples in a quantity that Flex Marketing
determines to be sufficient in order to aid in the production of the
Infomercial. It is specifically understood that, in writing the script and
producing the Infomercial, Banyan will rely on such Product Information
provided by Flex Marketing and will not be responsible for the
authenticity, accuracy or verification thereof or of any claims or
attributes to the extent that Producer has relied upon the Product
Information provided by Flex Marketing only.
Governing Law
This Agreement shall be construed according to the internal laws of the
Commonwealth of Pennsylvania without regard to conflict of law principles. Each
of THE CLIENT and Banyan hereby consents to the exclusive jurisdiction of the
state courts of the Commonwealth of Pennsylvania, Philadelphia County, and the
United States District Court for the Eastern District of Pennsylvania, in
<PAGE>
all matters arising out of this Agreement. Banyan hereby consents to service of
process by certified mail, return receipt requested, at the addresses indicated
below or such other address as Banyan may from time to time inform THE CLIENT.
Any notice, demand, election or communication required, permitted or desired to
be given hereunder shall be in writing and shall be personally delivered or
shall be sent by commercial courier service, certified mail (return receipt
requested), or electronic facsimile (but in the case of facsimile transmission,
also by commercial courier service). Notices, demands, elections or
communications shall be deemed received on the first to occur of the following:
(a) when personally delivered; (b) when actually received; or (c) when sent by
commercial courier service, to (2) business days following the deposit thereof
with such service. Notices, demands, elections or communications shall be
addressed as follows (or to any other address which the relevant party may
designate to the other parties by written notice):
If to THE CLIENT: Flex Marketing
P.O. Box 22
Canfield, OH 44406
Attn: Ernie Zavarol, President
Fax: 330-797-4069
If to Banyan: Banyan Productions
225 Arch Street
Philadelphia, PA 19106
Attn: Jan Dickler, CEO
Ph: 215-928-1414
Fax: 215-928-9944
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have executed this Agreement on the date first above written.
By: /s/ Ernest Zavarol, President By: /s/ Jan Dickler , CEO
- ------------------------------------ ---------------------------------
Name/Title Name/Title
Flex Marketing Banyan Productions
<PAGE>
Definitions
(a) Gross Revenues. "Gross Revenues" shall mean gross revenues from sales
of Product and any up sells of the Product, exclusive of shipping and
handling charges and sales taxes, use taxes, value added taxes, and any
other taxes imposed upon sales.
(b) Adjusted Gross Revenues. "Adjusted Gross Revenues" or "AGR" shall mean
Gross Revenues from sales of the Product and any up sells of the Product,
less all of the following:
(i) refunds, credits or other allowances on account of return or rejection
of goods or otherwise granted in the ordinary course of business, as
actually incurred and as reserved for ("Returns").
(ii) uncollectible accounts due to credit card charge backs, bad checks or
other reasons of uncollectibility, as actually incurred and as reserved for
("Uncollectibles"); and
(iii) sales made at or below cost of goods for purposes of liquidation or
closeout ("Liquidation Sales").
EXHIBIT 10.30
AFTERMARKET - FLEX MARKETING INBOUND TELEMARKETING
AGREEMENT
THIS Agreement ("Agreement") is made as of Wednesday, December 23, 1998, by and
between the AFTERMARKET COMPANY, a California LLC ("AMC"), with offices at 4141
E. Raymond Street, Suite 1, Phoenix, AZ 85040 and FLEX MARKETING, A DIVISION OF
BOSTON MEDICAL ("Client"), located at 43 Tauton Green, Suite #5, Tauton, MA
02780, for the development, administration, and implementation of Direct
Response Projects related to ("Clients") products and services.
1. Services - AMC will provide inbound telesales services for Client. AMC
shall use its best efforts to provide agreed upon services. The Client will
assist and cooperate to the best of its ability with AMC to provide such
services. If Client's products, programs, materials, goods and property
become objectionable (e.g. prohibited by law or sexually explicit) as
determined within AMC's sole discretion, AMC may immediately terminate
their obligations under this Agreement without liability.
2. Confidentiality - All parties recognize and agree the names and addresses
of the consumers responding to project(s) are confidential. Additional
information concerning Client and Clients products which (a) if tangible
form, is marked as confidential or private when disclosed, or (b) if
intangible, is identified as confidential or private upon disclosure, or
(c) concerns marketing strategies, formulas, business plans, print
material, research, etc. and other similar information shall also be
considered confidential. All confidential information may not be disclosed
or used for any purpose whatsoever except to perform under this Agreement.
This paragraph does not apply to information known or which has become
public through no fault of AMC including information AMC already had in its
possession prior to the date of the agreement or obtains from a third party
on a non-confidential basis; nor any information of Clients that is
required by law to be disclosed.
3. Telesales Scripting - Client acknowledges and agrees that AMC provides
direction on unique direct response marketing strategies that may be
employed by the Client. This is especially true regarding the creation of
the Inbound Telesales Script and product Fact Sheets, which are designed by
AMC for their exclusive use in answering inbound calls on Client's direct
response marketing campaigns. These Inbound Telesales Scripts and Fact
Sheets are the property of AMC and AMC retains the copyrights to such
Inbound Telesales Scripts and Fact Sheets that cannot be used by the client
outside AMC.
4. No Hire - Should Client, or any successor in interest to Client or any
company, person or entity under control of Client, employ any AMC
professional(s) in any capacity, including subcontractor status, during the
term of this Agreement for a period of thirty-six (36) months thereafter,
then Client agrees to pay AMC a finder's fee for each such AMC professional
so employed by Client or such other party, in the amount of the greater:
(I) ten thousand dollars ($10,000) or (II) forty percent (40%) of one
standard work year (i.e. 2080 hours) including any increases thereof.
"AMC professional" shall mean any person, other than a person who's job
title is Receptionist or Secretary, who is: (I) AMC employee at any time
during the term of this Agreement or (II) employed by AMC as a
sub-contractor and who is assigned by AMC to perform Services for Client
under this Agreement.
<PAGE>
5. Coverage Retrieval - Where AMC provides Client telephone coverage (via long
distance telephone numbers with an "800 or 888" prefix) in the United
States and Canada, the Client will direct the public to call certain "800
or 888" numbers assigned to Client by AMC. These numbers shall be used only
during the duration of the term of the Agreement and will remain the
exclusive property of AMC. Upon termination of this Agreement or if the
agreed upon monthly service as provided in the pricing agreement annexed
hereto minimum is not received during a thirty (30) days period, AMC may
retrieve these numbers. Client will not be authorized to use these
telephone numbers after retrieval. AMC may direct telesales consultants to
inform callers on a particular telephone number that AMC is not taking
calls for such program, service or product. Client shall pay AMC a per
second charge for AMC operators handling such calls, a charge for
informational announcement time and commission per sale as defined in the
pricing agreement annexed hereto. AMC will not be liable to Client or any
other person for direct or indirect claim, loss, injury, damage or cost
sustained in connection with the retrieval of any numbers.
6. Credit Requirements and Payment - AMC may establish, change and/or restrict
a credit ceiling on the account of Client, based on the credit and payment
history of Client and may require a security deposit by the Client as a
condition of service. If service volume causes the amount owed by the
Client to exceed it's credit ceiling, AMC may require payment of an
additional deposit. The deposit(s) is a security deposit against payment of
invoices, and not in lieu of the payment. If there remains unencumbered
funds following completion of all projects and Client's payment of all
outstanding invoices, whichever is later, AMC will refund the balance
within 30 days of the later event. AMC will provide weekly invoices for
services. Client shall pay the entire amount of invoices within 14 days
from invoice date. Any amount unpaid will be subject to a 1.5% late fee
assessed to all account(s) with balance older than net 14 days. Payment is
not dependent upon Client collection from customers. It is the
responsibility of Client to charge customers credit cards.
AMC may delay the transmission of order data until Client's accounts are
brought current. Client shall pay all postage and/or carrier fees incurred
by AMC on behalf of or for the benefit of the Client. Any charges incurred
with respect to Fulfillment services provided by AMC to Client shall be
paid in advance by Client. If Client fails to pay any monies due under this
Agreement, AMC will place account of Client on hold, retrieve all 800
numbers, and retain possession of all products, customer files and data
under this Agreement. If Client account is on hold, Client will be subject
to a "hold" charge equal to the greater of Two Hundred Fifty Dollars
$250.00) or Five Percent (5.0%) of Client's then outstanding balance of its
accounts, in addition to the interest, transmission, restoral and other
charges provided herein.
7. Project Pricing - AMC will provide Client, on a per project basis, the
specific charges and fees for services to be provided as defined in the
pricing agreement annexed hereto. Client will pay AMC any advance payment
on a per project basis.
8. Data Order - AMC agrees to transmit all orders to Client in the format
required by Client. This format shall be mutually agreed upon prior to
beginning of a program and will require Client approval before program
begins. AMC will not be responsible or liable for any costs relating to any
checking or credit card accounts, or any related fees and taxes.
9. Duration and Termination - Both parties agree that each reserves the tight
to terminate this Agreement by providing fourteen days (14) written notice
of its intent to terminate.
10. Parties Authority and Compliance - This Agreement and any Addenda made part
hereof, do not create a joint venture. The parties agree that AMC shall
solely be acting as Client's agent when performing obligations under this
<PAGE>
Agreement. AMC and Client shall comply with all federal and state laws and
regulations governing telemarketing activities including, without
limitation, the Telemarketing and Consumer Fraud and Abuse Prevent Act of
1993 and all regulations promulgated thereunder, and the parties agree to
provide each other upon written request with written evidence of
compliance.
11. Inability to Perform - The obligations of AMC and Client will be suspended
if hindered or prevented because of labor disturbance, including strikes
and lockouts; failure of a carrier to provide lines of services; failure of
supplier to deliver necessary supplies; and, shipping problems, Government
regulations or interference; accidents, fires, explosions or any similar or
dissimilar cause beyond the reasonable control of such party; and,
telecommunications or other equipment or software failure or similar
problem. Adequate back up and contingent plans will be made to reroute
projects to overflow telemarketing companies in order to minimize the
possibility of Client losses and to maintain the project for the Client in
the event of such emergencies. Client will arrange for such overflow
telemarketing companies, where Client elects to provide overflow facilities
and disaster recovery in the event AMC is unable to perform. This
contingency overflow and disaster recovery will be arranged at the sole
expense of the Client. Additionally, Alternative Destination Routing
features requested by Client will be implemented and billed to Client at
AMC cost. If a party's obligations are suspended pursuant to this section,
AMC will not be liable to the Client or any other person or entity for any
claims or causes of action in any way arising out of or related to such
suspension.
12. Limitation of Liability - AMC will not be liable to Client for any lost
profits, any lost business, or any indirect, consequential, incidental or
special losses or damages arising under this Agreement or any Addenda
thereto. Any and all actions or claims brought against AMC or successor for
breach of Agreement must be commenced within six (6) months after such
cause of claims has accrued or be forever barred.
13. Indemnification - The Client agrees to indemnify, defend and hold harmless
AMC and it's respective directors, officers, employees and agents from and
against all liabilities and expenses whatsoever, including without
limitation, claims, damages, judgments, awards settlements, investigations,
cost and reasonable attorney fees, which may incur or become obligated to
pay arising out of resulting from or relating to any products or services
of Client marketed by AMC on Client's behalf under the terms of this
Agreement, or breach by Client of any of its representations, obligations,
agreements or duties under this Agreement.
AMC will promptly notify Client of any claims threatened or asserted
against it. AMC shall have the right to satisfy and discharge the same by
suit or settlement or otherwise. The amount of any claim determined to be
due by way of suit, settlement, or otherwise shall immediately become due
and payable by Client to AMC upon demand. AMC shall indemnify, defend and
hold harmless Client, its affiliated companies and respective directors
officers, employees and agents from all claims which any of them may insure
resulting from breach by AMC of any representation or obligation.
Under this Agreement the Client will promptly notify AMC of all claims
threatened or asserted by any party. AMC reserves the right, at its own
expense, to contest such claims. If AMC is actively contesting a claim, the
Client shall not settle with claimant without AMC's written consent.
14. Attorney Fees - In the event of legal action or other proceedings brought
because of an alleged dispute, breach, default or misrepresentation in
connection with this Agreement, the prevailing party shall be entitled to
recover reasonable attorney's fees, expenses and costs incurred in
<PAGE>
addition to any other relief to which they may be entitled.
15. Entire Agreement - this Agreement constitutes the entire understanding
between AMC and Client and supersedes all negotiations, representations,
prior discussions and preliminary agreements between the parties relating
to the subject matter hereof. Any modification or Addenda must be in
writing and signed by both parties.
16. Controlling Law - The validity, interpretation, and performance of this
Agreement, will be controlled and construed under the laws of the County of
Riverside, State of California, in the United States of America.
17. Further Action - AMC and Client shall execute and deliver all documents,
provide all information and take or forebear from all such action as may be
necessary or appropriate to achieve the purposes of this Agreement.
18. Severability - In the event that any provision contained herein is held to
be invalid, illegal or unenforceable by any court, such provision will be
deemed severable from the remainder of this Agreement, and shall not affect
the remaining provisions.
19. Presumptions - AMC and Client jointly prepared this Agreement so may
interpretation herein shall not be strictly construed against either party.
20. Waiver - The failure of either AMC or Client to take affirmative action,
with respect to any conduct of the other which is in violations of this
Agreement, shall not be construed as a waiver of the violation or breach,
nor shall it be construed or deemed to be a waiver of any rights of the
parties.
21. Publicity - Any publicity concerning the relationship established by this
Agreement shall be release only upon mutual consent of both AMC and Client.
AMC and Client agree that AMC and/or any of its authorized representatives
may use Client's name as a reference or as a part of AMC's Client list, in
any written or oral proposal which AMC may make to prospective Clients, and
that such use of this information shall not constitute a disclosure of
confidential information.
22. Authorization - Client represents and warrants that it is duly organized
and in good standing and is authorized to enter into this Agreement. The
person executing this Agreement on behalf of the Client is authorized to
execute and deliver the same on behalf of the Client and to bind Client.
AfterMarket: Flex Marketing:
By: /s/ John Stones By: /s/Ernie Zavarol
- ----------------------- -----------------------
John Stones Ernie Zavarol
Executive Vice President
1-12-99
Date Date
<PAGE>
<TABLE>
<CAPTION>
Pricing Agreement
<S> <C>
ADMINISTRATIVE/CLIENT SERVICE FEES: $2,000.00
Program Set-Up Costs N/C
Account Management Costs N/C
Clerical Costs $5,000.00-to be waived
Security Deposit/Monthly Service Minimum as per agreement by
(Monthly Service Minimum will be waived during phone /s/EZ
the first three (3) months following program set-up)
TELEMARKETING:
Proposed Environment - Semi-Dedicated N/C
800 Number Fees/Transfer Fee N/C
Commission on Order 3% or $3.00, whichever
is the greater with $1.00
commission/TSC incentive for
each continuity sale made
Talktime Charges $0.02 per second
Informational Announcement Time $0.004 per second
TRAINING:
Agent Training - With Program Start-Up Training N/C
Specialized Training
- - After Original Training Is Completed $15.00 per Consultant, per hour
REPORTING/DATA TRANSMISSION:
Reports Visa Magnetic Format/Hard Copy N/C
Fulfillment Transfers N/C
Standardized Reports
AMC Client Memo N/C
Media Report N/C
Aspect Report N/C
Customized Reporting (dependent on volume) $100.00 per hour programming
Media Electronically transmitted to AMC N/C
Data Entry of media Information - minimum of $5.00 per
schedule 0.15 per station record
</TABLE>
AfterMarket: Flex Marketing:
By: /s/ John Stones By: /s/Ernie Zavarol
- ---------------------------- ----------------------
John Stones Ernie Zavarol
Executive Vice President
1-12-99
Date Date
<PAGE>
INBOUND TELESALES PROGRAM OUTLINE
Product Backstroke Back Massager Projected Start Date: December 10th @ 10pm
Client: Flex Marketing Overflow Telemarketer:
Contact Name: Ernie Zavoral Contact Name:
Address: Address:
City, State, Zip: City, State, Zip:
Phone: 330/793-4070 Fax: 330/797-4069 Phone: Fax:
[x] Please check if billing address is the same
Customer Service: 1-877-628-5267
Offer: Combines massage, pressure point therapy & spinal mobility in one
easy to use machine. It uses 28 massage elements that target the
muscles in the back & neck at the same time. It is compact and
portable for easy storage. Includes step by step instructional video
and guide to personal back care.
Upsell 1: 2 free airline tickets, for trying a risk free 30 day membership to
30 day membership to connections
Upsell 2: Arnold Palmer's Revolutionary "perform cool pain relieving roll and
gel"
Upsell 3: 2 week supply of Back Relief Plus, a Natural supplement (continuity @
$19.95 Month
- ----------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Price:$59.90 S/H: $14.95 1@ 2@ $29.95 payments Tax: OH 5.5% (states)
$59.95 FL
Upsell 1: $6.00 per month S/H: 1@ payments Tax:
$72.00
Upsell 1: $5.95 S/H: $2.95 1@ $5.95 payments Tax: OH 5.5% (states)
FL
Upsell 1: $39.90 S/H: $3.95 2@ $19.95 payments Tax:
per month
</TABLE>
Guarantee 30 days Refund: XProduct Cost __S&H Out __S&H Return
Do Not Ship To:___________ S/H for Foreign Country:______________
Payment Methods:
[x]Check Debit [x]Visa [x]MasterCard [x]AMEX [x]Discover [ ]_______
<PAGE>
<TABLE>
<S> <C> <C>
Distribution of Client Media Companies: Fulfillment/Order Data To:
memo: FAX DAILY DOWNLOAD DAILY
Name: Steve Netzley
Name: Ernie Zavoral Company: MCM /s/ ASW
----------------------- ---------------- ---------------------------
Fax: 330/797-4069 Address: ____________ ---------------------------
--------------------- ---------------------------
Name: Phone: 760/929-0041 ___________________________
Fax: ________________ Fax: __________ City, State, Zip
Name: ________________ Please Include Additional Phone______________________
Fax: ________________ Media On Separate Sheet Fax________________________
</TABLE>
Calls Generated:
[x]Informercial [ ]Spot [ ]Print [ ]Mail [ ]Literature [ ]Sample [ ]______
Customized greeting and/or announcement: [x]Yes [ ]No [ ]Other:___________
Shipment Method: _______________________________________________________
Notes: _____________________________________________________________
Circ: IS, Scripting, Accounting, Client, file
PROGRAM OUTUNEDOC 12/4/9
EXHIBIT 10.31
DEAL TERMS
MEDIA FUNDING AND SERVICING FEE AGREEMENT
This Media Funding and Servicing Fee Agreement (the "Agreement") is
entered into by and between Media Funding Corporation ("Corporation") and
NATIONAL BOSTON MEDICAL, INC.
("Client") as of JANUARY 18th, 1999.
1. DEFINITIONS: As used herein, the following terms have the following
respective meaning:
(a) "Credit Card Processing Company" shall mean 1st USA PAYMENTECH;
(b) "Fulfillment Company" shall mean the fulfillment company selected
by Client to ship and process all orders for Produce which initially shall be
ASW LOGISTICS;
(c) "Gross Media Billings" shall mean all media costs charged by any
broadcast or cable entity to advertisers, including the media agency feel;
(d) "Gross Revenues" shall mean all monies collected or processed
from any source in connection with the sale of Products from the exhibition of
the Show;
(e) "Inbound Telemarketing Service" shall mean AFTERMARKET AND CO.
which is the Client's selected Inbound telemarketing Service;
(f) "Media Agency" shall mean MAXIMUM COVERAGE MEDIA which is the
Client's selected Media Agency;
(g) "Media Funding Servicing Fee" shall mean five percent (5%) of the
Gross Media Billings paid to Corporation deducted from revenues produced by the
How,
(h) "Product" or "Products" shall mean any and all products featured
in the Show, manufactured for sale to end users or sold in connection with the
Show produced by Client covered by this Agreement. Any variation in the
manufacture of the Products in the Show sold under the same tradename or
trademark as the Products in the Show shall also be Products which are subject
to this Agreement.
(i) "Reserve Account" shall mean funds that Client agrees Corporation
may deduct and retain from Gross Revenues after payment for all media purchases
in an amount not to exceed two and one-half percent (2.5%) of Gross Revenues up
to a maximum retention of one (1) week's media purchases. The Reserve Account
shall be deposited into an interest bearing account at an FDIC insured bank. The
Reserve Account may be applied only as set forth in paragraph 5(c) of the
Standard Terms and Conditions;
(j) "Show" shall mean an original direct response television
commercial of whatever length produced by Client, describing and promoting any
of the Products for direct response advertising purposes, called "BACKSTROKE
MASSAGER";
(k) "Territory" shall mean the entire world; and
(l) "Test Results" shall mean all of the data available in connection
with Client's test marketing
<PAGE>
of the Show, which shall be provided to Corporation upon execution of this
Agreement or immediately upon completion of the test marketing if not available
upon execution of this Agreement. Currently Corporation considers Test Results
over a 1.7 to 1 MER to be satisfactory.
2. TERM. One (1) year from date (the "Initial Term"). Unless this Agreement is
sooner terminated, this Agreement shall automatically be extended for
consecutive one (1) year periods (each a "Renewal Term") commencing after the
end of the Initial Term. The Initial Term and any Renewal Terms shall be
collectively referred to as the "Term."
3. COMPENSATION.
(a) In consideration of Corporation's agreements hereunder,
Corporation shall receive the Media Funding Servicing Fee for media purchases
and for the purchase of all guaranteed run of scheduled media time; and
(b) Corporation shall receive no consideration in connection with any
monies paid to the media Agency for the purchase of pre-inquiry time.
4. CLIENT'S MATERIAL OBLIGATIONS
(a) CLIENT MAY NOT CHANGE ITS CREDIT CARD PROCESSING COMPANY or enter
into an agreement with any other credit card processing company without
Corporation's prior written approval for the Show.
(b) CLIENT MAY NOT CHANGE ITS FULFILLMENT COMPANY or enter into an
agreement with any other fulfillment company without Corporation's prior written
approval for the Show.
(c) CLIENT MAY NOT CHANGE ITS MEDIA AGENCY COMPANY or enter into an
agreement with any other media agency company without Corporation's prior
written approval for the Show.
(d) CLIENT MAY NOT CHANGE ITS INBOUND TELEMARKETING SERVICE
COMPANY or enter into an agreement with any other inbound telemarketing service
company without Corporation's prior written approval for the Show.
(e) A breach by Client of the provisions of this paragraph shall
constitute a material breach of this Agreement. In the event of any such
material breach, in addition to any and all other rights or remedies available
to Corporation whether at low or in equity, Corporation may do any of the
following: (i) seek injunctive relief to enjoin the irreparable injury to be
caused to Corporation in whatever form and whatever forum Corporation deemed
appropriate; (ii) deduct from the Reserve Account such amount as Corporation
deems appropriate to reimburse Corporation for any and all reasonable expenses
incurred as a result of Client's breach of this paragraph; and (iii) pursue such
other remedy or action as Corporation chooses.
5. STANDARD TERMS. Attached hereto and incorporated by reference
herein are the Standard Terms and Conditions which are made a part and parcel of
this Agreement
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
"Corporation"
MEDIA FUNDING CORPORATION
By: /s/ Peter Bieler
-------------------------------
PETER BIELER, President
"Client"
NATIONAL BOSTON MEDICAL, INC.
By: /s/ Daniel J. Hoyng
------------------------------
DAN HOYNG, President
<PAGE>
STANDARD TERMS AND CONDITIONS
1. MEDIA PURCHASES.
(a) Corporation and Client shall designate in writing a mutually acceptable
Media Agency which will provide its services to Client. Client shall be solely
responsible for all communications of any kind between Client and Media Agency
with respect to all maters relating to media purchases. Client shall arrange for
an ongoing open communication between Corporation and media Agency for the
purpose of Corporation discussing Client's media buying schedule.
(b) Client shall consult with Media Agency to develop a media schedule for
the total purchases to be made by media Agency on Client's behalf to be paid for
by Corporation and shall cause the media schedule to be submitted to Corporation
weekly in a timely fashion for written approval by Corporation. All media
purchases must be pre-approved by Corporation in writing. Client agrees that
during the Term of this Agreement, Client shall not arrange for the airing of
the Show with any other media agency or representative, without Corporation's
prior written consent.
(c) Client, at no cost to Corporation, shall cause to be delivered all
necessary copies of Client's Show to broadcast entities or Corporation's
designee, at least three (3) weeks prior to scheduled air date in whatever
format Media Agency advises Client is required. Corporation shall not be
responsible for the return of Show copies to Client.
(d) Client shall cause Media Agency to provide Corporation with standard
reports in a timely fashion.
(e) Corporation shall be responsible for all Corporation-approved media
advances and media commitments made on behalf of Client through the Media Agency
subject to the terms and conditions contained herein.
(f) Client agrees to execute a letter directing the Media Agency to comply
with the terms of this paragraph.
2. FULFILLMENT. Client shall cause the Fulfillment Company to furnish
Corporation with a weekly inventory report on inventory "ready shipment" at
fulfillment Company's shipping location. Client hereby grants Corporation the
right to verify inventory levels with Fulfillment Company. If Client fails to
maintain sufficient inventory, Corporation shall have the right but not the
obligation to cause to be manufactured sufficient inventory at Client's sole
cost and expense. In connection therewith, Client agrees to execute a letter
directing the Fulfillment Company to comply with the terms of this paragraph.
3. TELEMARKETING. Client shall cause the Inbound Telemarketing Company to
provide Corporation with all standard daily and weekly reports generated in a
timely fashion. Client agrees to pay Inbound Telemarketing Company charges in a
timely fashion. If Inbound Telemarketing Company disrupts service due to
non-payment, Corporation may elect to pay Inbound Telemarketing Company to
continue service, and deduct any monies so paid from Gross Revenues. Client
agrees to execute a letter directing the Inbound Telemarketing Company to comply
with the terms of this paragraph.
4. ROLL-OUT. Corporation shall not be required to fund the media roll-out
of the Show if Corporation determines that:
<PAGE>
(a) In Corporation's sole discretion, or upon advice of counsel, the risk
of airing the Show is unacceptable;
(b) Client, in Corporation's opinion, cannot manufacture or deliver
sufficient quantities of Product in relation to media time purchased;
(c) Client's relationships with its service vendors such as its inbound
telemarketer, Fulfillment Company and Product manufacturer are unacceptable to
Corporation;
(d) Client's right to sell the Product is in question;
(e) The Test Results are unsatisfactory; or
(f) Client is in material breach of this Agreement.
5. PAYMENT INSTRUCTIONS
(a) Client hereby authorizes the Credit Card Processing Company to withhold
from Client and pay directly to Corporation all of the following:
(i) all monies paid or owed by Corporation to any third party for
Gross Billings including Media Agency fees;
(ii) the Media Funding Servicing Fee;
(iii) any monies expended by Corporation to manufacture inventory of
the Product so as to insure sufficient inventory at Fulfillment Company;
(iv) the Reserve Account which shall be liquidated within one hundred
and twenty (120) days after the Term; and
(b) When Corporation funds media, it shall invoice Client and send a copy
of much invoice to the Credit Card Processing Company. The invoice will match
the face value of the check written to the Media Agency (including media agency
commission), plus the Media Funding Servicing Fee. The invoice is due and
payable by the Credit Card processing Company from Gross Revenues on the
Thursday of the broadcast week during which the media time is scheduled to run.
Client agrees to execute a letter directing the Credit Card Processing Company
tom comply with the terms of this paragraph.
(i) the invoice will not reflect any servicing charge by Corporation
for per- inquiry media; and
(ii) the amounts billed by the Media Agency for the purchase of
guaranteed run of schedule time will be billed and be payable in the week
following the week in which the time runs.
(c) Except as otherwise set forth in this Agreement, Client shall have not
obligation to Corporation for payment of any monies due Corporation as set forth
in paragraph 5(a)(i) through (iv) above, unless there is insufficient monies
collected by the Credit Card Processing Company as a result of either (i)
returns of the Product in excess of ten percent (10%) of sales; (ii) failure or
refusal of the Credit Card processing Company to pay Corporation; or
<PAGE>
(iii) failure of Client or Fulfillment Company to fill orders received, for any
reason. In such event, Corporation may apply any monies held in the Reserve
Account, and Client shall reimburse Corporation for any media costs paid for by
MFC and not yet recouped. In addition, MFC shall be entitled to recoup any and
all expenses including, but not limited to, attorneys' fees incurred as a result
of any failure by Client to promptly pay to MFC monies which become due as a
result of this paragraph.
6. WARRANTIES AND REPRESENTATIONS OF CLIENT. Client represents and warrants
to Corporation as follows:
(a) Client is a CORPORATION, duly organized, valid existing and in good
standing under the laws of the state of NEVADA. Client has full power to carry
on its business as it is now conducted, and to own and sell the Product under
state and federal law;
(b) The execution and delivery of this Agreement and the consummation that
transactions contemplated hereby do not conflict with, or result in a breach of,
or constitute a default under any agreement to which Client is currently a
party;
(c) Client has good and marketable title to the Product and the right to
sell the Product bearing any tradenames or trademarks contained thereon, free
and clear of all liens, leases, pledges, claims, charges, conditions or
encumbrances of any kind or nature, except for the security interest granted to
Corporation in this Agreement;
(d) There are no claims, lawsuits, actions or proceedings pending, or
threatened against Client which could adversely affect the Product or the rights
granted to Corporation hereunder or the transactions contemplated by this
Agreement;
(e) The Products are merchantable, suitable and fit for the use for which
each was intended. Client is not aware of any defects or potential harm to
users. Client is not aware of any claims which have been made in connection with
the safety of the Products. Client has complied with all federal, state or other
laws, rules and regulations in respect of the development, manufacture, testing
and packaging of the Product, including without limitation consumer protection
laws and rules and regulations of the food and drug administration or any other
agency having jurisdiction.
(f) Client has the full right and title to use and exploit the Show and
Client will not cause any claims or litigation with respect thereto, concerning
or purporting to adversely affect the show;
(g) No consent of any third party or any state or federal governmental
agency is required to be obtained by Client in order to consummate the
transaction contemplated by this Agreement or to enable Client to perform
Client's obligations hereunder;
(h) Client will be able to manufacture or cause to be manufactured an
adequate supply of the Products to be sold pursuant to the Show;
(i) All credit sales of the Products will be made through a single merchant
account with the authorized Credit Card Processing Company; and
(j) Client or its manufacturer has purchased and shall at Client's sole
cost and expense maintain during the Term product liability insurance with
<PAGE>
limits of not less than $1,000,000/3,000,000 covering Client and Client's agents
against product liability or defects. Siad insurance policy shall name
Corporation and each of Corporation's shareholders, officers and directors as an
additional insured and Corporation shall be provided with an appropriate
insurance certificate to that effect. Said insurance policy should also provide
that it may not be canceled without thirty (30) days prior written notice to
Corporation.
7. WARRANTIES AND REPRESENTATIONS OF CORPORATION. Corporation represents
and warrants to Client as follows:
(a) Corporation is a corporation, duly organized, valid existing and in
good standing under the laws of the state of California. Corporation has full
power to carry on its business as it is now conducted under state and federal
law.
(b) The execution and delivery of this Agreement and the consummation that
transactions contemplated hereby do not conflict with, or result in a breach of,
or constitute a default under any agreement to which Corporation is currently a
party;
(c) There are no claims, lawsuits, actions or proceedings pending, or
threatened against Corporation which could materially adversely affect the
transactions contemplated by this Agreement; and
(d) No consent of any third party or any state or federal governmental
agency is required to be obtained by Corporation in order to consummate the
transaction contemplated by this Agreement or to enable Corporation to perform
Corporation's obligations hereunder.
8. EXCLUSIVITY.
(a) Subject to all of the terms and conditions of this Agreement, Client
agrees that during the Term the Show will not be broadcast on television except
pursuant to the terms of this Agreement;
(b) During the Term of this Agreement, neither Client nor its principles or
affiliates, without the expressed written permission of Corporation, shall
engage any other media company, media buyer or television station or
participate, directly or indirectly in the airing of the Show with anyone other
than Corporation or its designated representative.
(c) This Agreement shall remain in effect if Client decides to alter or
substantially change the Show as long as the Product offered in the new show is
the same or substantially the same Product as offered in the Show.
9. EVENT OF DEFAULT. For purposes of this Agreement, "Event of Default"
means each of the following:
(a) Either party breaches any material term, covenant, agreement, warranty
or obligation set forth in this Agreement and the defaulting party fails to cure
such breach within five (5) days after being notified in writing of such breach;
(b) Client has changed or attempted to change any or all of Client's vendor
services without Corporation's prior written approval of the change, or
<PAGE>
Corporation's lack of approval of a proposed new vendor service;
(c) Any representation made by either party in this Agreement proves to
have been incorrect in any material respect at the time made, or any such
representation later becomes incorrect in any material way;
(d) This Agreement is terminated pursuant to subparagraphs (i), (ii), (iii)
of paragraph 11(a) or paragraph 11(b) below;
(e) Corporation no longer has a first priority perfected security interest
in any part of the Collateral;
(f) Client is adjudged bankrupt by any court of competent jurisdiction, or
Client files for bankruptcy protection or an involuntary bankruptcy proceeding
is brought against Client and such proceeding is not dismissed within thirty
days; and
(g) A court of competent jurisdiction, by issuing any injunction or
restraining order or by any other means, prohibits or materially restricts
Client from selling the Product.
10. SECURITY INTEREST. Attached hereto as Exhibit "A" and incorporated by
reference herein is the terms of the security interest to be granted to
Corporation by Client.
11. TERMINATION.
(a) Corporation may terminate this Agreement as follows:
(i) Corporation give written notice to Client that Corporation does
not intend to air the Show;
(ii) An Event of Default has occurred;
(iii) Client violates the terms of paragraph 4 of the Deal Terms;
(iv) Corporation gives written notice to Client that Corporation
desires to terminate this Agreement because Client has; (i) failed to ship
its Product to its telemarketing customer within fourteen (14) days of
Client's merchant bank approval of the order, (ii) failed to maintain an
adequate supply of the Product at the Fulfillment Company, or (iii) the
level of chargebacks and returns of the Product exceed ten percent (10%);
(v) Client gives written notice to Corporation that Client does not
intend to continue to air the Show, provided, however, that in the event
that subsequent to such written notice, Client changes its decision and
intends to air the Show, Corporation shall have the right to reinstate this
Agreement and the Term shall be the unexpired Term remaining as of the date
Corporation first elected to terminate the Agreement after receipt of
Client's written notice that Client did not intend to air the Show.
(vi) Either party gives written notice within thirty (30) days prior
to the end of the Initial term, or any Renewal Term, as the case may be,
that effective as of the end of the Initial Term, or any Renewal Term,
<PAGE>
this Agreement is to be terminated. In the event of any termination as set
forth above, Client shall remain obligated to comply with all of its
payment obligations until such time as Corporation has received all amounts
due Corporation for the services rendered during the Term. Corporation's
right to terminate this Agreement shall be in addition to any of
Corporation's legal and equitable rights or remedies which shall be
cumulative.
(b) Client shall have the right to terminate this Agreement if Client gives
written notice to Corporation that Corporation has materially breached this
Agreement and the parties cannot mutually resolve the issue which is the subject
of the alleged material breach within ten (10) days of the date on which said
notice is received by Corporation. If such resolution does not occur, then the
effective date of such termination shall be the third day after the end of the
ten-day period.
12. REPORTS.
(a) Client hereby authorizes Client's inbound telemarketing company, Media
Agency, Credit Card Processing Company, Client's check cashing and Fulfillment
Company to release to Corporation in a timely manner all information necessary
for Corporation to monitor the sale and stocking of the Products, including
without limitation, inbound orders (broken down by airing), daily inventory
reported from the Fulfillment Company and credit card chargebacks by the Credit
Card Processing Company.
(b) Client agrees to notify Corporation of any litigation filed against
Client by any third party in connection with the Product or Show. Such notice
shall be provided to Corporation as soon as possible, but in any event, within
ten (10) days after Client receives notice of the litigation. Concurrently with
such notice, Client shall provide Corporation with a copy of the complaint
filed, a summary of the facts and circumstances relating to the litigation, and
the name, address, and telephone number of the attorney retained to represent
Client in connection with the matter.
13. TAXES. Each party shall be responsible for all of its own Federal,
State and local taxes of any kind or nature whatsoever.
14. INDEPENDENT PARTIES. Each of Corporation and Client are dealing with
the other as independent contractors. This Agreement does not create, nor as it
intended to create, a joint venture or partnership between the parties hereto.
15. CONFIDENTIALITY. Corporation and Client each agree to hold the terms
and provisions of this Agreement and all information received form the other
party hereto in confidence; provided that, this provision shall not apply with
respect to information which becomes generally available to the public other
than as a result of disclosure by the party hereto that is required to keep such
information confidential or is information where disclosure is required by
applicable federal or state law or by court order.
16. INDEMNIFICATIONS.
(a) As used herein, the following terms shall have the following meanings:
(i) "Corporation's Group" shall mean Corporation, its subsidiary and
affiliated companies, its officers, directors, employee and shareholders,
and its successors and assigns, and each
<PAGE>
of them.
(ii) "Client's Group" shall mean Client, its subsidiary and affiliated
companies, its officers, directors, employees and shareholders, and its
successors and assigns, and each of them.
(b) Corporation shall indemnify and hold harmless Client's Group from and
against any damages, losses, obligations, liabilities, claims, actions or causes
of action sustained or suffered by Client's Group arising from or relating to
(i) any breach of any representation, warranty, covenant or agreement made by
Corporation in this Agreement, or in any certificate, instrument or agreement
delivered by Corporation's Group pursuant hereto or thereto or in connection
with the transactions contemplated hereby or thereby, or any facts or
circumstances constituting such breach, (ii) the execution, delivery or
performance of this Agreement by Corporation, and (iii) all reasonable costs and
expenses (including, without limitation, reasonable attorneys, accountants' and
other professional fees and expenses) incurred by the Client's group in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against hereunder.
(c) Client shall indemnify and hold harmless Corporation's Group from and
against any damages, losses, obligations, liabilities, claims, actions or causes
of action sustained or suffered by Client's Group arising out of or relating to
(i) any material breach of any representation, warranty, covenant or agreement
made by Client in this Agreement, or in any certificate, instrument or agreement
delivered by Client's Group pursuant hereto or thereto or in connection with the
transactions contemplated hereby or thereby or any facts or circumstances
constituting such breach, (ii) the execution, delivery or performance of this
Agreement, (iii) the use and operation of any Product of Client's, including
without limitation, damage to persons, property, or the environment, (iv) the
production or broadcast of the Show, and (v) all reasonable costs and expenses
(including, without limitation, reasonable attorneys', accountants' and other
professional fees and expenses) incurred by Corporation's Group, in connection
with any action, suit, proceeding, demand, assessment of judgment incident to
any of the matters indemnified against hereunder.
(d) The person(s) seeking indemnity under paragraph (b) or (c) of this
Section, as the case may be (hereinafter referred to as the "Indemnitee") shall
give written notice to the persons and/or entities from whom or which such
indemnity is sought hereunder (each and all of such persons and entities being
hereinafter referred to as the "Indemnitor") of any assertion of liability by a
third party which might give rise to a claim by the Indemnitee against the
Indemnitor based on the indemnity contained herein, stating the nature and basis
of said assertion and the amount thereof, to the extent known.
The defense of any suit, action, legal or administrative proceeding that
may be threatened, brought or instituted against any Indemnitee on account of
any matter which is or may be the subject to the indemnity provided for herein
shall be conducted at the sole expense of Indemnitor by legal counsel
unilaterally selected and approved by the Indemnitee.
The Indemnitee shall be kept fully informed of such action, suit or
proceeding at all stages thereof. The Indemnitor shall not make any settlement
of any claim without the prior written consent of the Indemnitee, not to be
unreasonably withheld, provided that if Indemnitor fails to undertake the
defense of such action, suit, or proceeding, then Indemnitee may settle such
claim on such terms as the Indemnitee elects and Indemnitor shall be deemed to
have approved such settlement.
(e) The remedies provided for in this Section shall be cumulative and shall
<PAGE>
not preclude assertion by the Indemnitee of any other rights or the seeking of
any other remedies against the Indemnitor.
(f) The provisions of this Section shall survive the termination of this
Agreement.
17. NOTICES. All notices, statements or demands shall be in writing and
shall be serve din person, by express mail, by certified mail, by private
overnight delivery or by electronic transmission with a follow up copy by
regular mail.
Any notice or demand to Corporation shall be given to:
Media Funding Corporation
6255 Sunset Boulevard
20th Floor
Los Angeles, California 90028
FAX: (323) 465-8172
Any notice or demand to Client shall be given to:
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
FAX: (508) 880-5208
18. MISCELLANEOUS.
(a) In addition to the provisions specifically referred to herein, the
provisions of Section 6 and 15 shall also survive the fulfillment of the
parties' other obligations pursuant to this Agreement and/or termination of this
Agreement for any reason.
(b) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of California applicable to agreements made within that
State. Jurisdiction shall be in California.
(c) This Agreement with all of its attachments and exhibits constitute the
entire Agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior letters and agreements with respect to the
subject matter hereof. Except as otherwise provided herein, this Agreement may
not be amended, supplemented, canceled or discharged except by written
instrument executed by each of the parties hereto.
(d) If any provision of this Agreement, as applied to any part or to any
circumstances, shall be finally determined by a court to be void or
unenforceable, the same shall be stricken from this Agreement and shall in no
way affect any other provisions of this Agreement or the validity or
enforceability of this Agreement.
(e) The waiver by any party to this Agreement of the breach of any
provision of this Agreement by the other part shall not operate or be construed
as a waiver of any subsequent breach by the other party.
<PAGE>
(f) The paragraph headings contained in this Agreement are for convenient
reference only and shall not affect the construction of any provision of this
Agreement.
(g) Any controversy or claim arising out of, or relating to, this
Agreement, the breach thereof, or the validity of this arbitration provision,
shall be settled by binding arbitration in Los Angeles County in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
the judgment upon any award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. Nothing contained herein shall prevent any
party from (i) seeking and obtaining equitable relief, including but not limited
to, prohibitory and mandatory injunctions, specific performance, or
extraordinary writs, nor (iii) prevent a party from filing legal action to
compel arbitration under the provisions hereof, provided that such party
stipulates in such action, at any other party's request, to arbitration on the
merits of said case.
(h) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all which together shall constitute one
and the same instrument.
END OF STANDARD TERMS
<PAGE>
EXHIBIT "A"
SECURITY INTEREST
1. In consideration of the promises, covenants and agreements given
or to be given to Client by Corporation under the Agreement, Client hereby
conveys, assigns, transfers and grants to Corporation a security interest in all
of Client's present and hereafter acquired right, title and interest in and to
the collateral (as hereinafter defined), for the purpose of securing the prompt
payment in full, in immediately available funds, and the full performance of,
each and every obligation, debt, liability, covenant, commitment, duty and
agreement of Client contained in or in any way arising under, connected with or
evidenced by the Agreement, whether now existing or hereafter arising, whether
incurred voluntarily or involuntarily, whether direct or indirect, absolute or
contingent, or liquidated or unliquidated, whether or not from time to time
decreased or extinguished and later increased, created or incurred, and
irrespective of whether sounding in contract or otherwise.
2. Should an Event of Default occur, Corporation shall have, in
addition to all other rights and remedies that Corporation may have at low or in
equity, or under any other document or agreement executed by Client in favor of
Corporation, and all rights and remedies of a secured party under the California
Commercial Code, which rights and remedies of Corporation shall be cumulative
and non-exclusive.
3. For the purpose of perfecting the security interest created under
these provisions, Client shall execute and deliver on demand such endorsements,
consents, financing statements and other instruments, documents and writings as
Corporation may request or require, in its sole and absolute discretion, in
order to impose, perfect or to continue the perfection or the first priority of
the security interest created under these provisions, including, without
limitation, a UCC-1 financing statement.
4. Effective upon the occurrence of any Event of Default which Client
fails to remedy within ten (10) days after receipt of written notice of such
default, Client irrevocably appoints Corporation as its attorney-in-fact, with
full power of substitution, to do all acts necessary or incident to the powers
granted to Corporation under these provisions, as fully as Client may, including
without limitation, the execution and recordation of any claim of lien on behalf
of and in the name of Client.
5. The security interest created pursuant to these provisions shall
survive the termination of this Agreement, and shall remain in effect until the
satisfaction in full of the obligations that such security interest secure, as
described in subparagraph (a) of these provisions.
6. For purposes of this Agreement, "Collateral" means, collectively,
the Products and all proceeds and products of the Products, including, but not
limited to, the following (i) all of the proceeds from the sale of the Products
collected by Credit Card processing Company; (ii) all monies held by Media
Agency for the purchase of time; (iii) all refunds received by media Agency in
connection with the purchase of time; (iv) all products for direct response sale
held by Fulfillment Company; and (v) the Show for the purpose of airing the Show
pursuant to this Agreement.
EXHIBIT 10.32
Paymentech & Co.
January 18, 1999
Page 1
MEDIA FUNDING CORPORATION
6255 SUNSET BLVD.
2OTH FLOOR
LOS ANGELES, CA 90028
January 18th, 1999
Paymentech Merchant Services, Inc.
4 Northeastern Boulevard
Salem, NH 03079
Dear Sirs:
This letter is attached to and made a part of that certain Media
Funding and Servicing Fee Agreement (the "Agreement") by and between the
undersigned and Media Funding Corporation, a California corporation (the
"Corporation").
The undersigned hereby agrees and acknowledges as follows:
1. As of the date hereof the undersigned has entered into an
agreement with you (Paymentech") to process all credit card payments made in
connection with the sale of the Produce (the Backstroke Massager).
2. From time to time Corporation will submit to you a statement (the
"Statement") regarding the amounts payable (any and all such amounts being
hereafter referred to as the "Applicable Amount") by the undersigned to
Corporation pursuant to the Agreement. Without limiting the generality of what
may be included in any Statement, the Statement will include information
regarding the media costs advanced by Corporation on behalf o the undersigned.
The Statement shall be in summary form and shall be sent concurrently to the
undersigned.
3. The undersigned hereby directs Paymentech to pay to Corporation an
amount equal to the Applicable Amount. Such payment shall be made from monies
collected by Paymentech or otherwise available to Paymentech as a result of the
net proceeds originating from credit card transactions of viewers of the
broadcast of the undersigned's infomercial or direct response television
commercial title The Backstroke Massager. Paymentech shall make such payment as
soon as practicable after receipt of each Statement (and in all cases within
three (3) business days after such receipt) so long as proceeds are available.
Payment to Corporation shall take precedence over all other payments except for
Paymentech's fee for the services rendered by Paymentech to the undersigned,
subject to any reserves required by Paymentech. If payment to Corporation is not
made because the net credit card proceeds are insufficient, payment to
Corporation will be made as soon as practical thereafter. With respect thereto
Corporation is a third party beneficiary of the Paymentech's agreement with the
undersigned.
4. This letter constitutes the undersigned's irrevocable direction to
have the Applicable
<PAGE>
Amount paid by Paymentech to Corporation as provided herein without further
instruction or direction from the undersigned.
5. Pursuant to the Agreement, the undersigned granted a security
interest (the "Security Interest") to Corporation in all monies received by any
credit card processing company in connection with such credit card processing
company's activities on behalf of the undersigned. Paymentech hereby consents to
the grant of the Security Interest, provided that the Security Interest shall be
junior only to any security interest which Paymentech may require from
undersigned to secure the payment by undersigned of fees, chargebacks, refunds
and reserves, charged directly by Paymentech to undersigned.
6. Corporation and the undersigned both agree to indemnify and hold
harmless Paymentech for any action taken against Paymentech in accordance with
the terms of this letter.
7. The undersigned hereby instructs Paymentech to list below all
merchant account numbers for the undersigned used to process transactions for
the Show (The Backstroke Massager).
#____________________ #_____________________
#____________________ #_____________________
Please acknowledge your receipt of this letter and your agreement to
comply with the terms hereof by signing the enclosed copy of this letter and
returning it to the undersigned.
Very truly yours,
By:/s/ Peter Bieler
-----------------------
PETER BIELER
Its: President
AGREED TO AND ACCEPTED: AGREED TO AND ACCEPTED:
PAYMENTECH MERCHANT SERVICES, INC. NATIONAL BOSTON MEDICAL, INC.
By:_/s/Kathleen Keller By: /s/ Daniel Hoyng
- ---------------------- ---------------------
KATHLEEN KELLER DAN HOYNG
Its _____________________ Its: President
EXHIBIT 10.33
ACCOMMODATION AGREEMENT
WHEREAS, National Boston Medical, Inc. (Company) has entered into an agreement
(the Merchant Agreement) with Cardservice International (Processor) for
processing its bankcard transactions for the Show titled "The Backstroke
Massager" as of February 15, 1999;
WHEREAS, the Company has entered into a certain Media Funding and Servicing Fee
Agreement (Media Funding Agreement) with Media Funding Corporation (MFC);
WHEREAS, MFC desires assurances from Company that Company will pay the sums due
it pursuant to the Media Funding Agreement and Company desires to provide such
assurances; and
WHEREAS, Processor is willing to provide certain services to Company and MFC;
NOW THEREFORE, on the basis of the above state premises, Company and MFC request
and Company directs and authorized Processor and Processor agrees to do the
following:
1. Statements. MFC shall first, from time to time, present statements to
Processor regarding the amounts payable by Company to MFC pursuant to the Media
Funding Agreement. As soon as practical, but in no event more than five (5)
business days after each such statement.
a. Processor shall first deduct its fees and charges for processing
Company's bankcard transactions from the amounts it owes to Company;
b. From the remaining balance, Processor shall then deduct and pay to MFC
the amounts owing by Company to MFC as indicated on the statements
submitted by MFC; and
c. Finally, the remaining balance shall be paid to Company pursuant to
its Merchant Agreement with Processor.
2. Accuracy of Statements. Processor shall have no responsibility for
determining the accuracy of the amounts shown due by MFC on the statements but
shall perform a purely mechanical act.
3. Dispute Regarding Statement. If any dispute arises between Company and MFC
concerning the accuracy of the statement presented by MFC, and Processor is
advised in writing of the existence of such dispute, Processor shall distribute
the undisputed amount of any statement in accordance with the procedure set
forth in paragraph 1 above. Then, if the parties are still in dispute as to the
remaining funds, Processor shall, after deducting its fees and charges for
processing Company's bankcard transactions to the extent it has not already done
so (as determined exclusively by Processor base don its own record of
transactions), hold any such disputed amount in a segregated, interest bearing
account until it has been informed in writing by Company and MFC or by court
order, judicial decision or an arbitration award, as to who should receive such
disputed funds.
4. MFC's Right to Suspend Funding. During the period of any dispute regarding
any statement, MFC may suspend MFC's funding of media time and such action by
MFC shall not be a breach of the Media Funding Agreement with Company and shall
be in addition to all of MFC's other rights and remedies.
<PAGE>
5. Processor's Costs and Fees in Case of Dispute. Any and all of Processor's
costs and reasonable attorneys' fees arising out of a dispute between Company
and MFC, whether or not litigation or arbitration is involved, shall be the
joint and several responsibility of Company and MFC. Processor shall have the
right to deduct such fees and costs from any disputed funds which it may be
holding.
This right may be exercised at its sole discretion.
6. MFC Indemnity. In consideration of this accommodation, MFC releases Processor
and its officers, directors, agents, attorneys, employees and contractors from
any and all liability arising from or connected with this accommodation and
holds Processor harmless therefrom, except for any liability arising out of an
international act or the gross negligence of Processor. Except for the
limitation set forth in the previous sentence, MFC shall indemnify Processor and
its officers, directors, agents, attorneys, employees and contractors from any
and all liability, including attorneys' fees arising from or connected with
Processor's conduct in this matter.
7. Company Indemnity. In consideration for this accommodation, Company releases
Processor and its officers, directors, agents, attorneys, employees and
contractors from any and all liability arising from or connected with this
accommodation and holds Processor harmless therefrom except for any liability
arising out of an intentional act or the gross negligence of Processor. Except
for the limitation set forth in the previous sentence Company shall indemnify
Processor and its officers, directors, agents, attorneys, employees and
contractors from any and all liability, including attorneys' fees arising from
or connected with Processor's conduct in this matter.
8. Reserve Account. Company acknowledges and confirms the security interest and
reserve account rights held by Processor as set forth in the Merchant Agreement.
However, prior to establishing a reserve account, Processor shall reasonably
consult with MFC and Company concerning the terms and conditions pursuant to
which any reserve account shall be established. If Processor, MFC and Company
are unable to agree on the terms and conditions, then MFC and Processor shall
seek agreement between themselves. If agreement is still not achieved, then
Processor may proceed to establish a reserve account in accordance with its
rights as set forth in the Merchant Agreement.
9. Attorneys' Fees. If any litigation or arbitration arises from this Agreement,
the prevailing party shall be entitled to recover the actual attorneys' fees and
costs in addition to such damages or other relief as it may be entitled to.
10. Entire Agreement, Modification. This Agreement contains the full agreement
of the parties. Promises or representations, if any, made prior to the execution
of this Agreement shall have no force or effect unless contained herein. This
Agreement may only be modified in writing, signed by all parties.
11. Governing Law. This Agreement shall be interpreted in accordance with the
laws of the State of California and its courts shall have exclusive jurisdiction
over this matter. The parties agree that the exclusive venue for any action
arising from this Agreement shall be in the County of Los Angeles, State of
California.
12. Availability of Funds. Each party acknowledges that Processor has made no
representations and makes no representations concerning the amount of Company
monies that it will have available for transfer or concerning the length of time
it will take to accomplish the transfers.
13. Authority to Sign. Each of the persons executing this Agreement represents
that it has been duly
<PAGE>
authorized to do so by the entity it represents and agrees to hold Processor
harmless form any claim by MFC or by Company or any of their respective
subsidiaries, affiliates, shareholders, partners or creditors concerning
Processor's transfer of funds pursuant to this Agreement.
14. Facsimile Copies. A fully executed facsimile copy of this Agreement shall be
deemed the original and Processor shall be entitled to rely on the authenticity
of the facsimile as though it were the original.
15. Notices. Notices shall be in writing and shall be given by facsimile
transmission with the original mailed, postage prepaid by first class mail.
Notice shall be deemed given upon completion of a successful facsimile
transmission. Notices shall be given as follows:
Media Funding Corporation Cardservice International, Inc.
6255 Sunset Blvd., 20th Floor 26775 Malibu Hills Road
Los Angeles, CA 90028 Agoura Hills, CA 91376
Facsimile No.: (323) 465-8172 Facsimile No.: (818) 878-8499
Attn: Peter Bieler Attn: Timothy Miller
With a copy to: National Boston Medical, Inc.
Wolf, Rifkin & Shapiro, LLP 43 Taunton Green
11400 W. Olympic Blvd., 9th Floor Taunton, MA 02780
Los Angeles, CA 90064 Facsimile No.: (508) 880-5208
Facsimile No.: (310) 479-1422 Attn: Dan Hoyng
Attn: Michael Wolf, Esq.
With a copy to:
Tonkin, Torp, et al.
1600 Pioneer Tower
888 S.W. 5th Avenue
Portland, OR 97204
Facsimile No.: (503) 274-8779
Attn: Tom Harbolt, Esq.
This Agreement is entered into in Los Angeles, California on the date it has
been executed by all parties.
National Boston Medical, Inc.
By: /s/ Daniel J. Hoyng Dated: 2/22/99
- ------------------------------
Its: ______________________
Media Funding Corporation
By: /s/Rob Cary Dated: 2/22/99
- ------------------------
Its: Vice President
<PAGE>
Cardservice International, Inc.
By:_________________________ Dated: ___________________
Its:_________________________
EXHIBIT 10.34
ASW SERVICES
3200 Gilchrist Road, Mogadore, OH 44260
Phone: (330) 733-6291 - Fax (330) 733-5196
ASW Logistics, Inc.
Service Agreement Addendum
ASW Logistics, Inc. agrees to provide the following service to Flex Marketing,
Inc. for the amount specified in the accompanying rate quotation for handling
charges for the specified product:
Space
1. Public storage for palletized product up to 2500 square feet.
2. Working area for labeling and shipment preparation up to 750 square feet.
Services
1. Receive specified product for storage at our 1501 Exeter Road facility.
2. Receive downloaded customer files from telemarketing company in a
compatible format with the PC Charge software and UPS Software or Excel
spread sheet software.
a) File will be sent to ASW Logistics, Inc. by e-mail, diskette, or by
direct link.
b) Any faxed files will be subject to clerical charges as stated in the
Accessorial Charges sheet.
3. Batch process the downloaded files for credit approval using the PC Charge
software.
a) ASW Logistics, Inc. will use software provided by Flex Marketing, Inc.
b) Approved customer credit cards will proceed to next service.
c) Declined customer files for credit approval will be printed out and
either faxed to Flex Marketing or called by CSR provided by ASW
Logistics, Inc. to obtain new credit card number to be approved or to
cancel the order.
4. Approved credit card number files will then be downloaded into our system
for shipment. a) We will download files that are sent to us by 8:00am and
process them on the same day.
a) Any files received after 8:00am will be processed the following
business day, unless volume is low (under 200 orders), then they will
be processed up to 3:00pm.
b) Business hours at the Exeter Road facility are 7:00am to 6:00pm Monday
through Friday. Holidays observed by ASW Logistics, Inc. and its
employees are New Year's Day, Memorial Day, Independence Day, Labor
Day, thanksgiving Day, Friday after Thanksgiving, Christmas Eve,
Christmas Day and New Year's Eve.
c) If required ASW Logistics will work scheduled holidays at our
scheduled overtime rates as specified on the Accessorial Charges
sheet.
5. ASW will prepare and ship product via UPS using the downloaded files that
have credit approval. a) ASW Logistics, Inc. will supply labels for the
packages ready for shipment. b) Labels will be placed on the designated
side of the packages as specified by Flex Marketing.
a) Product will ship the same day that labels are placed unless otherwise
specified.
1. An exception to this will be when volume becomes very high, then
a trailer will be spotted by UPS and will ship the following day.
b) Any other specified shipment methods other than UPS ground services,
such as next day air, second day air and Fed-Ex will be paid directly
by Flex Marketing, but will be prepared by ASW Logistics, Inc.
6. ASW Logistics will provide customer service for the following:
<PAGE>
a) Calls include tracking packages, giving information on shipment of the
package, calls of complaint or praise of the product.
b) Customer service reps will place outgoing calls to customers with
declined or bad credit card numbers.
c) Flex Marketing will provide and pay for the 1-800 line for their
customer calls routed to ASW Logistics, Inc.
7. ASW will provide a product return service for $2.00 per return.
a) Services include: receipt of return product, inspection of
product for quality assurance, sorting of products (good,
bad), repackaging good product in boxes provided by Flex
Marketing, Inc. for reshipment and storage of bad returns.
b) An alternative to the storage of the bad returns will be to
send them back with the empty pallets to contracted molding
company.
c) Customers with returned product will be credited by Flex
Marketing, inc.
d) Any follow ups needed due to customer returns, may be handled by
ASW Logistics, Inc. which will be charged at our standard
clerical rate, with a 1/2 hour minimum, as specified in the
Accessorial Charges sheet.
If additional space is needed, an additional nine cents will be added to the
handling charges to those products that occupy the additional space.
There will be minimum weekly payment of $275.00.
Items beyond the scope of services to be provided under this agreement shall be
subject to Extra Services charges provided for in Section 8 of the Standard
Contract terms and Conditions for Merchandise Warehouseman and shall be invoiced
in accordance with the attached Accessorial Charge sheet.
THE ABOVE SERVICE REQUIREMENT ADDENDUM IS HEREBY ACCEPTED AND TERMS
HEREIN AGREED TO
____________________________________ ASW Logistics, Inc.
DEPOSITOR
By: /s/ Christopher Crockett
By:/s/ Remon Hayek Date: 10/31/97
EXHIBIT 10.35
BLITZ MARKETING
AGREEMENT
THIS AGREEMENT made this November 19th, 1998, by and between Blitz Marketing,
inc. and FLEX MARKETING, INC., a National Boston Medical Co. ("Client").
WHEREAS, Client is in the business of selling its products and/or services via
direct marketing to consumers who respond to television or print advertising
using toll-free telephone numbers ("Customers"); and
WHEREAS, Blitz Marketing is engaged in the business of marketing discount buying
club memberships; and
WHEREAS, Client desires to make available the discount buying club memberships
offered by Blitz Marketing to its Customers; and
WHEREAS, Some Customers will elect to purchase Blitz Marketing discount club
memberships ("Members").
NOW, THEREFORE, in consideration of the mutual undertakings hereinafter set
forth and other good and valuable consideration, the parties agree as follows:
1. Client's Duties.
(a) Client shall, at its sole expense, market the discount buying
club memberships listed in Schedule A attached hereto ("Services") to all
Customers. The parties understand and agree that the products and services
included in the Services may change at the sole discretion of Blitz Marketing.
In such a case, Blitz Marketing shall provide to Client an amended Schedule A,
and those products and services shall be included under the definition of
"Services" as used herein and subject to the terms and conditions of this
Agreement.
(b) Client will cause its inbound telemarketing service to read to
every Customer at the end of the inbound script Client provides to its service,
the script attached hereto as Schedule B (or as amended from time to time at
Blitz Marketing's sole discretion), or other marketing materials provided by
Blitz Marketing ("Offer"). Client shall not amend, alter or edit such script or
other marketing materials without Blitz Marketing's prior written approval.
Client will not offer or market Services to any person or entity other than its
Customers without the prior written consent of Blitz Marketing.
(c) Client shall cause its inbound telemarketing service to provide
to Blitz Marketing (or its designee) daily, except on weekends and holidays, via
electronic medium the following information for those Customers who purchase
Services ("Memberships"): (i) name; (ii) address; (iii) telephone number; and
(iv) credit card type, number and expiration date. Blitz Marketing acknowledges
and agrees that Client will have no obligation to provide to blitz Marketing
information about sales of Client's products via direct response advertisement.
(d) Client shall provide to Blitz Marketing by facsimile transmission
a daily report showing the number of Offers made and Memberships sold for each
of Client's products.
<PAGE>
2. Blitz Marketing's Duties.
(a) Blitz Marketing will provide to Client a telemarketing script
and./or other marketing materials for use with in marketing the Services.
(b) Blitz Marketing, at its sole expense, will perform all
fulfillment activities in connection with the Memberships, including providing
the buying club services, customer service, processing cancellations, issuing
refunds and collecting membership fees.
(c) Blitz Marketing shall pay to Client a $12.50 fee (the "Signup
Fee") for each new membership generated by Client. Client is responsible for all
telemarketing charges incurred for the reading of the script to its Customers.
Blitz Marketing shall Reimburse client, from the Signup Fee for
Telemarketing Fees to include: per read charges by Answering Service plus any
additional fees charged by the Answering Service for including the Script and
providing reports to Blitz Marketing.
Client Shall invoice Blitz Marketing bi-weekly for the prior two
weeks activities for Telemarketing Fees as specified above. Blitz Marketing
shall pay client for the Telemarketing Fees within 15 days of receipt of
invoice.
Client Payment for the balance of the Signup Fee of Memberships shall
be made on a monthly basis 45 days after the end of each month.
(d) Blitz Marketing shall pay to Client $10.00 per renewed Membership
("Renewal Fee") that is renewed annually. Payment of the Renewal Fees will be
made 45 days after the completion of each renewal year for each Membership.
3. Indemnities.
(a) Blitz Marketing shall indemnify and hold harmless Client, as well
as the employees, officers, directors and agents of Client from and against any
actual or threatened claims, damages, charges, judgments, liabilities and
expenses actually and reasonably incurred by or imposed against Client,
including Client's actual attorneys' fees arising from a breach by Blitz
Marketing of its warranties and representations contained in this Agreement.
(b) Client shall indemnify and hold harmless Blitz Marketing, as well
as the employees, officers, directors and agents of Blitz Marketing from and
against any actual or threatened claims, damages, charges, judgments,
liabilities and expenses actually and reasonably incurred by or imposed against
Blitz Marketing, including Blitz Marketing's actual attorneys' fees arising from
a breach by Client of its warranties and representations contained in this
Agreement.
4. Non-compete.
During the term of this Agreement and for one year thereafter,
neither Client nor any of its affiliates or subsidiaries shall, directly or
indirectly, alone or in connection with others, purchase market, administer,
permit the marketing of or otherwise make available to Members or Customers any
products, programs or consumer membership services similar to those listed in
Exhibit A hereto.
<PAGE>
5. Confidentiality.
The parties shall hold in strict confidence and will not use
otherwise than in connection with this Agreement all non-public, proprietary,
and other confidential information with regard to the business operations of the
other party, including, but not limited to, pricing, scripts, vendor networks,
financial information, plans and strategies furnished to the other party or
which become known to such party because of this Agreement. Nothing herein shall
apply to information that is publicly available, acquired form any third-party
without any obligation to maintain confidentiality, or is independently
developed by the receiving party without use of any confidential information of
the disclosing party. Nothing herein shall prohibit the receiving party from
disclosing any confidential information to its auditors, tax consultants, or
attorneys or the filing of documents as required by law.
6. Intellectual Property.
This Agreement shall not convey any license to Blitz Marketing or
Client to use the other party's trademarks or copyrights, other than in
connection with the performance of the obligations hereunder. All right, title
and interest in and to any trademarks or copyrights owned by Blitz Marketing is
and shall remain the sole property of Blitz Marketing and neither Client, nor
any third party shall acquire any right, title or interest in such trademarks or
copyrights. Client agrees not to dispute or challenge the validity of or contest
the rights of Blitz Marketing in or to any of its trademark or copyrights.
7. Term.
The term of this Agreement shall be one year from the date of
execution and shall automatically renew for successive one-year periods unless
either party gives written notice of termination 30 days prior to the end of any
one-year period. Upon notice of termination by either party, Client shall
immediately stop reading Blitz Marketing's script, and Blitz Marketing shall not
be responsible for further payment of fees hereunder.
8. General Provisions.
(a) Neither party is the employee, partner, joint venture, agent or
legal representative of the other party for any purpose, nor shall either party
have the authority to enter into any contracts in the name or on behalf of the
other party.
(b) This Agreement may be assigned only upon the written agreement of
both parties. This Agreement and the rights and obligations herein shall bind
and inure to the benefit of the successors and permitted assigns of the parties.
(c) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all
previous proposals both oral and written and all other communication between the
parties.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the state of California (without regard to conflicts of law
principles) and the parties hereby consent to the jurisdiction of the California
state or federal courts located in Los Angeles Country, California over all
matters relating to this Agreement.
<PAGE>
(e) This Agreement may not be amended, modified or supplemented
except by written agreement signed by each party. The waiver of any party hereto
of a breach of any provision of this Agreement shall not operate as a waiver of
any subsequent breach.
(f) The provisions of paragraph 3, 4, 5 and 6 shall survive the ter-
mination or expiration of this Agreement.
(g) Should any part of this Agreement be held invalid, such decision
shall not affect the validity of any remaining portion, all remaining portions
shall remain in effect as if this Agreement has been executed without the
invalid portion.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date first written above.
BLITZ MARKETING, LLC
By: /s/ Ernest Zavoral By: /s/Brian McGregor
- ----------------------- -------------------------
FLEX MARKETING, INC.
11-13-98
<PAGE>
Schedule A
The CONNECTIONS Discount Buying Service currently includes significant discounts
on the following products/services:
Movie Tickets
New Cars
Travel
Mortgage Reduction
Home Purchases/Sales
prescriptions, Contact Lens, Vitamins, Eye Wear
Video Rentals and Purchases
Books
Music CDs and Cassettes
Toys and Games
Restaurants
Theme Parks
Activities Information Hotline
Discount Shopping Service for Electronics, Computers, Appliances,
Home Office, Furniture and Home Entertainment Products
Among other products/services.
EXHIBIT 10.36
STRUCTURE AGREEMENT BETWEEN MAXIMUM COVERAGE MEDIA, INC.
AND NATIONAL BOSTON MEDICAL
BACKGROUND
1. National Boston Medical is in the business of, among other things,
marketing and distributing via television.
2. Maximum Coverage Media, Inc. (MCM) is a medial agency that supplies airtime
on a wide range of television stations, local cable systems, national cable
networks, and regional sports networks.
3. The parties wish by this Agreement to set forth the terms under which
National Boston Medical will utilize MCM as its agent for purchasing long
form commercial airtime on national cable networks, regional sports
networks broadcast television stations, and local cable systems.
COVENANTS
1. Media Purchasing: MCM will act as National Boston Medical's agent of record
for the placing and purchasing of infomercial media time on all national
cable networks, regional sports networks, broadcast television stations,
and local cable systems for all versions of National Boston Medical's "Back
Stroke" infomercial.
2. Administrative Services: MCM will review all infomercial media contracts
entered into on behalf of National Boston Medical for verification of all
particulars contained therein, including, without limitation, extent,
dates, and times of media placements, and will secure proof of performance
of all media placed on National Boston Medical's behalf by MCM. MCM will
verify all proof of performance records (station invoices and affidavits)
for accuracy and present them to National Boston Medical in a timely manner
each month.
3. Commissions and Payments: National Boston Medical shall pay MCM one-hundred
percent (95%) of the gross dollar amount of each media purchase. This will
include MCM's commission at a rate of 10% of said amount in full
consideration of MCM's services pursuant to this Agreement. MCM will
invoice National Boston Medical for commissions and media charges. MCM
invoices will reflect all commissions and media charges for unpaid media
airing within twenty-one (21) days of the invoice date. Payment of proper
invoices shall be due to MCM within 5 (five) business days of the date
received by National Boston Medical. If media time that MCM has been paid
for by National Boston Medical does not air, National Boston Medical shall
be credited the amount that was prep-paid for the media that did not air
together with all other credits, discounts, rebates, refunds, or such
similar payments received in connection with media time. Although it is not
MCM's policy to do so, if at any time, MCM secures more media time than was
authorized by National Boston Medical, National Boston Medical will not be
liable for payment for any and all media above the authorized budget. At
any reasonable time during the term of this agreement, and for one (1) year
thereafter, and upon reasonable prior notice to MCM, National Boston
Medical may examine MCM's files and records pertaining to media purchases
for National Boston Medical only. Additional Compensation: National Boston
Medical shall provide MCM with 75,000 shares of National Boston Medical
unrestricted series 144 stock with "piggyback" registration rights upon the
execution of this Agreement. National Boston Medical shall provide to MCM
an
<PAGE>
additional 50,000 shares of series 144 restricted stock for each three
month period in which the infomercial campaign averages a gross media ratio
of 1.9 to 1 or higher. These additional shares shall be issued within
thirty (30) days from the completion of each of the following three month
periods in which the gross media ratio is 1.9 to 1 or higher. March 1, 1999
to May 30, 1999 May 31, 1999 to August 29, 1999 August 30, 1999 to November
28, 1999 November 29, 1999 to February 27, 1999
4. Term: This agreement will remain in effect until thirty (30) days after
either party informs the other, in writing, of termination.
5. Cancellations: Subject to the cancellation policies of each individual
media entity, MCM shall cancel all television airtime purchased by MCM on
behalf of National Boston Medical which National Boston Medical is unable
to use or no longer desires. National Boston Medical shall be liable for
any and all media charges for the time canceled which MCM is unable, in the
exercise of its best efforts, to avoid.
6. Access to Proprietary Software (MTS): National Boston Medical shall be
entitled to a viewonly version of MCM's proprietary software system known
as the Media Tracking System (MTS). MCM agrees to distribute a version of
MTS to National Boston Medical within three (3) weeks of the first airing
of National Boston Medical's infomercial upon written request from National
Boston Medical. National Boston Medical shall be entitled to use this
software as long as this Agreement is in full force and effect.
The parties have caused this Agreement to be duly executed on the dates
indicated below.
Maximum Coverage Media, Inc. National Boston Medical
/s/ Steve Netzley /s/Daniel Hoyng
- ---------------------- --------------------------
Name: Steve Netzley Name:
Title: President Title:
Date: 3-1-99 Date:
EXHIBIT 10.37
INTERNATIONAL CAMPAIGN MANAGEMENT AGREEMENT
This Agreement ("Agreement") is made this 26th day of May, 1999 by and between
Frederiksen Television, Inc., a Virginia corporation (hereinafter referred to as
"FTV"), and National Boston Medical, Incorporated, a Nevada corporation
(hereinafter referred to as "Client").
Recitals
A. Client controls the worldwide marketing and distribution rights with respect
to certain products as set forth on Attachment 1 (individually, the "Product";
collectively, the "Products") to be marketed and distributed through various
distribution channel, including broadcast and cable television.
B. FTV is in the business of marketing and distributing products domestically
and internationally through a variety of distribution channels, including
broadcast and cable television.
C. Client and FTV wish to enter into this Agreement whereby FTV will represent
Client and provide certain advisory and other services to Client in connection
with the marketing and distribution of the Product(s) through international
distribution channels, as more specifically set forth herein.
Covenants
In consideration of the mutual promises and undertakings set forth herein, and
intending to be legally bound hereby, the parties agree as follows:
1. FTV shall, on behalf of Client, represent Client in connection with the
possible establishment of business relationships with distributors in
international markets for the Product(s) (collectively, "Distributors"). The
services to be provided by FTV in connection with the foregoing include (i)
making appropriate introductions on behalf of Client to the appropriate
representatives of prospective Distributors; (ii) formulating an appropriate
strategy and structural alternatives with respect to the marketing and
distribution of the Product(s) through home shopping channels and in
international markets; (iii) advising in negotiations with respect to
Distributors; and (iv) any other services reasonably requested by Client in
connection with the establishment of distribution agreements with Distributors.
FTV shall keep Client advised of all developments materially affecting Client's
potential business relationship with Distributors, including advising Client in
writing of the Distributors whom FTV has contacted regarding the Product(s).
2. Client will make available to FTV certain information and materials
concerning the Product(s) and Client's business, which may be necessary for FTV
to provide the services described herein. Any such information or materials
provided by Client hereunder, other than that which is available form public
sources or becomes available form public sources subsequent to it being made
available to FTV, will be treated by FTV in a strictly confidential manner and
will not be used for any purpose other than for providing the services pursuant
to this Agreement. FTV will use its best effo4rts to assure that any third
parties to whom any of such information or material is furnished provide
appropriate assurances as to its confidential treatment by them. Notwithstanding
the foregoing, Client shall have no obligation to disclose to FTV any
information regarding the Product(s)' quantitative analysis or recipe secrets.
3. Should Client establish a business relationship with one or more Distributors
whereby Client agrees to supply Product(s) to the distributors pursuant to an
<PAGE>
agreement within twelve (12) months from the date hereof or within twelve (12)
months thereafter as a result of discussions initiated by FTV during the initial
twelve (12) month period, Client agrees to pay FTV a continuing participation
fee in cash equal to twelve percent (12%) of Client's net Sales of the
Product(s), as defined below, to the Distributor(s). Client shall pay such
participation fee to FTV within fifteen (15) days after the end of each calendar
month based on Client'/s cash receipt of Net Sales of the Product(s). Net Sales
of the Product(s) is defined and understood to include gross revenues received
by Client from sales to the Distributors, including Upsells, excluding (i) sales
which result in refunds, credits or other allowances to customers on account of
rejection or return; (ii) uncollectible accounts due to credit card chargebacks,
bad checks or other reasons of uncollectibility; (iii) sales, value-added taxes,
or any similar taxes collected from the consumer for remittance to a
governmental entity.
4. Client grants FTV the right to examine the books and records of Client
related to Product(s) sales to Distributors up to two (2) times per calendar
year, such examination to take place at Client's place of business during normal
business hours, upon at least fifteen (15) days written notice. FTV agrees to
bear the costs of such examination, except in the event that such examination
discloses a discrepancy in FTV's favor of more than five (5) percent of the
amount due FTV hereunder, then Client shall bear FTV's reasonable costs of such
examination.
5. Client will reimburse FTV all out-of-pocket expenses arising in connection
with the services provided by FTV pursuant to this Agreement, which expenses may
include but are not limited to the reproduction of dubs and master tapes, the
conversions of dubs and master tapes into various formats, courier charges, and
the registration of appropriate import documents. Client shall reimburse such
approved expenses within thirty (30) days after receipt of FTV's invoice of such
expenses. FTV shall not incur such costs without prior written consent of the
Client.
6. Client acknowledges that FTV has had, and continues to have, a business
relationship with may of the Distributors to whom FTV will introduce the
Product(s). In the event that FTV becomes aware that its prior or existing
relationship with a Distributor (or its employees or affiliates) may impair in
any way the services to be provided by FTV under this Agreement, FTV shall
immediately notify Client of the existence of or potential for, a conflict of
interest and Client and FTV will discuss in good faith the appropriate means to
resolve the existing or potential conflict of interest.
7. The provisions hereof shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto with written consent of both
parties for the assignment.
8. This Agreement is deemed made in Massachusetts and shall be governed by the
laws of the Massachusetts, without regard to the state's rules concerning
conflicts of law.
9. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, and all of which together shall constitute
one and the same Agreement. A signature delivered by facsimile shall be deemed
to be an original signature and shall be effective upon receipt thereof by the
other party.
In witness whereof, the parties have caused this Agreement to be duly executed
on the first date written above.
<PAGE>
For Frederiksen Television, Inc.
By: /s/Fred Thomas Redding
Title: President & CEO
For National Boston Medical, Incorporated
By: /s/ Daniel J. Hoyng
Title: President & CEO
<PAGE>
INTERNATIONAL DISTRIBUTION AGREEMENT
Attachment 1
Product(s) Supporting DRTV Format
A product known as "Backstroke Back Massager" 28:30 Infomercial
EXHIBIT 10.38
CONFIDENTIALITY & Manufacturing AGREEMENT
1. Confidential Information: During our negotiations, discussions and visits
with Ernest Zavoral/Remon Hayek, herein after referred to as (EZ/RH), we at
Kongent Company Limited, herein after referred to as (KCL) understands that we
may come into possession of and may hereafter obtain confidential or proprietary
information acquired or developed by and belonging or relating to EX/RH,
including, but not limited to, EZ/RH's methods and systems, the names and
addresses of EZ/RH's consultants manufactures and suppliers; prices charged and
cost paid by EZ/RH; regardless of whether any such information, date or
documents qualify or qualified as a "trade secret" under applicable federal or
state law (the "Confidential Information"). Because the secrecy of the
Confidential Information gives EZ/RH a significant competitive advantage in the
development, marketing and sale of EZ/RH's trade and business, KCL agrees that
we will not directly or indirectly disclose, use or cause or aid in the
disclosure or use of any Confidential Information at any time, for whatever
reason, except with the prior written consent of consent may be withheld at
Their sole and uncontrolled discretion.
2. Confidential Documents. During our negotiations, discussions and visits with
Ernest Zavoral/Remon Hayek, KCL will have access to confidential documents or
papers belonging or relating to EZ/RH, including but not limited to documents
aor papers of any type; photographs or films of any type; computerized
information of any type; or any other things containing or reflecting
information, including but not limited to consultants, pricing information,
suppliers and other sensitive information, relating to the business or trade of
EZ/RH, as well as copies, abstracts or summaries of any of the aforementioned
items (the "Confidential Documents"). Because the secrecy of the Confidential
Documents gives EZ/RH a significant competitive advantage in the development,
marketing and sale of EZ/RH trade and business, KCL agrees that KCL will not,
directly or indirectly, cause, permit or aid the release or distribution to or
use by any person, corporation or entity in the United States or outside the
country, any of the Confidential Documents for whatever reason, except with the
prior written consent of EZ/RH's. EZ/RH's consent may be withheld at its sole
and uncontrolled discretion. In the event KCL are in possession of any
Confidential Documents, KCL agrees to return all of said documents, drawings and
prototypes to EZ/RH immediately, upon demand by EZ/RH.
3. Enforcement. During KCL's negotiations and visits to EZ/RH, KCL agrees that
if KCL violates, disregard or commits a breach of any of the provisions of this
Agreement, Flex Marketing Inc. shall have the right to enforce this Agreement in
any court having equity jurisdiction. KCL acknowledges and agrees that any such
breach of this Agreement by KCL will cause irreparable injury to EZ/RH and that
money damages will not provide an adequate remedy to EZ/RH. In addition, EZ/RH
shall have any other rights and remedies available at law including, but not
limited to, general damages punitive damages and injunctive relief.
4. Manufacturing. KLC agrees not to manufacture products that EZ/RH disclose to
KLC to anyone else without the written consent from EZ/RH. KCL will supply foam
roller assemblies and complete manufacturing of product fully assembled boxed
ready to ship to our distribution network.
5. OHIO and International LAWS During our negations, discussions and visits to
EZ/RH, KCL understands that this Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio and International.
<PAGE>
AGREED TO AND ACCEPTED BY AGREED TO AND ACCEPTED BY:
Ernest Zavoral/Remon Hayek Kongent Company Limited (KCL)
By: /s/ Ernest Zavoral /s/ Keith Lee
- ----------------------- --------------------
By: Ernest Zavoral By: Keith Lee
Title: Partner Title: President
Date: August 10, 1998 Date: August 11, 1998
EXHIBIT 10.39
KONGENT COMPANY LIMITED
2F, NO.259, SEC.2, SUIYUAN RD.
TAICHUNG CITY, TAIWAN, R.O.C.
TEL: 886-4-241-6385 TEL: 886-4-241-6386
ATT: MR. EMIE ZAVORAL DATE: 3-23-1998
FLEX MARKETING, INC.
2955 CANFIELD RD.
YOUNDSTOWN, OH 44511, USA.
FAX: 330-797-4069
DEAR MR. ZAVORAL:
HERE IS THE PRICE LIST FOR BACKSTROKE SET:
QUOTATION
PAYMENT BY IRREVOCABLE AT SIGHT L/C.
SHIPMENT ABOUT 30 DAYS AFTER WE RECEIPT YOUR L/C.
VALIDITY END OF JUNE, 1998
- -----------------------------------------------------------------------------
ITEM DESCRIPTION UNIT PRICE
FOB TAIWAN
- ------------------------------------------------------------------------------
BACK MASSAGER ABS __(?) (AS SAMPLE SUPPLIED FROM YOU) US$10.50/UNIT
__(?) BOX (4 COLOR BOX AS SMALL SAMPLE
SENT) 7 PCS OF STEEL BAR .15" 7 PCS OF PLASTIC
BAR .16" 7 PCS OF FOAM SHAFTS (AS YOUR DRAWING) 2
PCS OF ABS WHEEL.
1 SET OF NECK PIECE (FOAM ROLLER, PLASTIC BAR
STEEL BAR AND ABS BRACKETS)
1 INSTRUCTIONAL BOOKLET (AS THE SAMPLE)
BEST REGARDS,
/s/ Keith Lee
- ----------------------
KEITH LEE, PRESIDENT
EXHIBIT 10.40
SPI
SARE PLASTICS INC.
December 10, 1998
Ernest Zavoral, President
Flex Marketing, inc.
P.O. Box 22
Canfield, OH 44406
Dear Ernest:
This is the quote you asked for & we discussed yesterday to assemble
and package the foam roller back massage.
The assembly would include the drilling of the frame, (using your
drill press) putting together all components, placing lock caps on one end of
metal rods, and gluing ends of cartons after videotape, instructions and
assembled unit is put in carton.
The price to do this would be $2.50 for each unit, with all
components being supplied to us.
If you would like for us to pick up the components from Esterle Mold,
the cost for each trip would be $75.00 using or 24ft. van body truck.
The payment terms would be net 30 days.
If you need more information please call me.
Thanks for giving us the opportunity to be a part of this program.
Sincerely,
/s/Paul W. Sare
Paul W. Sare
14600 COMMERCE ST.oALLIANCE, OHIO 44601oPHONE (330) 821-4299oFAX (330) 821-3433
EXHIBIT 10.41
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment agreement (Agreement) is made and effective this 11th
Day of May1999 by and between National Boston Medical, Inc. (Company) and Daniel
Hoyng (Executive).
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment
The Company hereby agrees to employ the Executive for a term beginning on the
date of this Agreement and ending June 1, 2001 as its CEO or at a higher
responsible management position with the Company and the Executive hereby
accepts such employment in accordance with the terms of this Agreement.
Not withstanding the aforesaid, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before June 30, 2001, the
remaining term of the Agreement shall be extended such that each and every
moment of time thereafter, the remaining term shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after July 1, 2001, the Board of Directors or the Executive Committee of
the Company notifies the Executive in writing of its determination to have the
date of this Agreement expire one year from the date of such notification.
In the event of any conflict or ambiguity between the terms of this Agreement
and terms of employment applicable to regular employees, the terms of this
Agreement shall control.
2. Duties of the Executive
The Executive shall devote substantial time, attention and energy to the affairs
of the Company and/or its subsidiaries during the term of this Agreement and
shall have such duties, responsibilities and authority as shall be the character
and dignity appropriate and consistent with the position and title of CEO or
such responsibility or authority as from time to time additionally authorized by
the Board of Directors. The Executive may engage in other activities, such as
activities including serving on the Board of Directors of other
corporations/organizations, and/or advising other corporations/organizations in
each case to the extent that such activities do not materially detract from or
limit the performance of the Executive's duties under this Agreement, or inhibit
in any material way the business of the Company and its subsidiaries. The
Executive will engage in no activity, paid or otherwise, for a competitor of the
Company so long as this Agreement is in effect. The Executive shall perform all
duties in a professional, ethical and businesslike manner.
The Executive will not be required to render services hereunder outside of the
Boston/Taunton metropolitan area without his approval. Whether or not such
approval is given, The Executive shall be entitled to full compensation as
provided for in this Agreement. The Executive shall have the right to perform
his duties out of any of his personal residences, provided that such does not
result in actions injurious to the Company.
3. Compensation
The Executive will be paid compensation during this Agreement as follows:
A.) A base salary, commencing May 11, 1999 of not less than $175,000 per
year, (or such greater amounts as may be approved by the Board of Directors
or the executive committee in accordance with authority given by the Board
<PAGE>
of Directors) payable in installments on a semi-monthly but not less than a
monthly schedule. The Executive's base salary may be increased consistent
with recommendations of the Executive Committee of the Board. At least
annually the Executive Committee shall review the Executive's base salary
for competitiveness and appropriateness in the industry. In no event shall
the Executive's base salary be less than $175,000 on an annual basis.
B.) The Company agrees to pay a Quarterly Bonus of not less than $5,000 per
calendar quarter to the Executive. During the term of this Agreement said
bonus shall be paid in cash no later than the 1st day of each calendar
quarter, with the first payment due and payable to the Executive on or
before June 1, 1999 and continuing thereafter until the first day of June
2001. From time to time during the term of this Agreement, the Executive
may receive a greater quarterly bonus if approved by the Executive
Committee; however, the quarterly bonus shall never be less than $5,000.
C.) In addition to the other payments referred to in this Agreement, the
Executive shall be entitled to receive and participate in an annual
incentive bonus plan. The amount of the Executive's participation and the
benefits paid under the incentive bonus plan shall be based upon goals
recommended by the Executive and approved by the Executive Committee. The
annual incentive bonus plan payments will be paid in cash and the payment
will be made not later than 30 days following the close of the fiscal year
for each year this Agreement is in effect.
D.) In addition to other payments referred to in this Agreement, the
Executive will be granted 250,000 shares of stock of the Company annually
on the anniversary date of this Agreement. The above shares shall carry an
anti-dilution provision allowing the Executive in the event of any
additional stock offerings of the Company, to purchase up to the number of
shares necessary to maintain the Executive's stock position prior to the
offering. Such shares will be made available at 75% of the initial price of
each offering. The initial shares shall vest upon execution and be
delivered not later than December 31, 1999. The additional shares shall
vest and be delivered not later that December 31, 2000; and December 31,
2001. Prior to vesting, the Executive shall be entitled to receive
dividends on and vote the unvested shares. Should this Agreement be
terminated prior to June 30, 2001 such shares shall be delivered and vested
to the Executive as stated above.
E.) It is intended that the Executive have the opportunity to attain a
reasonable ownership position of not less than 3 % - 5% of the outstanding
stock of the Company. In furtherance of this goal and in addition to the
payments referred to in this Agreement, the Executive shall be entitled to
receive discount option grants (the exercise purchase price shall be the
lower of the average price of the NBM stock during the last twelve months
or the current market price as of the date of the option) to purchase the
stock of the Company totaling no less than 2,000,000 shares over 2 years.
The first such award will be for no less than 1,000,000 shares with an
award date of June 1, 1999 and each additional year shares shall be awarded
each June 1st through the year 2001. The foregoing shall become vested
immediately upon the award of the shares. The Executive shall have the
right to exercise the option by payment in cash or if approved by the Board
of Directors, the Executive may execute a short term note with the Company
for payment of such stock and options. The exercise period of any options
shall be three years from the date of the grant.
F.) The Executive may choose once each year of this Agreement to convert
one-third of his annual salary to stock or stock options, with the purchase
price shall be the lower of the average price of the NBM stock during the
last twelve months or the current market price as of the date the Executive
chooses to exercise such option.
<PAGE>
G.) In addition to the other payments referred to in this Agreement, the
Company agrees to award to the Executive a transition bonus of 250,000
shares of stock. Said shares of stock shall be awarded as soon as
administratively practical following May 23, 1999 but not later than June
10, 1999.
H.) All shares included in this agreement shall carry piggy back
registration rights.
If any payments due the Executive under this Agreement result in the Executive's
liability for an excise tax ("parachute tax") under Section 49 of the Internal
Revenue Code of 1986, as amended (the "Code") the Company will pay to the
Executive, after deducting any Federal, State or local income tax imposed, the
"parachute tax" liability. Such payment shall be made to the Executive no later
than 30 days prior to the due date of the "parachute tax."
4. Benefits
E.) Holidays: The Executive will be entitled to at least nine (9) paid
holidays each calendar year and twelve (12) personal days. The Company will
notify the Executive on or about the beginning of each calendar year with
respect to the holiday schedule for the coming year. Personal holidays, if
any, will be scheduled in advance subject to the requirements of the
Company. Such holidays must be taken during the calendar year and unused
days shall not carry forward into the next year.
F.) Vacation: The Executive shall be entitled to five (5) weeks or
thirty-five (35) paid vacation days per year effective as of the date of
the Agreement.
G.) Sick Leave: The Executive shall be entitled to sick leave and emergency
leave according to the regular policies and procedures of the Company.
Additional sick leave or emergency leave over and above paid leave provided
by the Company, if any, shall be granted at the discretion of the Executive
Committee of the Board of Directors.
H.) Medical and Group Life Insurance: Company agrees to include Executive
and his family members in the group medical and hospital plan of the
Company and provide group life insurance at no charge to the Executive, in
the amount of $1,000,000 during the term of this Agreement. Executive shall
be responsible for any state or federal tax imposed upon these benefits.
I.) The Company shall provide at its' expense disability insurance for the
Executive for the term of this Agreement.
J.) The Company shall provide at its' expense Officer's and Director's
liability insurance covering the Executive for the term of this Agreement.
Such coverage shall be in the amount of not less than $5 million and shall
be effective not later than September 1, 1999.
K.) Pension and Profit Sharing Plan: The Executive shall be eligible to
participate in any pension or profit sharing plan or other type plan
adopted by the Company for the benefit of its officers and/or regular
employees.
L.) In addition to any other compensation, the Executive will receive an
automobile of his choice not to exceed $800 per month or an allowance in
the amount of $800 per month to be paid to the Executive each month during
the term of this Agreement.
<PAGE>
M.) Expense Reimbursement: The Executive shall be entitled to reimbursement
for all reasonable expenses, including travel and entertainment incurred by
the Executive in the performance of his duties. The Executive will maintain
records and written receipts as required by Company policy and reasonably
requested by the Board of Directors to substantiate such expenses. Subject
to the terms of Section 2, the Executive may, at his sole discretion, work
from his residence or a location of his choice. The Company will reimburse
the Executive for reasonable home office use, including but not limited to
an appropriate computer/modem installation.
N.) Cell phone and Pager Reimbursement: The Executive shall be entitled to
reimbursement for cell phone and nation wide pager service or the Company
may at its expense provide the Executive with such service.
O.) Financial and Tax Advice: During (a) the term of this Agreement (b) the
12 month period following the termination of this Agreement as a result of
Death and/or Disability, and (c) the three year period following the
voluntary termination by the Executive with good reason or the involuntary
termination by the Company without cause... the Company shall provide the
Executive (or, if Executive shall have died, his estate) at the Company's
expense, third party professional financial and tax advisory services,
primarily oriented to planning in light of the Executive's entitlement to
compensation and benefits and appropriate in light of circumstances of
Executive or his estate. Executive (or his estate) may select the service
professional of his choice.
5. Termination
A. The Company shall have the right to terminate this Agreement under the
following circumstances:
i. Upon the death of the Executive.
ii. Upon notice to the Executive in the event of notice of illness or
other disability which has incapacitated him from performing his
duties for 12 consecutive months as determined in good faith by
the Board.
iii. For good cause upon notice from the Company. Termination by the
Company of the Executive for "good cause" as used in this
Agreement shall be limited to mean gross negligence,
misappropriation or theft of Company funds or conviction of state
or federal offenses which would prevent the Executive from
performance of his duties. With respect to any termination for
good cause by the Company, the specifics of the cause shall be
communicated to the Executive in writing at least thirty (30)
days prior to the date on which the termination is proposed to
take effect. The Executive shall be given the opportunity to
correct or respond to such cause.
B. If this Agreement is terminated pursuant to Section 4 (A - iii) above,
Executive's rights and the Company's obligations hereunder shall forthright
terminate except as expressly provided in this Agreement.
C. If this Agreement is terminated pursuant to Section 4 (A - i or ii)
hereof, Executive or his estate shall be entitled to receive 100% of the
Executives salary and incentives for the balance of the term of the
Agreement, together with bonus and other incentives as provided for in this
Agreement.
6. Termination by Executive
The Executive shall have the right to terminate this Agreement with thirty (30)
days written notice the Company given within sixty (60) days of the occurrence
of any of the following events:
A. The Executive is not elected or retained as CEO of the Company
<PAGE>
B. The Company acts to materially reduce the Executive's position, title,
duties, authority or responsibilities.
C. The Company acts to reduce the compensation, bonus or incentives of the
Executive.
7. Consequences of Breach by the Company
A. If this Agreement is terminated pursuant to Section 5 hereof, or if the
Company shall terminate the Executive or the Executive's duties under this
Agreement in any way that is a breach by the Company, the following shall
apply:
i. The Executive shall receive a cash payment that is equal to the
present value of the Executive's base salary hereunder for the
remainder of the term, payable within 30 days of the date of such
termination.
ii. The Executive shall be entitled to bonus payments and benefits as
provided in Section 3 (it being understood, however, that all
such bonus payments, if made pursuant to this clause, shall be
paid in cash regardless of whether or not such payments exceed
the cash limit.
iii. All stock options and common stock and restricted stock granted
by the Company to the Executive under this Agreement shall
accelerate and become immediately vested and exercisable.
B. The parties believe that because of the limitations of Section 5 the
above payments do not constitute "Excess Parachute Payments" under section
280G of the Internal Revenue Code of 1954, as amended (the Code).
Notwithstanding such belief, if any benefit is determined to be an "Excess
Parachute Payment" the Company shall pay the Executive an additional amount
(Tax Payment) such that (x) the excess of all Excess Parachute Payments
(including payment under this sentence) over the sum of the excise tax
thereon under section 4999 of the Code and under applicable state law is
equal to (y) the excess of all Excess Parachute Payments (excluding
payments under this sentence) over income tax thereon under subtitle A of
the Code and under applicable state law provided that the Company shall not
be obligated to make tax payment in excess of the value of 6.6667
Compensation Years. For the purposes hereof, the value of a Compensation
Year, including stock options and bonus entitlements, is defined as equal
two (2) times the base salary set forth in this Agreement.
8. Change of Control
If, within twenty-four (24) months following a change of control the Executive
is terminated, the termination shall be deemed a "Change of Control
Termination." For the purpose of this paragraph... (a) the delivery of a notice
of termination by the Company... within 24 months of a Change of Control and (b)
a Constructive Discharge within 24 months following a Change of Control will
also be deemed a Change of Control Termination. In the event of a Change of
Control Termination, the Company will pay to the Executive a lump sum payment of
299% of the Executive's average annual base salary plus both quarterly and
annual incentive bonuses during the preceding 3 year period. In the event that a
Change of Control Termination occurs before the Executive completes three (3)
years of service, the lump sum payment will be valued at 299% of the Executive's
average annual base salary plus both quarterly and annual incentive bonuses
during all years of service. Additionally, any options and or restricted stock
granted to the Executive shall become fully vested as of the date of the Change
of Control Termination. Provided further, the Executive will receive a cash
payment equal to the value of any options anticipated to be granted... within
three (3) years following the Change of Control Termination.
<PAGE>
If any portion of any payment or distribution by the Company, to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this section ... shall be subject to the
excise tax imposed by section 4999 of the (Internal Revenue) Code, or any
interest or penalties are incurred by the Executive with respect to such excise
tax... the Company shall pay to the Executive an additional payment (the
Gross-up Payment) in an amount such that after the payment of such Excise Tax,
including, without limitation, any income tax and excise tax imposed on the
Gross-up payment, the Executive retains an amount including the Gross-up Payment
equal to the total payment hereunder without regard to the Gross-up Payment.
"Change of Control" shall be deemed to have occurred if at any time or from time
to time after the date of this agreement:
i. Any "person" or "group" ... is or becomes the "beneficial owner"
... directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the
Company's then outstanding securities... or,
ii. The stockholders of the Company approve a merger or consolidation
with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company...
continuing to represent... more than 50% of the combined voting
power of the voting securities or such surviving entity
outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets...or
iii. The Company has a change in Board Majority unapproved by at least
three-fourths of the directors.
9. Remedies
The Company recognizes that because of the Executive's special talents, stature,
and opportunities in the industry, and because of the creative nature of and
compensation practices of the industry and the material impact that individual
projects can have on a company's results of operations, in the event of
termination by the Company hereunder or in the event of termination by the
Executive before the end of the agreed term, the Company acknowledges and agrees
that the provisions of this Agreement regarding further payments of base salary,
bonuses and the exercisability of stock options constitute fair and reasonable
provisions for the consequences of such termination, do constitute a penalty and
such payments and benefits shall not be limited or reduced by amounts that the
Executive might earn or be able to earn from any other employment or ventures
during the remainder of the agreed term of this Agreement.
<PAGE>
10. Notices
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
be certified mail, postage pre-paid, or recognized overnight delivery service;
If to the Company:
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
Attn.: Daniel Hoyng, CEO
If to the Executive:
Mr. Daniel Hoyng
310 Nichols Drive
Taunton, MA 02780
Final Agreement
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
11. Governing Law
This Agreement shall be construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts.
12. Headings
Headings in this Agreement are provided for convenience only and shall not be
used to construe meaning or intent.
13. Binding Agreement
This Agreement shall be binding upon and inure to the benefit of the Executive,
his heirs, distributees and assigns.
14. Severability
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
15. Arbitration
The parties agree that they will use their best efforts to amicably resolve any
dispute arising out of or relating to this Agreement. Any controversy, claim or
dispute that cannot be so resolved shall be settled by final binding arbitration
in accordance with the rules of the American Arbitration Association and
judgement upon the award rendered by the arbitrator or arbitrators may be
entered in any court having jurisdiction thereof. Any such Arbitration shall be
concluded in such place as shall be mutually agreed upon by the parties. Within
fifteen (15) days of the commencement of the arbitration, each party shall
<PAGE>
select one person to act as arbitrator, and the two arbitrators shall select a
third arbitrator within ten (10) days of their appointment. Each party shall
bear its own costs and expenses and an equal share of the arbitrator's expenses
and administrative fees of arbitration.
16. Protection of the Company's Interests
During the term of this Agreement, the Executive shall not directly or
indirectly engage in competition with the Company. At no time shall the
Executive divulge, furnish, or make accessible to any person any information of
a confidential or proprietary nature obtained by him while in the employ of the
Company except as necessary in the performance of his duties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
/s/ Daniel J. Hoyng
- -----------------------
Daniel J. Hoyng
Executive's Signature and Acceptance
/s/ Vittorio Bianchi
- -----------------------
Vittorio Bianchi
Director
National Boston Medical, Inc.
EXHIBIT 10.42
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment agreement (Agreement) is made and effective this 23rd
Day of July,1999 by and between National Boston Medical, Inc. (Company) and
Ernest Zavoral (Executive).
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment
The Company hereby agrees to employ the Executive, for a term beginning on the
date of this Agreement and ending July 26, 2001 as its Chief Operating Officer
or at a higher responsible management position with the Company and the
Executive hereby accepts such employment in accordance with the terms of this
Agreement.
Not withstanding the aforesaid, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before July 26, 2001, the
remaining term of the Agreement shall be extended such that each and every
moment of time thereafter, the remaining term shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after July 26, 2001, the Board of Directors or the Executive Committee of
the Company notifies the Executive in writing of its determination to have the
date of this Agreement expire one year from the date of such notification.
In the event of any conflict or ambiguity between the terms of this Agreement
and terms of employment applicable to regular employees, the terms of this
Agreement shall control.
2. Duties of the Executive
The Executive shall devote substantial time, attention and energy to the affairs
of the Company and/or its subsidiaries during the term of this Agreement and
shall have such duties, responsibilities and authority as shall be the character
and dignity appropriate and consistent with the position and title of Chief
Operating Officer or such responsibility or authority as from time to time
additionally authorized by the Board of Directors. The Executive may engage in
other activities, such as activities including serving on the Board of Directors
of other corporations/organizations, and/or advising other
corporations/organizations in each case to the extent that such activities do
not materially detract from or limit the performance of the Executive's duties
under this Agreement, or inhibit in any material way the business of the Company
and its subsidiaries. The Executive will engage in no activity, paid or
otherwise, for a competitor of the Company so long as this Agreement is in
effect. The Executive shall perform all duties in a professional, ethical and
businesslike manner.
The Executive will not be required to render services hereunder outside of the
Boston/Taunton metropolitan area without his approval. Whether or not such
approval is given, The Executive shall be entitled to full compensation as
provided for in this Agreement. The Executive shall have the right to perform
his duties out of any of his personal residences, provided that such does not
result in actions injurious to the Company.
3. Compensation
The Executive will be paid compensation during this Agreement as follows:
<PAGE>
A.) A base salary, commencing July 23, 1999 of not less than $100,000 per
year, (or such greater amounts as may be approved by the Board of Directors
or the executive committee in accordance with authority given by the Board
of Directors) payable in installments on a semi-monthly but not less than a
monthly schedule. The Executive's base salary may be increased consistent
with recommendations of the Executive Committee of the Board. At least
annually the Executive Committee shall review the Executive's base salary
for competitiveness and appropriateness in the industry. In no event shall
the Executive's base salary be less than $100,000 on an annual basis.
B.) The Company agrees to pay a Quarterly Bonus of not less than $5,000 per
calendar quarter to the Executive. During the term of this Agreement said
bonus shall be paid in cash no later than the 1st day of each calendar
quarter. The effective date of the quarterly bonus for this Agreement shall
be April 1, 1999, with the first payment due and payable to the Executive
on or before July 1, 1999 and continuing thereafter until the first day of
July 2002. From time to time during the term of this Agreement, the
Executive may receive a greater quarterly bonus if approved by the
Executive Committee; however, the quarterly bonus shall never be less than
$5,000.
C.) In addition to the other payments referred to in this Agreement, the
Executive shall be entitled to receive and participate in an annual
incentive bonus plan. The amount of the Executive's participation and the
benefits paid under the incentive bonus plan shall be based upon goals
recommended by the Executive and approved by the Executive Committee. The
annual incentive bonus plan payments will be paid in cash and the payment
will be made not later than 30 days following the close of the fiscal year
for each year this Agreement is in effect.
D.) In addition to other payments referred to in this Agreement, the
Executive will be granted 400,000 shares of stock of the Company upon
execution of this Agreement and 150,000 additional shares annually upon the
anniversary date of this Agreement (July 23, 1999) for each of the
succeeding years of the initial term of the agreement. The above shares
shall carry an anti-dilution provision allowing the Executive in the event
of any additional stock offerings of the Company, to purchase up to the
number of shares necessary to maintain the Executive's stock position prior
to the offering. Such shares will be made available at 75% of the initial
price of each offering. The initial shares shall vest upon execution and be
delivered not later than August 30, 1999. The additional shares shall vest
and be delivered not later that July 23, 2000; July 23, 2001. Prior to
vesting, the Executive shall be entitled to receive dividends on and vote
the unvested shares. Should this Agreement be terminated prior to July 23,
2001 such shares shall be delivered and vested to the Executive as stated
above.
E.) It is intended that the Executive have the opportunity to attain a
reasonable ownership position of not less than 1.0 % of the outstanding
stock of the Company. In furtherance of this goal and in addition to the
payments referred to in this Agreement, the Executive shall be entitled to
receive discount option grants (the exercise purchase price shall be the
lower of the average price of the NBM stock during the last twelve months
or the current market price as of the date of the option) to purchase the
stock of the Company totaling no less than 750,000 shares over 3 years. The
first such award will be for no less than 250,000 shares with an award date
of July 26, 1999 and each additional year shares shall be awarded each June
1st through the year 2001. The foregoing shall become vested immediately
upon the award of the shares. The Executive shall have the right to
exercise the option by payment in cash or if approved by the Board of
Directors, the Executive may execute a short term note with the Company for
payment of such stock and options. The exercise period of any options shall
be three years from the date of the grant
<PAGE>
F.) The Executive may choose once each year of this Agreement to convert
one-third of his annual salary to stock or stock options, the purchase
price shall be the lower of the average price of the NBM stock during the
last twelve months or the current market price as of the date the Executive
chooses to exercise such option.
G.) If any payments due the Executive under this Agreement result in the
Executive's liability for an excise tax ("parachute tax") under Section 49
of the Internal Revenue Code of 1986, as amended (the "Code") the Company
will pay to the Executive, after deducting any Federal, State or local
income tax imposed, the "parachute tax" liability. Such payment shall be
made to the Executive no later than 30 days prior to the due date of the
"parachute tax."
H.) All shares included in this agreement shall carry piggy back
registration rights.
4. Benefits
A.) Holidays: The Executive will be entitled to at least nine (9) paid
holidays each calendar year and twelve (12) personal days. The Company will
notify the Executive on or about the beginning of each calendar year with
respect to the holiday schedule for the coming year. Personal holidays, if
any, will be scheduled in advance subject to the requirements of the
Company. Such holidays must be taken during the calendar year and unused
days shall not carry forward into the next year.
B.)Vacation: The Executive shall be entitled to five (5) weeks or
thirty-five (35) paid vacation days per year effective as of the date of
the Agreement.
C.) Sick Leave: The Executive shall be entitled to sick leave and emergency
leave according to the regular policies and procedures of the Company.
Additional sick leave or emergency leave over and above paid leave provided
by the Company, if any, shall be granted at the discretion of the Executive
Committee of the Board of Directors.
D.) Medical and Group Life Insurance: Company agrees to include Executive
and his family members in the group medical and hospital plan of the
Company and provide group life insurance at no charge to the Executive, in
the amount of $1,000,000 during the term of this Agreement. Executive shall
be responsible for any state or federal tax imposed upon these benefits.
E.) The Company shall provide at its' expense disability insurance for the
Executive for the term of this Agreement.
F.) The Company shall provide at its' expense Officer's and Director's
liability insurance covering the Executive for the term of this Agreement.
Such coverage shall be in the amount of not less than $5 million and shall
be effective not later than September 1, 1999.
G.) Pension and Profit Sharing Plan: The Executive shall be eligible to
participate in any pension or profit sharing plan or other type plan
adopted by the Company for the benefit of its officers and/or regular
employees.
H.) In addition to any other compensation, the Executive will receive an
automobile of his choice not to exceed $800 per month or an automobile
allowance in the amount of $800 per month to be paid to the Executive each
month during the term of this Agreement.
<PAGE>
I.) Expense Reimbursement: The Executive shall be entitled to reimbursement
for all reasonable expenses, including travel and entertainment incurred by
the Executive in the performance of his duties. The Executive will maintain
records and written receipts as required by Company policy and reasonably
requested by the Board of Directors to substantiate such expenses. Subject
to the terms of Section 2, the Executive may, at his sole discretion, work
from his residence or a location of his choice. The Company will reimburse
the Executive for reasonable home office use, including but not limited to
an appropriate computer/modem installation.
J.) Cell phone and Pager Reimbursement: The Executive shall be entitled to
reimbursement for cell phone and nation wide pager service or the Company
may at its expense provide the Executive with such service.
K.) Financial and Tax Advice: During (a) the term of this Agreement (b) the
12 month period following the termination of this Agreement as a result of
Death and/or Disability, and (c) the three year period following the
voluntary termination by the Executive with good reason or the involuntary
termination by the Company without cause... the Company shall provide the
Executive (or, if Executive shall have died, his estate) at the Company's
expense, third party professional financial and tax advisory services,
primarily oriented to planning in light of the Executive's entitlement to
compensation and benefits and appropriate in light of circumstances of
Executive or his estate. Executive (or his estate) may select the service
professional of his choice.
5. Termination
A. The Company shall have the right to terminate this Agreement under the
following circumstances: i. Upon the death of the Executive. ii. Upon
notice to the Executive in the event of notice of illness or other
disability which has incapacitated him from performing his duties for 12
consecutive months as determined in good faith by the Board. iii. For good
cause upon notice from the Company. Termination by the Company of the
Executive for "good cause" as used in this Agreement shall be limited to
mean gross negligence, misappropriation or theft of Company funds or
conviction of state or federal offenses which would prevent the Executive
from performance of his duties. With respect to any termination for good
cause by the Company, the specifics of the cause shall be communicated to
the Executive in writing at least thirty (30) days prior to the date on
which the termination is proposed to take effect. The Executive shall be
given the opportunity to correct or respond to such cause.
B. If this Agreement is terminated pursuant to Section 4 (A - iii) above,
Executive's rights and the Company's obligations hereunder shall forthright
terminate except as expressly provided in this Agreement.
C. If this Agreement is terminated pursuant to Section 4 (A - i or ii)
hereof, Executive or his estate shall be entitled to receive 100% of the
Executives salary and incentives for the balance of the term of the
Agreement, together with bonus and other incentives as provided for in this
Agreement.
6. Termination by Executive
The Executive shall have the right to terminate this Agreement with thirty (30)
days written notice the Company given within sixty (60) days of the occurrence
of any of the following events:
<PAGE>
A. The Executive is not elected or retained as COO of the Company
B. The Company acts to materially reduce the Executive's position, title,
duties, authority or responsibilities.
C. The Company acts to reduce the compensation, bonus or incentives of the
Executive.
7. Consequences of Breach by the Company
A. If this Agreement is terminated pursuant to Section 5 hereof, or if the
Company shall terminate the Executive or the Executive's duties under this
Agreement in any way that is a breach by the Company, the following shall
apply:
i. The Executive shall receive a cash payment that is equal to the
present value of the Executive's base salary hereunder for the remainder
of the term, payable within 30 days of the date of such termination.
ii. The Executive shall be entitled to bonus payments and benefits as
provided in Section 3 (it being understood, however, that all such bonus
payments, if made pursuant to this clause, shall be paid in cash
regardless of whether or not such payments exceed the cash limit.
iii. All stock options and common stock and restricted stock granted by
the Company to the Executive under this Agreement shall accelerate and
become immediately vested and exercisable.
B. The parties believe that because of the limitations of Section 5 the
above payments do not constitute "Excess Parachute Payments" under section
280G of the Internal Revenue Code of 1954, as amended (the Code).
Notwithstanding such belief, if any benefit is determined to be an "Excess
Parachute Payment" the Company shall pay the Executive an additional
amount (Tax Payment) such that (x) the excess of all Excess Parachute
Payments (including payment under this sentence) over the sum of the
excise tax thereon under section 4999 of the Code and under applicable
state law is equal to (y) the excess of all Excess Parachute Payments
(excluding payments under this sentence) over income tax thereon under
subtitle A of the Code and under applicable state law provided that the
Company shall not be obligated to make tax payment in excess of the value
of 6.6667 Compensation Years. For the purposes hereof, the value of a
Compensation Year, including stock options and bonus entitlements, is
defined as equal two (2) times the base salary set forth in this
Agreement.
8. Change of Control
If, within twenty-four (24) months following a change of control, the Executive
is terminated, the termination shall be deemed a "Change of Control
Termination." For the purpose of this paragraph... (a) the delivery of a notice
of termination by the Company... within 24 months of a Change of Control and (b)
a Constructive Discharge within 24 months following a Change of Control will
also be deemed a Change of Control Termination. In the event of a Change of
Control Termination, the Company will pay to the Executive a lump sum payment of
299% of the Executive's average annual base salary plus both quarterly and
annual incentive bonuses during the preceding 3 year period. In the event that a
Change of Control Termination occurs before the Executive completes three (3)
years of service, the lump sum payment will be valued at 299% of the Executive's
average annual base salary plus both quarterly and annual incentive bonuses
during all years of service. Additionally, any options and or restricted stock
granted to the Executive shall become fully vested as of the date of the Change
of Control Termination. Provided further, the Executive will receive a cash
payment equal to the value
<PAGE>
of any options anticipated to be granted... within three (3) years following the
Change of Control Termination.
If any portion of any payment or distribution by the Company, to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this section ... shall be subject to the
excise tax imposed by section 4999 of the (Internal Revenue) Code, or any
interest or penalties are incurred by the Executive with respect to such excise
tax... the Company shall pay to the Executive an additional payment (the
Gross-up Payment) in an amount such that after the payment of such Excise Tax,
including, without limitation, any income tax and excise tax imposed on the
Gross-up payment, the Executive retains an amount including the Gross-up Payment
equal to the total payment hereunder without regard to the Gross-up Payment.
"Change of Control" shall be deemed to have occurred if at any time or from time
to time after the date of this agreement:
i. Any "person" or "group" ... is or becomes the "beneficial owner" ...
directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company's then outstanding
securities... or,
ii. The stockholders of the Company approve a merger or consolidation
with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company... continuing to
represent... more than 50% of the combined voting power of the voting
securities or such surviving entity outstanding immediately after such
merger or consolidation, or the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets...or
iii. The Company has a change in Board Majority unapproved by at least
three-fourths of the directors.
9. Remedies
The Company recognizes that because of the Executive's special talents, stature,
and opportunities in the industry, and because of the creative nature of and
compensation practices of the industry and the material impact that individual
projects can have on a company's results of operations, in the event of
termination by the Company hereunder or in the event of termination by the
Executive before the end of the agreed term, the Company acknowledges and agrees
that the provisions of this Agreement regarding further payments of base salary,
bonuses and the exercisability of stock options constitute fair and reasonable
provisions for the consequences of such termination, do constitute a penalty and
such payments and benefits shall not be limited or reduced by amounts that the
Executive might earn or be able to earn from any other employment or ventures
during the remainder of the agreed term of this Agreement.
<PAGE>
10. Notices
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
be certified mail, postage pre-paid, or recognized overnight delivery service;
If to the Company:
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
Attn.: Daniel Hoyng, CEO
If to the Executive:
Mr. Ernest Zavoral
211 Dartmouth Ave.
Canfield, OH 44406
11. Final Agreement
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
12. Governing Law
This Agreement shall be construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts.
13. Headings
Headings in this Agreement are provided for convenience only and shall not be
used to construe meaning or intent.
14. Binding Agreement
This Agreement shall be binding upon and inure to the benefit of the Executive,
his heirs, distributees and assigns.
15. Severability
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
<PAGE>
16. Arbitration
The parties agree that they will use their best efforts to amicably resolve any
dispute arising out of or relating to this Agreement. Any controversy, claim or
dispute that cannot be so resolved shall be settled by final binding arbitration
in accordance with the rules of the American Arbitration Association and
judgement upon the award rendered by the arbitrator or arbitrators may be
entered in any court having jurisdiction thereof. Any such Arbitration shall be
concluded in such place as shall be mutually agreed upon by the parties. Within
fifteen (15) days of the commencement of the arbitration, each party shall
select one person to act as arbitrator, and the two arbitrators shall select a
third arbitrator within ten (10) days of their appointment. Each party shall
bear its own costs and expenses and an equal share of the arbitrator's expenses
and administrative fees of arbitration.
17. Protection of the Company's Interests
During the term of this Agreement, the Executive shall not directly or
indirectly engage in competition with the Company. At no time shall the
Executive divulge, furnish, or make accessible to any person any information of
a confidential or proprietary nature obtained by him while in the employ of the
Company except as necessary in the performance of his duties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
/s/ Ernest Zavoral
- -----------------------
Ernest Zavoral
Executive's Signature and Acceptance
/s/ Daniel J. Hoyng
- ---------------------------
Daniel J. Hoyng
Chairman and CEO
National Boston Medical, Inc.
EXHIBIT 10.43
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment agreement (Agreement) is made and effective this 2nd
Day of August 1999 by and between National Boston Medical, Inc. (Company) and
Barry P. McFarland (Executive).
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment
The Company hereby agrees to employ the Executive for a term beginning on the
date of this Agreement and ending August 2, 2000 as its Chief Financial Officer
(CFO) or at a higher responsible management position with the Company and the
Executive hereby accepts such employment in accordance with the terms of this
Agreement.
Not withstanding the aforesaid, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before August 2, 2000, the
remaining term of the Agreement shall be extended such that each and every
moment of time thereafter, the remaining term shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after August 2, 2000, the Board of Directors or the Executive Committee of
the Company notifies the Executive in writing of its determination to have the
date of this Agreement expire one year from the date of such notification.
In the event of any conflict or ambiguity between the terms of this Agreement
and terms of employment applicable to regular employees, the terms of this
Agreement shall control.
2. Duties of the Executive
The Executive shall devote substantial time, attention and energy to the affairs
of the Company and/or its subsidiaries during the term of this Agreement and
shall have such duties, responsibilities and authority as shall be the character
and dignity appropriate and consistent with the position and title of CFO or
such responsibility or authority as from time to time additionally authorized by
the Board of Directors. The Executive may engage in other activities, such as
activities including serving on the Board of Directors of other
corporations/organizations, and/or advising other corporations/organizations in
each case to the extent that such activities do not materially detract from or
limit the performance of the Executive's duties under this Agreement, or inhibit
in any material way the business of the Company and its subsidiaries. The
Executive will engage in no activity, paid or otherwise, for a competitor of the
Company so long as this Agreement is in effect. The Executive shall perform all
duties in a professional, ethical and businesslike manner.
The Executive will not be required to render services hereunder outside of the
Boston/Taunton metropolitan area without his approval. Whether or not such
approval is given, The Executive shall be entitled to full compensation as
provided for in this Agreement. The Executive shall have the right to perform
his duties out of any of his personal residences, provided that such does not
result in actions injurious to the Company.
3. Compensation
The Executive will be paid compensation during this Agreement as follows:
A.) A base salary, commencing August 2, 1999 of not less than $125,000 per
year, (or such greater amounts as may be approved by the Board of Directors
or the executive committee in accordance with authority given by the
<PAGE>
Board of Directors) payable in installments on a semi-monthly but not less
than a monthly schedule. The Executive's base salary may be increased
consistent with recommendations of the Executive Committee of the Board. At
least annually the Executive Committee shall review the Executive's base
salary for competitiveness and appropriateness in the industry. In no event
shall the Executive's base salary be less than $125,000 on an annual basis.
B.) The Company agrees to pay a Quarterly Bonus of not less than $5,000 per
calendar quarter to the Executive. During the term of this Agreement said
bonus shall be paid in cash no later than the 1st day of each calendar
quarter. The effective date of the quarterly bonus for this Agreement shall
be April 1, 1999, with the first payment due and payable to the Executive
on or before July 1, 1999 and continuing thereafter until the first day of
September 2000. From time to time during the term of this Agreement, the
Executive may receive a greater quarterly bonus if approved by the
Executive Committee; however, the quarterly bonus shall never be less than
$5,000.
C.) In addition to the other payments referred to in this Agreement, the
Executive shall be entitled to receive and participate in an annual
incentive bonus plan. The amount of the Executive's participation and the
benefits paid under the incentive bonus plan shall be based upon goals
recommended by the Executive and approved by the Executive Committee. The
annual incentive bonus plan payments will be paid in cash and the payment
will be made not later than 30 days following the close of the fiscal year
for each year this Agreement is in effect.
D.) In addition to other payments referred to in this Agreement, the
Executive will be granted 500,000 shares of stock of the Company upon
execution of this Agreement and 500,000 additional shares upon the
anniversary date of this Agreement (August 2, 2000). The above shares shall
carry an anti-dilution provision allowing the Executive in the event of any
additional stock offerings of the Company, to purchase up to the number of
shares necessary to maintain the Executive's stock position prior to the
offering. Such shares will be made available at 75% of the initial price of
each offering. The initial shares shall vest upon execution and be
delivered not later than August 30, 1999. The additional shares shall vest
and be delivered not later that August 2, 2000. Prior to vesting, the
Executive shall be entitled to receive dividends on and vote the unvested
shares. Should this Agreement be terminated prior to August 2, 2000 such
shares shall be delivered and vested to the Executive as stated above.
E.) It is intended that the Executive have the opportunity to attain a
reasonable ownership position of not less than 1.0 % of the outstanding
stock of the Company. In furtherance of this goal and in addition to the
payments referred to in this Agreement, the Executive shall be entitled to
receive discount option grants (the exercise purchase price shall be the
lower of the average price of the NBM stock during the last twelve months
or the current market price as of the date of the option) to purchase the
stock of the Company totaling no less than 500,000 shares. These shares
will be awarded as of August 2, 1999. The foregoing shall become vested
immediately upon the award of the shares. The Executive shall have the
right to exercise the option by payment in cash or if approved by the Board
of Directors, the Executive may execute a short term note with the Company
for payment of such stock and options. The exercise period of any options
shall be three years from the date of the grant
F.) The Executive may choose once each year of this Agreement to convert
one-third of his annual salary to stock or stock options, the purchase
price shall be the lower of the average price of the NBM stock during the
last twelve months or the current market price as of the date the Executive
chooses to exercise such option.
<PAGE>
G.) If any payments due the Executive under this Agreement result in the
Executive's liability for an excise tax ("parachute tax") under Section 49
of the Internal Revenue Code of 1986, as amended (the "Code") the Company
will pay to the Executive, after deducting any Federal, State or local
income tax imposed, the "parachute tax" liability. Such payment shall be
made to the Executive no later than 30 days prior to the due date of the
"parachute tax."
H.) All shares included in this agreement shall carry piggy back
registration rights.
4. Benefits
A.) Holidays: The Executive will be entitled to at least nine (9) paid
holidays each calendar year and twelve (12) personal days. The Company will
notify the Executive on or about the beginning of each calendar year with
respect to the holiday schedule for the coming year. Personal holidays, if
any, will be scheduled in advance subject to the requirements of the
Company. Such holidays must be taken during the calendar year and unused
days shall not carry forward into the next year.
B.) Vacation: The Executive shall be entitled to five (5) weeks or
thirty-five (35) paid vacation days per year. Such days to accrue to the
Executive at a rate of 1.3462 days per week from the effective date of the
Agreement which for this purpose shall be April 1, 1999.
C.) Sick Leave: The Executive shall be entitled to sick leave and emergency
leave according to the regular policies and procedures of the Company.
Additional sick leave or emergency leave over and above paid leave provided
by the Company, if any, shall be granted at the discretion of the Executive
Committee of the Board of Directors.
D.) Medical and Group Life Insurance: Company agrees to include Executive
and his family members in the group medical and hospital plan of the
Company and provide group life insurance at no charge to the Executive, in
the amount of $1,000,000 during the term of this Agreement. Executive shall
be responsible for any state or federal tax imposed upon these benefits.
E.) The Company shall provide at its' expense disability insurance for the
Executive for the term of this Agreement.
F.) The Company shall provide at its' expense Officer's and Director's
liability insurance covering the Executive for the term of this Agreement.
Such coverage shall be in the amount of not less than $5 million and shall
be effective not later than September 1, 1999.
G.) Pension and Profit Sharing Plan: The Executive shall be eligible to
participate in any pension or profit sharing plan or other type plan
adopted by the Company for the benefit of its officers and/or regular
employees.
H.) In addition to any other compensation, the Executive will receive an
automobile allowance in the amount of $800 per month to be paid to the
Executive each month during the term of this Agreement.
I.) Expense Reimbursement: The Executive shall be entitled to reimbursement
for all reasonable expenses, including travel and entertainment incurred by
the Executive in the performance of his duties. The Executive will maintain
<PAGE>
records and written receipts as required by Company policy and reasonably
requested by the Board of Directors to substantiate such expenses. Subject
to the terms of Section 2, the Executive may, at his sole discretion, work
from his residence or a location of his choice. The Company will reimburse
the Executive for reasonable home office use, including but not limited to
an appropriate computer/modem installation.
J.) Cell phone and Pager Reimbursement: The Executive shall be entitled to
reimbursement for cell phone and nation wide pager service or the Company
may at its expense provide the Executive with such service.
K.) Financial and Tax Advice: During (a) the term of this Agreement (b) the
12 month period following the termination of this Agreement as a result of
Death and/or Disability, and (c) the three year period following the
voluntary termination by the Executive with good reason or the involuntary
termination by the Company without cause... the Company shall provide the
Executive (or, if Executive shall have died, his estate) at the Company's
expense, third party professional financial and tax advisory services,
primarily oriented to planning in light of the Executive's entitlement to
compensation and benefits and appropriate in light of circumstances of
Executive or his estate. Executive (or his estate) may select the service
professional of his choice.
5. Termination
A. The Company shall have the right to terminate this Agreement under the
following circumstances:
i. Upon the death of the Executive.
ii. Upon notice to the Executive in the event of notice of illness or
other disability which has incapacitated him from performing his
duties for 12 consecutive months as determined in good faith by the
Board.
iii. For good cause upon notice from the Company. Termination by the
Company of the Executive for "good cause" as used in this Agreement
shall be limited to mean gross negligence, misappropriation or theft
of Company funds or conviction of state or federal offenses which
would prevent the Executive from performance of his duties.
With respect to any termination for good cause by the Company, the
specifics of the cause shall be communicated to the Executive in writing at
least thirty (30) days prior to the date on which the termination is
proposed to take effect. The Executive shall be given the opportunity to
correct or respond to such cause.
B. If this Agreement is terminated pursuant to Section 4 (A - iii) above,
Executive's rights and the Company's obligations hereunder shall forthright
terminate except as expressly provided in this Agreement.
C. If this Agreement is terminated pursuant to Section 4 (A - i or ii)
hereof, Executive or his estate shall be entitled to receive 100% of the
Executives salary and incentives for the balance of the term of the
Agreement, together with bonus and other incentives as provided for in this
Agreement.
6. Termination by Executive
The Executive shall have the right to terminate this Agreement with thirty (30)
days written notice the Company given within sixty (60) days of the occurrence
of any of the following events:
A. The Executive is not elected or retained as CFO of the Company
B. The Company acts to materially reduce the Executive's position, title,
duties, authority or responsibilities.
<PAGE>
C. The Company acts to reduce the compensation, bonus or incentives of the
Executive.
7. Consequences of Breach by the Company
A. If this Agreement is terminated pursuant to Section 5 hereof, or if the
Company shall terminate the Executive or the Executive's duties under this
Agreement in any way that is a breach by the Company, the following shall
apply:
i. The Executive shall receive a cash payment that is equal to the
present value of the Executive's base salary hereunder for the
remainder of the term, payable within 30 days of the date of such
termination.
ii. The Executive shall be entitled to bonus payments and benefits as
provided in Section 3 (it being understood, however, that all such
bonus payments, if made pursuant to this clause, shall be paid in cash
regardless of whether or not such payments exceed the cash limit.
iii. All stock options and common stock and restricted stock granted by the
Company to the Executive under this Agreement shall accelerate and
become immediately vested and exercisable.
B. The parties believe that because of the limitations of Section 5 the
above payments do not constitute "Excess Parachute Payments" under section
280G of the Internal Revenue Code of 1954, as amended (the Code).
Notwithstanding such belief, if any benefit is determined to be an "Excess
Parachute Payment" the Company shall pay the Executive an additional amount
(Tax Payment) such that (x) the excess of all Excess Parachute Payments
(including payment under this sentence) over the sum of the excise tax
thereon under section 4999 of the Code and under applicable state law is
equal to (y) the excess of all Excess Parachute Payments (excluding
payments under this sentence) over income tax thereon under subtitle A of
the Code and under applicable state law provided that the Company shall not
be obligated to make tax payment in excess of the value of 6.6667
Compensation Years. For the purposes hereof, the value of a Compensation
Year, including stock options and bonus entitlements, is defined as equal
two (2) times the base salary set forth in this Agreement.
8. Change of Control
If, within twenty-four (24) months following a change of control, the Executive
is terminated, the termination shall be deemed a "Change of Control
Termination." For the purpose of this paragraph... (a) the delivery of a notice
of termination by the Company... within 24 months of a Change of Control and (b)
a Constructive Discharge within 24 months following a Change of Control will
also be deemed a Change of Control Termination. In the event of a Change of
Control Termination, the Company will pay to the Executive a lump sum payment of
299% of the Executive's average annual base salary plus both quarterly and
annual incentive bonuses during the preceding 3 year period. In the event that a
Change of Control Termination occurs before the Executive completes three (3)
years of service, the lump sum payment will be valued at 299% of the Executive's
average annual base salary plus both quarterly and annual incentive bonuses
during all years of service. Additionally, any options and or restricted stock
granted to the Executive shall become fully vested as of the date of the Change
of Control Termination. Provided further, the Executive will receive a cash
payment equal to the value of any options anticipated to be granted... within
three (3) years following the Change of Control Termination.
<PAGE>
If any portion of any payment or distribution by the Company, to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this section ... shall be subject to the
excise tax imposed by section 4999 of the (Internal Revenue) Code, or any
interest or penalties are incurred by the Executive with respect to such excise
tax... the Company shall pay to the Executive an additional payment (the
Gross-up Payment) in an amount such that after the payment of such Excise Tax,
including, without limitation, any income tax and excise tax imposed on the
Gross-up payment, the Executive retains an amount including the Gross-up Payment
equal to the total payment hereunder without regard to the Gross-up Payment.
"Change of Control" shall be deemed to have occurred if at any time or from time
to time after the date of this agreement:
i. Any "person" or "group" ... is or becomes the "beneficial owner" ...
directly or indirectly, of securities of the Company representing 40%
or more of the combined voting power of the Company's then outstanding
securities... or,
ii. The stockholders of the Company approve a merger or consolidation with
any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company... continuing to
represent... more than 50% of the combined voting power of the voting
securities or such surviving entity outstanding immediately after such
merger or consolidation, or the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets...or
iii. The Company has a change in Board Majority unapproved by at least
three-fourths of the directors
9. Remedies
The Company recognizes that because of the Executive's special talents, stature,
and opportunities in the industry, and because of the creative nature of and
compensation practices of the industry and the material impact that individual
projects can have on a company's results of operations, in the event of
termination by the Company hereunder or in the event of termination by the
Executive before the end of the agreed term, the Company acknowledges and agrees
that the provisions of this Agreement regarding further payments of base salary,
bonuses and the exercisability of stock options constitute fair and reasonable
provisions for the consequences of such termination, do constitute a penalty and
such payments and benefits shall not be limited or reduced by amounts that the
Executive might earn or be able to earn from any other employment or ventures
during the remainder of the agreed term of this Agreement.
<PAGE>
10. Notices
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
be certified mail, postage pre-paid, or recognized overnight delivery service;
If to the Company:
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
Attn.: Daniel Hoyng, CEO
If to the Executive:
Mr. Barry McFarland
18 Twin Spring Dr.
Boylston, MA 01505
11. Final Agreement
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
12. Governing Law
This Agreement shall be construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts.
13. Headings
Headings in this Agreement are provided for convenience only and shall not be
used to construe meaning or intent.
14. Binding Agreement
This Agreement shall be binding upon and inure to the benefit of the Executive,
his heirs, distributees and assigns.
15. Severability
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
16. Arbitration
The parties agree that they will use their best efforts to amicably resolve any
dispute arising out of or relating to this Agreement. Any controversy, claim or
dispute that cannot be so resolved shall be settled by final binding arbitration
in accordance with the rules of the American Arbitration Association and
judgement upon the award rendered by the arbitrator or arbitrators may be
entered in any court having jurisdiction thereof. Any such Arbitration shall be
concluded in such place as shall be mutually agreed upon by the parties. Within
fifteen (15) days of the commencement of the arbitration, each party shall
<PAGE>
select one person to act as arbitrator, and the two arbitrators shall select a
third arbitrator within ten (10) days of their appointment. Each party shall
bear its own costs and expenses and an equal share of the arbitrator's expenses
and administrative fees of arbitration.
17. Protection of the Company's Interests
During the term of this Agreement, the Executive shall not directly or
indirectly engage in competition with the Company. At no time shall the
Executive divulge, furnish, or make accessible to any person any information of
a confidential or proprietary nature obtained by him while in the employ of the
Company except as necessary in the performance of his duties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
/s/ Barry P. McFarland
Barry P. McFarland
Executive's Signature and Acceptance
/s/ Daniel J. Hoyng
Daniel J. Hoyng
Chairman and CEO
National Boston Medical, Inc.
EXHIBIT 10.44
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment agreement (Agreement) is made and effective this 23rd
Day of July,1999 by and between National Boston Medical, Inc. (Company) and
Marek Lozowicki (Executive).
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment
The Company hereby agrees to employ the Executive for a term beginning on the
date of this Agreement and ending July 23, 2000 as its Vice President of
Operations or at a higher responsible management position with the Company and
the Executive hereby accepts such employment in accordance with the terms of
this Agreement.
Not withstanding the aforesaid, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before July 23, 2000, the
remaining term of the Agreement shall be extended such that each and every
moment of time thereafter, the remaining term shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after July 23, 2000, the Board of Directors or the Executive Committee of
the Company notifies the Executive in writing of its determination to have the
date of this Agreement expire one year from the date of such notification.
In the event of any conflict or ambiguity between the terms of this Agreement
and terms of employment applicable to regular employees, the terms of this
Agreement shall control.
2. Duties of the Executive
The Executive shall devote substantial time, attention and energy to the affairs
of the Company and/or its subsidiaries during the term of this Agreement and
shall have such duties, responsibilities and authority as shall be the character
and dignity appropriate and consistent with the position and title of Vice
President Operations or such responsibility or authority as from time to time
additionally authorized by the Board of Directors. The Executive may engage in
other activities, such as activities including serving on the Board of Directors
of other corporations/organizations, and/or advising other
corporations/organizations in each case to the extent that such activities do
not materially detract from or limit the performance of the Executive's duties
under this Agreement, or inhibit in any material way the business of the Company
and its subsidiaries. The Executive will engage in no activity, paid or
otherwise, for a competitor of the Company so long as this Agreement is in
effect. The Executive shall perform all duties in a professional, ethical and
businesslike manner.
The Executive will not be required to render services hereunder outside of the
Boston/Taunton metropolitan area without his approval. Whether or not such
approval is given, The Executive shall be entitled to full compensation as
provided for in this Agreement. The Executive shall have the right to perform
his duties out of any of his personal residences, provided that such does not
result in actions injurious to the Company.
3. Compensation
The Executive will be paid compensation during this Agreement as follows:
<PAGE>
A.) A base salary, commencing July 23, 1999 of not less than $75,000 per
year, (or such greater amounts as may be approved by the Board of Directors
or the executive committee in accordance with authority given by the Board
of Directors) payable in installments on a semi-monthly but not less than a
monthly schedule. The Executive's base salary may be increased consistent
with recommendations of the Executive Committee of the Board. At least
annually the Executive Committee shall review the Executive's base salary
for competitiveness and appropriateness in the industry. In no event shall
the Executive's base salary be less than $75,000 on an annual basis.
B.) The Company agrees to pay a Quarterly Bonus of not less than $3,000 per
calendar quarter to the Executive. During the term of this Agreement said
bonus shall be paid in cash no later than the 1st day of each calendar
quarter. The effective date of the quarterly bonus for this Agreement shall
be April 1, 1999, with the first payment due and payable to the Executive
on or before July 1, 1999 and continuing thereafter until the first day of
July 2002. From time to time during the term of this Agreement, the
Executive may receive a greater quarterly bonus if approved by the
Executive Committee; however, the quarterly bonus shall never be less than
$3,000.
C.) In addition to the other payments referred to in this Agreement, the
Executive shall be entitled to receive and participate in an annual
incentive bonus plan. The amount of the Executive's participation and the
benefits paid under the incentive bonus plan shall be based upon goals
recommended by the Executive and approved by the Executive Committee. The
annual incentive bonus plan payments will be paid in cash and the payment
will be made not later than 30 days following the close of the fiscal year
for each year this Agreement is in effect.
D.) In addition to other payments referred to in this Agreement, the
Executive will be granted 187,500 shares upon execution and an additional
187,500 shares on the anniversary date of this Agreement (July 23, 2000).
The above shares shall carry an anti-dilution provision allowing the
Executive in the event of any additional stock offerings of the Company, to
purchase up to the number of shares necessary to maintain the Executive's
stock position prior to the offering. Such shares will be made available at
75% of the initial price of each offering. The initial shares shall vest
upon execution and be delivered not later than August 30, 1999. The
additional shares shall vest and be delivered not later that July 23, 2000.
Prior to vesting, the Executive shall be entitled to receive dividends on
and vote the unvested shares. Should this Agreement be terminated prior to
July 23, 2000 such shares shall be delivered and vested to the Executive as
stated above.
E.) It is intended that the Executive have the opportunity to attain a
reasonable ownership position of not less than 1.0 % of the outstanding
stock of the Company. In furtherance of this goal and in addition to the
payments referred to in this Agreement, the Executive shall be entitled to
receive discount option grants (the exercise purchase price shall be the
lower of the average price of the NBM stock during the last twelve months
or the current market price as of the date of the option) to purchase the
stock of the Company totaling no less than 400,000 shares. These shares
will be awarded as of July 23,1999. The foregoing shall become vested
immediately upon the award of the shares. The Executive shall have the
right to exercise the option by payment in cash, or if approved by the
Board of Directors, the Executive may execute a short term note with the
Company for payment of such stock and options. The exercise period of any
options shall be three years from the date of the grant.
F.) The Executive may choose once each year of this Agreement to convert
one-third of his annual salary to stock or stock options, the purchase
price shall be the lower of the average price of the
<PAGE>
NBM stock during the last twelve months or the current market price as of
the date the Executive chooses to exercise such option.
G.) In addition to the other payments referred to in this Agreement, the
Company agrees to award to the Executive a signing bonus of 100,000 shares
of stock. Said shares of stock shall be awarded as soon as administratively
practical following July 30, 1999 but not later than August 13, 1999.
H.) If any payments due the Executive under this Agreement result in the
Executive's liability for an excise tax ("parachute tax") under Section 49
of the Internal Revenue Code of 1986, as amended (the "Code") the Company
will pay to the Executive, after deducting any Federal, State or local
income tax imposed, the "parachute tax" liability. Such payment shall be
made to the Executive no later than 30 days prior to the due date of the
"parachute tax."
I.) All shares included in this agreement shall carry piggy back
registration rights.
4. Benefits
A.) Holidays: The Executive will be entitled to at least nine (9) paid
holidays each calendar year and twelve (12) personal days. The Company will
notify the Executive on or about the beginning of each calendar year with
respect to the holiday schedule for the coming year. Personal holidays, if
any, will be scheduled in advance subject to the requirements of the
Company. Such holidays must be taken during the calendar year and unused
days shall not carry forward into the next year.
B.) Vacation: The Executive shall be entitled to five (5) weeks or
thirty-five (35) paid vacation days per year effective as of the date of
the Agreement.
C.) Sick Leave: The Executive shall be entitled to sick leave and emergency
leave according to the regular policies and procedures of the Company.
Additional sick leave or emergency leave over and above paid leave provided
by the Company, if any, shall be granted at the discretion of the Executive
Committee of the Board of Directors.
D.) Medical and Group Life Insurance: Company agrees to include Executive
and his family members in the group medical and hospital plan of the
Company and provide group life insurance at no charge to the Executive, in
the amount of $1,000,000 during the term of this Agreement. Executive shall
be responsible for any state or federal tax imposed upon these benefits.
E.) The Company shall provide at its' expense disability insurance for the
Executive for the term of this Agreement.
F.) The Company shall provide at its' expense Officer's and Director's
liability insurance covering the Executive for the term of this Agreement.
Such coverage shall be in the amount of not less than $5 million and shall
be effective not later than September 1, 1999.
G.) Pension and Profit Sharing Plan: The Executive shall be eligible to
participate in any pension or profit sharing plan or other type plan
adopted by the Company for the benefit of its officers and/or regular
employees.
<PAGE>
H.) In addition to any other compensation, the Executive will receive an
automobile allowance in the amount of $800 per month to be paid to the
Executive each month during the term of this Agreement.
I.) Expense Reimbursement: The Executive shall be entitled to reimbursement
for all reasonable expenses, including travel and entertainment incurred by
the Executive in the performance of his duties. The Executive will maintain
records and written receipts as required by Company policy and reasonably
requested by the Board of Directors to substantiate such expenses. Subject
to the terms of Section 2, the Executive may, at his sole discretion, work
from his residence or a location of his choice. The Company will reimburse
the Executive for reasonable home office use, including but not limited to
an appropriate computer/modem installation.
J.) Cell phone and Pager Reimbursement: The Executive shall be entitled to
reimbursement for cell phone and nation wide pager service or the Company
may at its expense provide the Executive with such service.
K.) Financial and Tax Advice: During (a) the term of this Agreement (b) the
12 month period following the termination of this Agreement as a result of
Death and/or Disability, and (c) the three year period following the
voluntary termination by the Executive with good reason or the involuntary
termination by the Company without cause... the Company shall provide the
Executive (or, if Executive shall have died, his estate) at the Company's
expense, third party professional financial and tax advisory services,
primarily oriented to planning in light of the Executive's entitlement to
compensation and benefits and appropriate in light of circumstances of
Executive or his estate. Executive (or his estate) may select the service
professional of his choice.
5. Termination
A. The Company shall have the right to terminate this Agreement under the
following circumstances: i. Upon the death of the Executive. ii. Upon
notice to the Executive in the event of notice of illness or other
disability which has incapacitated him from performing his duties for 12
consecutive months as determined in good faith by the Board. iii. For good
cause upon notice from the Company. Termination by the Company of the
Executive for "good cause" as used in this Agreement shall be limited to
mean gross negligence, misappropriation or theft of Company funds or
conviction of state or federal offenses which would prevent the Executive
from performance of his duties. With respect to any termination for good
cause by the Company, the specifics of the cause shall be communicated to
the Executive in writing at least thirty (30) days prior to the date on
which the termination is proposed to take effect. The Executive shall be
given the opportunity to correct or respond to such cause.
B. If this Agreement is terminated pursuant to Section 4 (A - iii) above,
Executive's rights and the Company's obligations hereunder shall forthright
terminate except as expressly provided in this Agreement.
C. If this Agreement is terminated pursuant to Section 4 (A - i or ii)
hereof, Executive or his estate shall be entitled to receive 100% of the
Executives salary and incentives for the balance of the term of the
Agreement, together with bonus and other incentives as provided for in this
Agreement.
6. Termination by Executive
<PAGE>
The Executive shall have the right to terminate this Agreement with thirty (30)
days written notice the Company given within sixty (60) days of the occurrence
of any of the following events:
A. The Executive is not elected or retained as Vice President of Operations
of the Company
B. The Company acts to materially reduce the Executive's position, title,
duties, authority or responsibilities.
C. The Company acts to reduce the compensation, bonus or incentives of the
Executive.
7. Consequences of Breach by the Company
A. If this Agreement is terminated pursuant to Section 5 hereof, or if the
Company shall terminate the Executive or the Executive's duties under this
Agreement in any way that is a breach by the Company, the following shall
apply:
i. The Executive shall receive a cash payment that is equal to the
present value of the Executive's base salary hereunder for the
remainder of the term, payable within 30 days of the date of such
termination.
ii. The Executive shall be entitled to bonus payments and benefits as
provided in Section 3 (it being understood, however, that all such
bonus payments, if made pursuant to this clause, shall be paid in cash
regardless of whether or not such payments exceed the cash limit.
iii. All stock options and common stock and restricted stock granted
by the Company to the Executive under this Agreement shall accelerate
and become immediately vested and exercisable.
B. The parties believe that because of the limitations of Section 5 the
above payments do not constitute "Excess Parachute Payments" under section
280G of the Internal Revenue Code of 1954, as amended (the Code).
Notwithstanding such belief, if any benefit is determined to be an "Excess
Parachute Payment" the Company shall pay the Executive an additional amount
(Tax Payment) such that (x) the excess of all Excess Parachute Payments
(including payment under this sentence) over the sum of the excise tax
thereon under section 4999 of the Code and under applicable state law is
equal to (y) the excess of all Excess Parachute Payments (excluding
payments under this sentence) over income tax thereon under subtitle A of
the Code and under applicable state law provided that the Company shall not
be obligated to make tax payment in excess of the value of 6.6667
Compensation Years. For the purposes hereof, the value of a Compensation
Year, including stock options and bonus entitlements, is defined as equal
two (2) times the base salary set forth in this Agreement.
8. Change of Control
If, within twenty-four (24) months following a change of control or the
Executive is terminated, the termination shall be deemed a "Change of Control
Termination." For the purpose of this paragraph... (a) the delivery of a notice
of termination by the Company... within 24 months of a Change of Control and (b)
a Constructive Discharge within 24 months following a Change of Control will
also be deemed a Change of Control Termination. In the event of a Change of
Control Termination, the Company will pay to the Executive a lump sum payment of
299% of the Executive's average annual base salary plus both quarterly and
annual incentive bonuses during the preceding 3 year period. In the event that a
Change of Control Termination occurs before the Executive completes three (3)
years of service, the lump sum payment will be valued at 299% of the Executive's
average annual base salary plus both quarterly and annual incentive bonuses
<PAGE>
during all years of service. Additionally, any options and or restricted stock
granted to the Executive shall become fully vested as of the date of the Change
of Control Termination. Provided further, the Executive will receive a cash
payment equal to the value of any options anticipated to be granted... within
three (3) years following the Change of Control Termination.
If any portion of any payment or distribution by the Company, to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this section ... shall be subject to the
excise tax imposed by section 4999 of the (Internal Revenue) Code, or any
interest or penalties are incurred by the Executive with respect to such excise
tax... the Company shall pay to the Executive an additional payment (the
Gross-up Payment) in an amount such that after the payment of such Excise Tax,
including, without limitation, any income tax and excise tax imposed on the
Gross-up payment, the Executive retains an amount including the Gross-up Payment
equal to the total payment hereunder without regard to the Gross-up Payment.
"Change of Control" shall be deemed to have occurred if at any time or from time
to time after the date of this agreement:
i. Any "person" or "group" ... is or becomes the "beneficial owner" ...
directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company's then outstanding
securities... or,
ii. The stockholders of the Company approve a merger or consolidation
with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company... continuing to
represent... more than 50% of the combined voting power of the voting
securities or such surviving entity outstanding immediately after such
merger or consolidation, or the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets...or
iii. The Company has a change in Board Majority unapproved by at least
three-fourths of the directors.
9. Remedies
The Company recognizes that because of the Executive's special talents, stature,
and opportunities in the industry, and because of the creative nature of and
compensation practices of the industry and the material impact that individual
projects can have on a company's results of operations, in the event of
termination by the Company hereunder or in the event of termination by the
Executive before the end of the agreed term, the Company acknowledges and agrees
that the provisions of this Agreement regarding further payments of base salary,
bonuses and the exercisability of stock options constitute fair and reasonable
provisions for the consequences of such termination, do constitute a penalty and
such payments and benefits shall not be limited or reduced by amounts that the
Executive might earn or be able to earn from any other employment or ventures
during the remainder of the agreed term of this Agreement.
<PAGE>
10. Notices
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
be certified mail, postage pre-paid, or recognized overnight delivery service;
If to the Company:
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
Attn.: Daniel Hoyng, CEO
If to the Executive:
Mr. Marek Lozowicki
51 School Street
Wayland, MA 01780
11. Final Agreement
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
12. Governing Law
This Agreement shall be construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts.
13. Headings
Headings in this Agreement are provided for convenience only and shall not be
used to construe meaning or intent.
14. Binding Agreement
This Agreement shall be binding upon and inure to the benefit of the Executive,
his heirs, distributees and assigns.
15. Severability
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
16. Arbitration
The parties agree that they will use their best efforts to amicably resolve any
dispute arising out of or relating to this Agreement. Any controversy, claim or
dispute that cannot be so resolved shall be settled by final binding arbitration
in accordance with the rules of the American Arbitration Association and
judgement upon the award rendered by the arbitrator or arbitrators may be
entered in any court having jurisdiction thereof. Any such Arbitration shall be
concluded in such place as shall be mutually agreed upon by the parties.
<PAGE>
Within fifteen (15) days of the commencement of the arbitration, each party
shall select one person to act as arbitrator, and the two arbitrators shall
select a third arbitrator within ten (10) days of their appointment. Each party
shall bear its own costs and expenses and an equal share of the arbitrator's
expenses and administrative fees of arbitration.
17. Protection of the Company's Interests
During the term of this Agreement, the Executive shall not directly or
indirectly engage in competition with the Company. At no time shall the
Executive divulge, furnish, or make accessible to any person any information of
a confidential or proprietary nature obtained by him while in the employ of the
Company except as necessary in the performance of his duties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
/s/ Marek Lozwicki
Marek Lozowicki
Executive's Signature and Acceptance
/s/ Daniel J. Hoyng
Daniel J. Hoyng
Chairman and CEO
National Boston Medical, Inc.
EXHIBIT 10.45
STANDARD FORM COMMERCIAL LEASE
1. PARTIES (Fill in) Lessor, which expression shall include Mello Investment
Trust, heirs, successors, and assigns where the context so admits, does hereby
lease to NATIONAL BOSTON MEDICAL, 43 Taunton Green, Taunton, MA 02780
Lessee, which expression shall include successors, executors, administrators,
and assigns were the context so admits, and the LESSEE hereby leases the
following described premises:
2. PREMISES (Fill in and include, if applicable, suite number, floor number, and
square feet) Entire Third Floor Space together with the right to use in common,
with others entitled thereto, the hallways, stairways, and elevators, necessary
for access to said leased premises, and lavatories nearest thereto.
3. TERM (Fill in) The term of this lease shall be for Three years. commencing on
December 1, 1997and ending on December 1, 2000.
4. RENT(Fill in) The LESSEE shall pay to the Lessor rent at the rate of $37,200
Dollars per year, payable in advance in monthly installments of $3,100.
5. SECURITY DEPOSIT Upon the execution of this lease, the LESSEE shall pay to
the LESSOR the amount of $3,100. Dollars, which shall be held as a security for
the LESSEE's
performance as herein provided and refunded to the LESSEE at the end of this
lease subject to the LESSEE's satisfactory compliance with the conditions
hereof.
6. RENT ADJUSTMENT
A. TAX ESCALATION (Fill in or delete)
B. OPERATING COST ESCALATION (Fill in or delete )
<PAGE>
C. CONSUMER PRICE ESCALATION (Fill in or delete )
7. UTILITIES *delete "air-conditioning" if not applicable) The LESSOR shall pay,
as they become due, all bills for electricity and other utilities (whether they
are used for furnishing heat or other purposes) that are furnished to the leased
premises and all bills for fuel . The LESSOR agrees to provide all other utility
service xxxxxxxxxxxxxxxxxx reasonable heat and air-conditioning* to the leased
premises, the hallways, stairways, elevators, and lavatories during normal
business hours on regular business days of the heating and air-conditioning*
seasons of each year, to furnish elevator service as is customary in similar
buildings in said city or town, all subject to interruption due to any accident,
to the making of repairs, alterations, or improvements, to labor difficulties,
to trouble in obtaining fuel, electricity, service or supplies form the sources
from which they are usually obtained for said building, or to any cause beyond
the LESSOR's control.
LESSOR shall have no obligation to provide utilities or equipment other than the
utilities and equipment within the premises as of the commencement date of this
lease. In the event LESSEE requires additional utilities or equipment, the
installation shall be subject to the written consent of the LESSOR.
8. USE OF LEAS ED PREMISES (Fill in) The LESSEE shall use the leased premises
only for the purpose of
<PAGE>
9. COMPLIANCE WITH LAWS The LESSEE acknowledges that no trade or occupation
shall be conducted in the leased premises or use made thereof which will be
unlawful, improper, noisy or offensive, or contrary to any law or any municipal
by-law or ordinance in force in the city or town in which the premises are
situated.
10. FIRE INSURANCE The LESSEE shall not permit any use of the leased premises
which will make voidable any insurance on the property of which the leased
premises are a part, or on the contents of said property or which shall be
contrary to any law or regulation from time to time established by the New
England Fire Insurance Rating Association, or any similar body succeeding to its
powers. The LESSEE shall on demand reimburse the LESSOR, and all other tenants,
all extra insurance premiums caused by the LESSEE's use of the premises.
11. MAINTENANCE The LESSEE agrees to maintain the leased premises in good
condition, damage by fire and other casualty only excepted, and whenever
necessary,
A. LESSEE'S OBLIGATIONS to replace plate glass and other glass therein,
acknowledging that the leased premises are now in good order and the glass
whole. The LESSEE shall not permit the leased premises to be over-loaded,
damaged, stripped, or defaced, nor suffer any waste. LESSEE is legally
responsible.
B. LESSOR'S OBLIGATIONS The LESSOR agrees to maintain the structure of the
building of which the leased premises are a part in the same condition as it is
at the commencement of the term or as it may be put in during the term of this
lease, reasonable wear and tear, damage by fire and other casualty only
excepted, unless such maintenance is required because of the LESSEE or those for
whose conduct the LESSEE is legally responsible.
12. ALTERATIONS- ADDITIONS The LESSEE shall not make structural alterations or
additions to the leased premises, but may make non-structural alterations
provided the LESSOR consents thereto in writing, which consent shall not be
unreasonably withheld or delayed. All such allowed alterations shall be at
LESSEE's expense and shall be in quality at least equal to the present
construction. LESSEE shall not permit any mechanics' liens, or similar liens, to
remain upon the leased premises for labor and material furnished to LESSEE or
claimed to have been furnished to LESSEE in connection with work of any
character performed or claimed to have been performed at the direction of LESSEE
and shall cause any such lien to be released of record forthwith without cost to
LESSOR. Any alterations or improvements made by the LESSEE shall become the
property of the LESSOR at the termination of occupancy as provided herein.
13. ASSIGNMENT-SUBLEASING The LESSEE shall not assign or sublet the whole or any
part of the leased premises without LESSOR's prior written consent.
Notwithstanding such consent, LESSEE shall remain liable to LESSOR for the
payment of all rent and for the full performance of the covenants and conditions
of this lease.
14. SUBORDINATION This lease shall be subject and subordinate to any and all
<PAGE>
mortgages, deeds of trust and other instruments in the nature of a mortgage, now
or at any time hereafter, a lien or liens on the property of which the leased
premises are part and the LESSEE shall, when requested, promptly execute and
deliver such written instruments as shall be necessary to show the subordination
of the lease to said mortgages, deeds of trust or other such instruments in the
nature of a mortgage.
15. LESSOR'S ACCESS The LESSOR or agents of the LESSOR may, at reasonable times,
enter to view the leased premises and may remove placards and signs not approved
and affixed as herein approved, and make repairs and alterations as LESSOR
should elect to do and may show the leased premises to others, and at any time
within three (3) months before the expiration of the term, may affix to any
suitable part of the leased premises a notice for letting or selling the leased
premises or property of which the leased premises are a part and keep the same
so affixed without hindrance or molestation.
16. INDEMNIFI CATION AND LIABILITY (Fill in) The LESSEE shall save the LESSOR
harmless from all loss and damage occasioned by the use or escape of water or by
the bursting of pipes, as well as from any claim or damage resulting from
neglect in not removing snow and ice from the roof of the building or from the
sidewalks bordering upon the premises so leased, or by any nuisance made or
suffered on the leased premises, unless such loss is caused by the neglect of
the LESSOR. The removal of snow and ice from the sidewalks bordering upon the
leased premises shall be responsibility.
17. LESSEE'S LIABILITY INSURANCE (fill in) The LESSEE shall maintain with
respect to the leased premises and the property of which the leased premises are
a part comprehensive public liability insurance in the amount of $1,000,000.00
with property damage insurance in limits of $1,000,000.00 in responsible
companies qualified to do business in Massachusetts and in good standing therein
insuring the LESSOR as well as LESSEE against injury to person or damage to
property as provided. The LESSEE shall deposit with the LESSOR certificates for
such insurance at or prior to the commencement of the term, and thereafter
within thirty (30) days prior to the expiration of any such policies. All such
insurance certificates shall provide that such policies shall not be cancelled
without at least ten (10) days prior written notice to each assured named
therein.
18. FIRE, CASUALTY EMINENT DOMAIN Should a substantial portion of the leased
premises, or of the property of which they are a part, be substantially damaged
by fire or other casualty, or be taken by eminent domain, the LESSOR may elect
to terminate this lease. When such fire, casualty, or taking renders the leased
premises substantially unsuitable for their intended use, a just and
proportionate abatement of rent shall be made, and the LESSEE may elect to
terminate this lease if:
(A) The LESSOR fails to give written notice within thirty (30) days
of intention to restore leased premises, or
(B) The LESSOR fails to restore the leased premises to a condition
substantially suitable for their intended use within ninety (90)
days of said fire, casualty or taking.
<PAGE>
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which the
LESSEE may have for damages or injury to the leased premises for any taking by
eminent domain, except for damage to the LESSEE's fixtures, property, or
equipment.
19. DEFAULT AND BANKRUPTCY (Fill in) In the event that:
(A) The LESSEE shall default in the payment of any installment of rent or
other sum herein specified and such default shall continue for ten (10)
days after written notice thereof; or
1. The LESSEE shall default in the observance or performance of any
other of the LESSEE's covenants, agreement, or obligations
hereunder and such default shall not be corrected within thirty
(30) days after written notice thereof; or
2. The LESSEE shall be declared bankrupt or insolvent according to
law, or, if any assignment shall be made of LESSEE's property for
the benefit of creditors.
Then the LESSOR shall have the right thereafter, while such default continues,
to re-enter and take complete possession of the leased premises, to declare the
term of this lease ended, and remove the LESSEE'S effects, without prejudice to
any remedies which might be otherwise used for arrears of rent or other default.
The LESSEE shall indemnify the LESSOR against all loss of rent and other
payments which the LESSOR may incur by reason of such termination during the
residue of the term. If the LESSEE shall default, after reasonable notice
thereof, in the observance of performance of any conditions or covenants on
LESSEE'S part to be observed or performed under or by virtue of any of the
provisions in any article of this lease, the LESSOR, without being under any
obligation to do so and without thereby waiving such default, may remedy such
default for the account and the expense of the LESSEE. If the LESSOR makes any
expenditures or incurs any obligations for the payment of money in connection
therewith, including but not limited to, reasonable attorney's fees in
instituting, prosecuting or defending any action or proceeding, such sums paid
or obligations insured, with interest at the rate of per cent per annum and
costs, shall be paid to the LESSOR by the LESSEE as additional rent.
20. NOTICE Any notice from the LESSOR to the LESSEE relating to the leased
premises or to the occupancy thereof, shall be deemed duly served, if left at
the leased premises addressed to the LESSEE, or if mailed to the leased
premises, registered or certified mail, return receipt requested, postage
prepaid, addressed to the LESSEE. Any notice from the LESSEE TO THE lessor
relating to the leased premises or to the occupancy thereof, shall be deemed
duly served, if mailed to the LESSOR by registered or certified mail, return
receipt requested, postage prepaid, addressed to the LESSOR at such address as
the LESSOR may from time to time advise in writing. All rent notices shall be
paid and sent to the LESSOR at 43 Taunton Green, Taunton, MA 02780.
21. SURRENDER The LESSEE shall at the expiration or other termination of this
lease remove all LESSEE's good and effects from the leased premises, (including,
without hereby limiting the generality of the foregoing, all signs and lettering
affixed or painted by the LESSEE, either inside or outside the leased premises).
LESSEE shall deliver to the LESSOR the leased premises and all
<PAGE>
keys, locks thereto, and other fixtures connected therewith and all alterations
and additions made to or upon the leased premises, in good condition, damage by
fire or other casualty only excepted. In the event of the LESSEE's failure to
remove any of the LESSEE's property from the premises, LESSOR is hereby
authorized, without liability to LESSEE for loss or damage thereto, and at the
sole risk of LESSEE, to remove and store any of the property at LESSEE's
expense, or to retain same under LESSOR's control or to sell at public or
private sale, without notice any or all of the property not so removed and to
apply the next proceeds of such sale to the payment of any sum due hereunder, or
to destroy such property.
22. BROKERAGE (Fill in or Delete) The Broker(s) named herein warrant(s) that he
(they) is (are) duly licensed as such by the Commonwealth of Massachusetts, and
join(s) in this agreement and become(s) a party hereto, insofar as any
provisions of this agreement expressly apply to him (them), and to any
amendments or modifications of such provisions to which he (they) agree(s) in
writing,.
LESSOR agrees to pay the above-named Broker upon the term commencement date a
fee for professional services of or pursuant to Broker's attached commission
schedule.
23. OTHER PROVISIONS It is also understood and agreed that
OPTIONAL: (National Boston Medical, Inc.'s option) 4th & 5th years of lease
$3,200. Per month
IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this ___
day of December, 1997.
/s/Daniel J. Hoyng /s/Carl , Trustee 1/28/98
LESSEE NATIONAL BOSTON MEDICAL LESSOR MELLO INVESTMENT TRUST
- ------------------------ --------------------------
LESSEE LESSOR
--------------------------------------
BROKER(S)
EXHIBIT 10.46
STANDARD FORM COMMERCIAL LEASE
1. PARTIES (Fill in) Lessor, which expression shall include Mello Investment
Trust, heirs, successors, and assigns where the context so admits, does hereby
lease to NATIONAL BOSTON MEDICAL, 43 Taunton Green, Taunton, MA 02780
Lessee, which expression shall include successors, executors, administrators,
and assigns were the context so admits, and the LESSEE hereby leases the
following described premises:
2. PREMISES (Fill in and include, if applicable, suite number, floor number, and
square feet) Second Floor Suite Four (4) 400 Square Feet.
together with the right to use in common, with others entitled thereto, the
hallways, stairways, and elevators, necessary for access to said leased
premises, and lavatories nearest thereto.
3. TERM (Fill in) The term of this lease shall be for One Year commencing on
September 1, 1998 and ending on August 31, 1999.
4. RENT (Fill in) The LESSEE shall pay to the Lessor rent at the rate of
$4,500.00 Dollars per year, payable in advance in lump sum upon occupancy.
5. SECURITY DEPOSIT (Fill in) Upon the execution of this lease, the LESSEE shall
pay to the LESSOR the amount of Dollars, which shall be held as a security for
the LESSEE's performance as herein provided and refunded to the LESSEE at the
end of this lease subject to the LESSEE's satisfactory compliance with the
conditions hereof.
6. RENT ADJUSTMENT
A. TAX ESCALATION (Fill in or delete)
B. OPERATING COST ESCALATION (Fill in or delete )
<PAGE>
C. CONSUMER PRICE ESCALATION (Fill in or delete )
7. UTILITIES *delete "air-conditioning" if not applicable) The LESSOR shall pay,
as they become due, all bills for electricity and other utilities (whether they
are used for
furnishing heat or other purposes) that are furnished to the leased premises and
all bills for fuel . The LESSOR agrees to provide all other utility service
xxxxxxxxxxxxxxxxxx reasonable heat and air-conditioning* to the leased premises,
the hallways, stairways, elevators, and lavatories during normal business hours
on regular business days of the heating and air-conditioning* seasons of each
year, to furnish elevator service as is customary in similar buildings in said
city or town, all subject to interruption due to any accident, to the making of
repairs, alterations, or improvements, to labor difficulties, to trouble in
obtaining fuel, electricity, service or supplies form the sources from which
they are usually obtained for said building, or to any cause beyond the LESSOR's
control.
LESSOR shall have no obligation to provide utilities or equipment other than the
utilities and equipment within the premises as of the commencement date of this
lease. In the event LESSEE requires additional utilities or equipment, the
installation shall be subject to the written consent of the LESSOR.
8. USE OF LEAS ED PREMISES (Fill in) The LESSEE shall use the leased premises
only for the purpose of
<PAGE>
9. COMPLIANCE WITH LAWS The LESSEE acknowledges that no trade or occupation
shall be conducted in the leased premises or use made thereof which will be
unlawful, improper, noisy or offensive, or contrary to any law or any municipal
by-law or ordinance in force in the city or town in which the premises are
situated.
10. FIRE INSURANCE The LESSEE shall not permit any use of the leased premises
which will make voidable any insurance on the property of which the leased
premises are a part, or on the contents of said property or which shall be
contrary to any law or regulation from time to time established by the New
England Fire Insurance Rating Association, or any similar body succeeding to its
powers. The LESSEE shall on demand reimburse the LESSOR, and all other tenants,
all extra insurance premiums caused by the LESSEE's use of the premises.
11. MAINTENANCE The LESSEE agrees to maintain the leased premises in good
condition, damage by fire and other casualty only excepted, and whenever
necessary,
A. LESSEE'S OBLIGATIONS to replace plate glass and other glass therein,
acknowledging that the leased premises are now in good order and the glass
whole. The LESSEE shall not permit the leased premises to be over-loaded,
damaged, stripped, or defaced, nor suffer any waste. LESSEE is legally
responsible.
B. LESSOR'S OBLIGATIONS The LESSOR agrees to maintain the structure of the
building of which the leased premises are a part in the same condition as it is
at the commencement of the term or as it may be put in during the term of this
lease, reasonable wear and tear, damage by fire and other casualty only
excepted, unless such maintenance is required because of the LESSEE or those for
whose conduct the LESSEE is legally responsible.
12. ALTERATIONS- ADDITIONS The LESSEE shall not make structural alterations or
additions to the leased premises, but may make non-structural alterations
provided the LESSOR consents thereto in writing, which consent shall not be
unreasonably withheld or delayed. All such allowed alterations shall be at
LESSEE's expense and shall be in quality at least equal to the present
construction. LESSEE shall not permit any mechanics' liens, or similar liens, to
remain upon the leased premises for labor and material furnished to LESSEE or
claimed to have been furnished to LESSEE in connection with work of any
character performed or claimed to have been performed at the direction of LESSEE
and shall cause any such lien to be released of record forthwith without cost to
LESSOR. Any alterations or improvements made by the LESSEE shall become the
property of the LESSOR at the termination of occupancy as provided herein.
13. ASSIGNMENT-SUBLEASING The LESSEE shall not assign or sublet the whole or any
part of the leased premises without LESSOR's prior written consent.
Notwithstanding such consent, LESSEE shall remain liable to LESSOR for the
payment of all rent and for the full performance of the covenants and conditions
of this lease.
<PAGE>
14. SUBORDINATION This lease shall be subject and subordinate to any and all
mortgages, deeds of trust and other instruments in the nature of a mortgage, now
or at any time hereafter, a lien or liens on the property of which the leased
premises are part and the LESSEE shall, when requested, promptly execute and
deliver such written instruments as shall be necessary to show the subordination
of the lease to said mortgages, deeds of trust or other such instruments in the
nature of a mortgage.
15. LESSOR'S ACCESS The LESSOR or agents of the LESSOR may, at reasonable times,
enter to view the leased premises and may remove placards and signs not approved
and affixed as herein approved, and make repairs and alterations as LESSOR
should elect to do and may show the leased premises to others, and at any time
within three (3) months before the expiration of the term, may affix to any
suitable part of the leased premises a notice for letting or selling the leased
premises or property of which the leased premises are a part and keep the same
so affixed without hindrance or molestation.
16. INDEMNIFI CATION AND LIABILITY (Fill in) The LESSEE shall save the LESSOR
harmless from all loss and damage occasioned by the use or escape of water or by
the bursting of pipes, as well as from any claim or damage resulting from
neglect in not removing snow and ice from the roof of the building or from the
sidewalks bordering upon the premises so leased, or by any nuisance made or
suffered on the leased premises, unless such loss is caused by the neglect of
the LESSOR. The removal of snow and ice from the sidewalks bordering upon the
leased premises shall be responsibility.
17. LESSEE'S LIABILITY INSURANCE (fill in) The LESSEE shall maintain with
respect to the leased premises and the property of which the leased premises are
a part comprehensive public liability insurance in the amount of $1,000,000.00
with property damage insurance in limits of $1,000,000.00 in responsible
companies qualified to do business in Massachusetts and in good standing therein
insuring the LESSOR as well as LESSEE against injury to person or damage to
property as provided. The LESSEE shall deposit with the LESSOR certificates for
such insurance at or prior to the commencement of the term, and thereafter
within thirty (30) days prior to the expiration of any such policies. All such
insurance certificates shall provide that such policies shall not be cancelled
without at least ten (10) days prior written notice to each assured named
therein.
18. FIRE, CASUALTY EMINENT DOMAIN Should a substantial portion of the leased
premises, or of the property of which they are a part, be substantially damaged
by fire or other casualty, or be taken by eminent domain, the LESSOR may elect
to terminate this lease. When such fire, casualty, or taking renders the leased
premises substantially unsuitable for their intended use, a just and
proportionate abatement of rent shall be made, and the LESSEE may elect to
terminate this lease if:
(A) The LESSOR fails to give written notice within thirty (30) days of
intention to restore leased premises, or
(B) The LESSOR fails to restore the leased premises to a condition
substantially suitable for their intended use within ninety
<PAGE>
(90) days of said fire, casualty or taking.
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which the
LESSEE may have for damages or injury to the leased premises for any taking by
eminent domain, except for damage to the LESSEE's fixtures, property, or
equipment.
19. DEFAULT AND BANKRUPTCY (Fill in) In the event that:
(A) The LESSEE shall default in the payment of any installment of rent or
other sum herein specified and such default shall continue for ten (10)
days after written notice thereof; or
1. The LESSEE shall default in the observance or performance of any
other of the LESSEE's covenants, agreement, or obligations
hereunder and such default shall not be corrected within thirty
(30) days after written notice thereof; or
2. The LESSEE shall be declared bankrupt or insolvent according to
law, or, if any assignment shall be made of LESSEE's property for
the benefit of creditors.
Then the LESSOR shall have the right thereafter, while such default continues,
to re-enter and take complete possession of the leased premises, to declare the
term of this lease ended, and remove the LESSEE'S effects, without prejudice to
any remedies which might be otherwise used for arrears of rent or other default.
The LESSEE shall indemnify the LESSOR against all loss of rent and other
payments which the LESSOR may incur by reason of such termination during the
residue of the term. If the LESSEE shall default, after reasonable notice
thereof, in the observance of performance of any conditions or covenants on
LESSEE'S part to be observed or performed under or by virtue of any of the
provisions in any article of this lease, the LESSOR, without being under any
obligation to do so and without thereby waiving such default, may remedy such
default for the account and the expense of the LESSEE. If the LESSOR makes any
expenditures or incurs any obligations for the payment of money in connection
therewith, including but not limited to, reasonable attorney's fees in
instituting, prosecuting or defending any action or proceeding, such sums paid
or obligations insured, with interest at the rate of per cent per annum and
costs, shall be paid to the LESSOR by the LESSEE as additional rent.
20. NOTICE Any notice from the LESSOR to the LESSEE relating to the leased
premises or to the occupancy thereof, shall be deemed duly served, if left at
the leased premises addressed to the LESSEE, or if mailed to the leased
premises, registered or certified mail, return receipt requested, postage
prepaid, addressed to the LESSEE. Any notice from the LESSEE TO THE lessor
relating to the leased premises or to the occupancy thereof, shall be deemed
duly served, if mailed to the LESSOR by registered or certified mail, return
receipt requested, postage prepaid, addressed to the LESSOR at such address as
the LESSOR may from time to time advise in writing. All rent notices shall be
paid and sent to the LESSOR at 43 Taunton Green, Taunton, MA 02780.
21. SURRENDER The LESSEE shall at the expiration or other termination of this
lease remove all LESSEE's good and effects from the leased premises, (including,
without hereby limiting the generality of the foregoing, all signs and lettering
affixed or painted by the LESSEE, either inside
<PAGE>
or outside the leased premises). LESSEE shall deliver to the LESSOR the leased
premises and all keys, locks thereto, and other fixtures connected therewith and
all alterations and additions made to or upon the leased premises, in good
condition, damage by fire or other casualty only excepted. In the event of the
LESSEE's failure to remove any of the LESSEE's property from the premises,
LESSOR is hereby authorized, without liability to LESSEE for loss or damage
thereto, and at the sole risk of LESSEE, to remove and store any of the property
at LESSEE's expense, or to retain same under LESSOR's control or to sell at
public or private sale, without notice any or all of the property not so removed
and to apply the next proceeds of such sale to the payment of any sum due
hereunder, or to destroy such property.
22. BROKERAGE (Fill in or Delete) The Broker(s) named herein warrant(s) that he
(they) is (are) duly licensed as such by the Commonwealth of Massachusetts, and
join(s) in this agreement and become(s) a party hereto, insofar as any
provisions of this agreement expressly apply to him (them), and to any
amendments or modifications of such provisions to which he (they) agree(s) in
writing,.
LESSOR agrees to pay the above-named Broker upon the term commencement date a
fee for professional services of or pursuant to Broker's attached commission
schedule.
23. OTHER PROVISIONS It is also understood and agreed that
IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this
____________ day of ______________________________, 19___.
/s/Daniel J. Hoyng /s/Carl , Trustee
LESSEE NATIONAL BOSTON MEDICAL LESSOR MELLO INVESTMENT TRUST
- ------------------------ --------------------------
LESSEE LESSOR
- -------------------------
BROKER(S)
EXHIBIT 10.47
RENTAL AGREEMENT
DATE: APRIL 8, 1999
Daniel Hoyng, hereafter RESIDENT, agrees to lease from Summit Management
Company, hereafter MANAGEMENT, Apartment 16-10908 of the Apartment Community
upon the following terms and conditions:
1. The initial term of this agreement shall begin on 4/8/99 and end on 3/31/00.
2. Rent is payable monthly and in advance at the rate of $1220.00 per month
on the first day of each calendar month at the office of MANAGEMENT.
Rental payments shall be governed in accordance with the attached lease
agreement.,
3. RESIDENT has paid MANAGEMENT a Security Deposit in the amount of $0. This
Security Deposit shall be held in a trust account with N/A and shall be
governed in accordance with the terms outlined in the attached lease
agreement.
4. MANAGEMENT shall pay for water, trash removal and common area utilities.
RESIDENT shall pay for all other utilities used at the aforementioned
apartment, including but not limited to, telephone service.
5. IN ADDITION TO THE PROVISIONS SET FORTH ABOVE, ALL TERMS AND PROVISIONS SET
FORTH IN THE STANDARD LEASE AGREEMENT ATTACHED HERETO ARE BY THIS REFERENCE
INCORPORATED HEREIN. RESIDENT HEREBY AGREES THAT RESIDENCY SHALL BE
GOVERNED BY ALL THE PROVISIONS SET FORTH ON THE ATTACHED STANDARD LEASE
AGREEMENT AS IF SUCH PROVISIONS WERE SET FORTH ON THIS PAGE. RESIDENT
HEREBY CERTIFIES AND AGREES THAT ALL THE RESIDENTS SIGNING THIS LEASE
AGREEMENT HAVE FULLY EXAMINED , READ AND UNDERSTAND THE STANDARD LEASE
AGREEMENT ATTACHED HERETO AND UNDERSTAND THAT THOSE PROVISIONS ARE PART OF
THIS AGREEMENT.
/s/ ( illegible )
Authorized Signatiure of MANAGEMENT, as Agent for Owner
/s/Daniel J. Hoyng April 8, 99
<PAGE>
RENTAL CONCESSION ADDENDUM
This addendum to the lease agreement dated APRIL 9, 1999 between Summit
Management Company, as Agent for Owner, (Management) and DANIEL HOYNG (RESIDENT)
shall be incorporated in and made part of the aforesaid lease.
1. It is agreed and understood by both parties that the RESIDENT has received
a rental incentive as follows
STARTING April 8, 1999 RESIDENT WILL RECEIVE A CONCESSION OF $102.00
OFF MARKET RENT MAKING RENT $1118.00 PER MONTH (PLUS $500.00 FOR
FURNITURE RENTAL) EXPIRING ON MARCH 31, 2000.
In the event that the aforementioned Lease is not fulfilled, the RESIDENT agrees
to reimburse MANAGEMENT in the amount of $1220.00, which is the total value of
the rental incentive listed above. This amount shall be reimbursed to MANAGEMENT
by RESIDENT prior to RESIDENT vacating premises.
Authorized Signature of MANAGEMENT, As Agent for Owner
/s/ Daniel J. Hoyng
Resident
APT#16-10908
<PAGE>
PAYMENT POLICY AND CREDIT RECORD
4. Rent is due on the first of each month. Rent is considered late on the
second of the month. Late fees of $75.00 will be charged on the sixth of
each month. Late fees are considered additional rent.
/s/ DJH
Initials
/s/ DJH
Initials
4. Your payment history will become a permanent part of your credit history
through Equifax Credit Reporting Systems (CBI). Any late payments will be
reported as derogatory credit to the bureau.
/s/ DJH
Initials
/s/ DJH
Initials
4. If attorney's fees have to be levied for non-payment of rent, a minimum
charge for those attorney's fees are $350.00
/s/ DJH
Initials
/s/ DJH
Initials
4. It is understood that a sixty (60) day written notice of my intent to
vacate or renew the lease agreement is required. If a 60-day notice is not
given in writing, my lease will be automatically be renewed on a month to
month basis which will be charged at the rental rate of the current market
rent plus a $75.00 month to month fee. This month to month lease will
continue on a monthly basis until a 30-day notice is given of an intent to
vacate.
DJH
Initials
DJH
Initials
Signed this 8th day of April, 1999.
/s/ Daniel J. Hoyng
- -------------------------
Resident
Resident Apartment#16-10908
MANAGEMENT REPRESENTATIVE
<PAGE>
SUMMIT PLANTATION LEASE ADDENDUM
You are obligated to pay all of the rent as it becomes due under the terms
whether or not you occupy the premises, have defaulted under the lease, have
abandoned the premises, or the lease is terminated because of your default. Not
withstanding the foregoing, however, we will release you from your obligations
under the lease including your obligation to pay rent hereunder upon fulfillment
of the following terms and conditions:
1. You give us written notice of your intention to vacate the premises 60 days
prior to the date on which you intend to vacate the premises.
2. You tender A termination fee equal to two months which equals $2440.00. The
termination fee is due and payable on the last day that you reside in your
apartment.
3. You surrender the premises in an undamaged condition acceptable to us in
our sole discretion on the date that you intend to vacate the premises.
4. Security deposit in the sum of $100.00 FORFEITED. I hereby agree to the
following conditions.
/s/ Daniel J. Hoyng
Lessee
Lessee
Lessee
Lessor
DATE
Bldg#16-10908
<PAGE>
WATER/SEWER ADDENDUM
I (WE) am aware that paying for water and sewage is part of this rental
agreement. If my water/sewer bill is not paid, I understand that I will be in
direct violation of my lease. Eviction proceedings may occur according to
paragraph four of the rental agreement if payment is neglected.
/s/ Daniel J. Hoyng April 8, 1999
RESIDENT DATE
RESIDENT DATE
RESIDENT DATE
MOLD AND MILDEW ADDENDUM
Resident acknowledges that the apartment unit is located in Florida which has a
climate conducive to the growth of mold and mildew, and that it is necessary to
provide proper ventilation and humidification of the apartment to retard and
prevent mold and mildew. Resident agrees to be responsible for properly
ventilation and dehumidifying the apartment and the contents to retard and
prevent mold and mildew and that Management shall not be responsible for damage
to the apartment or the personal property of the resident for damages caused by
mold and mildew.
/s/ Daniel J. Hoyng
Resident
Summit Plantation Representative
Apt #16-10908
<PAGE>
DIGITAL BROADCAST SIGNAL DISH
Resident Agreement
In accordance with the FCC ruling concerning the "Implementation of Section 207
of the Telecommunications Act of 1996", I understand that I may choose to
purchase and install a satellite dish otherwise known as a DBS(digital broadcast
signal) satellite dish. I understand that, in addition to allowing the purchase
of a DBS dish within a multifamily housing community, Section 207 of the
Telecommunication Act also outlines the parameters governing the installation of
the dish. These parameters are outlined below;
1. I/We understand that there is to be no drilling of any kind into the
balcony railings, balcony flooring, patio floor, patio railings, roof,
doorways, or walls.
2. The satellite dish must be kept within the boundaries of my apartment
dwelling only, not one adjoining or shared by another resident and not to
be extended by any devise such as a pole beyond the balcony railing. The
dish may not be attached to the outside wall, outside windowsill, or common
area balconies, stairwells or grounds.
3. I/We will give a copy of my liability insurance to the management
representative upon acquiring a satellite dish that will cover my property,
as well as any injury caused by the dish to myself, my property, as well as
but not limited to any other property or people.
4. The size of the dish may be no more than 1 meter in diameter.
5. I/We will obtain written authorization from the owner/manager of this
community prior to the installation of a DBS dish.
6. I/We will be responsible for any damages to property as a result of the
installation, removal and/or operation of the DBS dish.
/s/ Daniel J. Hoyng
RESIDENT SIGNATURE APT#16-10908
RESIDENT SIGNATURE COMMUNITY MANAGER
DATE
<PAGE>
1. PETS: No pets allowed except with expressed written consent and approval of
Management and the execution of a Pet Addendum. An additional deposit will
be required, a portion of which is non-refundable. The entire security
deposit may be applied against damages to the apartment in the event of
default by the Resident under the Lease Agreement.
2. Our Professional Landscaping: Help us maintain our clean and attractive
community by discarding your cans, cigarettes, paper, bottles, trash, etc.
in the proper containers provided. When walking your pet please use the
designated pet areas and clean up after your pet. Utilize all walkways
provided and refrain from walking through our landscaped areas.
3. Trash Disposal: Plastic trash bags are required to take your trash to the
dumpsters or compact areas. At no time is trash (bags, boxes, etc.) To be
left outside your doorway or in the breezeway. Break down any boxes before
placing them in dumpster., Do not dispose of heavy equipment, furniture or
large waste in the dumpsters or compactors. Such items should be taken to
the dump directly.
4. Guests: Residents shall be responsible and liable for the conduct of their
guests. Acts of guests in violation of the lease agreement or of
management's "Rules and Regulations" may be deemed by Management to be a
breach by resident. Any guest that will be staying in excess of 7 days must
be registered with the management/leasing office.
5. Amenities: Residents must abide by the posted regulations at each amenity.
Children under 16 must be accompanied by an adult.
6. Decorating Your New Home: Modifications to walls, shelves, closets, or
counters cannot be made to the apartment without prior written approval
from the Community Manager. Draperies must be lined with white materials so
exposure to the outside is consistent throughout the community. Patios and
balconies are not to be used as storage. In addition, please refrain from
hanging garments, towels, or other items over the railings. Plants are not
allowed on the balcony railings for safety reasons. Signs, additional
lighting, awnings, storm doors, markings, or other exterior additions need
to be approved by the Community Manager. Please do not store anything in
the A/C or hot water heater closet as this may cause the equipment to
malfunction or may cause a safety hazard.
7. Architecture: To maintain our architectural integrity refrain from erecting
radio or television aerials, dishes, or wires of CB base stations on any
part of the premises.
8. Neighbors: Respect the privacy of your neighbors with regard to loud
televisions, stereos, radios, and parties. All noise complaints should be
called into the local police first and then into the management/leasing
office.
9. Grilling: In accordance with fire laws, grilling of any kind (charcoal,
gas, or electric) is not allowed on patios or decks at any time.
10. Telephone and Cable: Telephones and cable TV's may only be connected at the
original wired locations provided by the telephone and cable company's.
Additional drilling, cutting or boring for wires is not permitted without
prior permission from your Community Manager.
11. Laundry Room: Please remove clothing promptly from machines. Use of tints
and dyes are not allowed. Report any malfunctions to the management/leasing
office as soon as possible.
12. Security Deposits: To avoid misunderstandings concerning the security
deposit, the following information is provided. RELEASE OF THE SECURITY
DEPOSIT IS SUBJECT TO THE FOLLOWING PROVISIONS:
1. Full term of the lease has expired.
2. a written sixty(60) day notice of intent to vacate must be given.
3. No damage to property beyond normal wear and tear.
4. Entire apartment is clean and refrigerator is defrosted.
5. No unpaid legal charges, delinquent rent, or other fees.
6. The "Apartment Inspection Form" must be completed at move-in and
signed by both the Community Manager and resident. All keys must be
returned and a walk of the apartment home is done with a management
representative. At this time the "Apartment Inspection Form" must be
completed to assure the apartments condition.
7. All debris, rubbish and discards placed in proper rubbish containers.
8. Your check will be mailed to you from our home office to your
forwarding address left with a management representative. The check is
made out jointly to all parties on the lease.
<PAGE>
9. Charges for damage, cleaning, repair, and all delinquent rents or fees
will be deducted from the deposit. 10. Your security deposit cannot be
applied to your last month's rent.
I/We hereby acknowledge that we have read the foregoing Rules and Regulations
and agree to abide by each one.
/s/ Daniel J. Hoyng April 8, 99
- --------------------------------- ---------------------------------------
Resident Date Resident Date
Community Manager Date
EXHIBIT 10.48
CAMPAIGN MANAGEMENT AGREEMENT
THIS AGREEMENT is entered as of the 1st day of May, 1999 ("May 1st, 1999") by
and between M2 MARKETING AND MANAGEMENT SERVICES, INC., 200 North Tustin Avenue,
Suite 206, Santa Ana, California 92705, a California Corporation (herein after
referred to as Campaign Manager) and, NATIONAL BOSTON MEDICAL, 43 Taunton Green,
Suite 5, Taunton, Massachusetts 02780 (herein after referred to as Client).
RECITALS
WHEREAS, Campaign Manager is in the Direct Response Television ("DRTV")
production management business.
WHEREAS, Client desires to utilize the services of Campaign Manager to manage
the DRTV Campaigns for short form and long form DRTV Commercials "Infomercial"
and produced for Client.
NOW THEREFORE, in consideration of the mutual promises, and upon the terms and
subject to the conditions set forth herein, the parties hereto agree as follows:
AGREEMENT
(A) Definitions.
1. "Infomercial" shall mean the infomercial/commercial produced for the
Backstroke Massager, manufactured or distributed by Client.
2. "Vendors" shall mean vendors in the following businesses:
a. Telemarketing (inbound) and/or outbound
b. Media Buying
c. All Home Shopping Opportunities
d. Fulfillment
3. "Term" of this agreement shall mean the period commencing on the Effective
Date, and continuing until either party notifies the other party of its
intent to terminate this agreement pursuant to Section 5 herein.
4. "DRTV Campaigns" shall mean Direct response Television Campaigns to be
utilized in connection with the infomercial.
5. "Territory" shall mean the United States and Canada.
(B) Project.
Client hereby retains Campaign Manager and Campaign Manager agrees that it is
responsible to manage Client's DRTV Campaign utilizing the Infomercial and
<PAGE>
to identify and select Vendors, negotiate fees in the best interest of the
Client, (subject to section3), manage Vendors, and report progress and results
to Client.
(C) Testing of Infomercial.
Client retains the right to determine the final telemarketing, fulfillment, and
media agency selection, including the right to select agencies or vendors, other
than those recommended by Campaign Manager herein. Client is under no obligation
to rollout the mass-market airing following the conclusion of the initial
testing) the Infomercial if it is not satisfied with the results of the test
broadcast of the infomercial. Client shall have exclusive control over the
broadcast, performance and transmission of the Infomercial after completion of
the initial testing thereof.
(D) Project Fees.
Client agrees to pay Campaign Manager the fee of $5,000 per month, payable on or
before the first business day of each month, during each month of the Term of
this Agreement, commencing with the month that Campaign Manager initiates its
performance on connection with the project.
In addition to monthly management fee, Client shall pay all hard costs that
Campaign Manager must pay outside Vendors in association with the project.
Campaign Manager shall not incur such costs without prior written consent of
Client.
Campaign Manager acknowledges that Client retains the right to select Vendors
hereunder and to approve the terms and conditions of any agreements or proposals
with such Vendors. Campaign Manager shall not be constituted the agent or legal
representative of Client for any purpose whatsoever. Campaign Manager is not
granted any express or implied right or authority to assume or create any
obligation or responsibility on behalf of or in the name of Client or to bind
Client in any manner. All persons employed or otherwise engaged by Campaign
Manager shall be deemed to be agents, employees, or representatives of Campaign
Manager and Campaign Manager shall be solely responsible for the acts or
omissions of such persons.
(E) Termination and Damages.
Either party may cancel by providing a thirty (30) day written notice to the
other party consistent with the method as described in Paragraph 11, "Notices"
which notice may be sent with or without cause. It shall be a breach of this
Agreement if Client unreasonably prevents completion of the Project. If such
breach occurs, Client shall pay Campaign Manager's actual damages, including,
but not limited to, compensation for time and effort expended, and the actual
amount of any expenses incurred.
(F) Indemnification.
1. Client agrees to indemnify, defend and hold harmless Campaign Manager, its
principals, officers, directors, employees, independent contractors,
agents, successors, assigns and licensees from all suits, claims, demands,
damages, debt, liability, account reckoning, obligation, cost, expense,
lien, action or cause of action, (including, but not limited to, actual
damages, punitive damages, fines and attorneys' fees, whether or not
litigation is commenced) arising out of (i) the product that is to be
managed, (ii) the information, data and material provided by Client to
<PAGE>
Campaign Manager and all claims made by Client with respect to the Product,
and (iii) any act or omission by Client in breach by Client of it s
warranties, representations, obligations and/or duties hereunder including,
but not limited to, those related to the Product, including, but not
limited to, the safety and efficacy of the Product , compliance with the
rules, regulations and guidelines of the Federal Trade Commission regarding
false and deceptive advertising practices.
2. Each party notify the other of any demand, suit or claim promptly after the
first party has been formally advised thereof. Campaign Manager and Client
shall each have the right to participate in the defense thereof with an
attorney of their choice at their sole expense.
3. The provisions of this paragraph 6 shall survive the expiration or other
termination of the Term of this Agreement.
(G) Insurance.
Client will obtain and maintain at its sole expense during the Term hereof and
for a period of one (1) year thereafter a comprehensive general liability and
product liability insurance policy with minimum limits of One Million Dollars
($1,000,000.00) per incident and Two Million Dollars ($2,000,000.00) in the
aggregate, with no deductible, naming Campaign Manager, and its respective
officers, directors, and employees as additional insured. Such insurance policy
shall provide that it cannot be canceled or modified subject to insures term.
Client will furnish Campaign Manager with a true and legible copy of the
insurance certificate upon execution of this agreement.
(H) Further Documentation.
The parties hereto agree to take all actions and execute all documents
reasonably necessary to effectuate the terms and intent of this Agreement.
(I) Binding Effect/Assignment.
This Agreement shall be binding upon and insure to the benefit of the parties
and their successors and assigns. This agreement is not assignable without the
prior written consent of the parties.
(J) Invalidity of Provisions.
If any provision of this Agreement shall be adjudged by a court to be void and
unenforceable, the same shall in no way affect any other provision of this
Agreement, or the validity or enforce ability of this Agreement as a whole.
(K) Notices.
All notices permitted or required under this Agreement shall be sent and deemed
given upon (i) personal delivery, (ii) 48 hours after having been dispatched by
telegram, or (iii) five (5) days after having been deposited in the United
States mail, certified, postage prepaid, return receipt requested, and addressed
to the respective parties as follows (or at such other address as may hereafter
be given by one party to the other party as provided by this Paragraph 11):
If to Client: NATIONAL BOSTON MEDICAL
43 Taunton Green, Suite 5
<PAGE>
Taunton, Massachusetts 02780
If to Campaign Manager: M2 MARKETING AND MANAGEMENT SERVICES, INC.
200 North Tustin Avenue, Suite 206
Santa Ana, California 92705
(L) Modification.
All modifications to this Agreement must be in writing and signed by each of the
parties.
(M) Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original Agreement, and all of which shall constitute one Agreement to
be effective as of the Effective Date.
(N) Attorney's Fees.
Should any dispute arise as a result of this Agreement, each party hereby agrees
to have the matter settled by the "under the rules" of American Arbitration
Association, without the necessity of a court order. All rights of discovery
allowed by law may be utilized and the prevailing party shall be entitled to an
award of reasonable attorneys' fees and costs in addition to any other relief.
Any decision by arbitration shall be final and binding upon the parties hereto.
(O) Miscellaneous.
All negotiations are merged into this Agreement. This Agreement constitutes the
entire understanding of the parties. There are no oral or other written
agreements between the parties concerning the subject of this Agreement.. This
Agreement shall constitute a binding obligation between the parties and shall be
applicable beyond the term of this Agreement. The agreement is established upon
execution.
(P) Direct Response Industry.
Client acknowledges and agrees that it is well-informed about the financial
risks associated with the Direct Response television advertising industry and
that Campaign Manager makes no warranty, expressed or implied, as to the degree
of success to be achieved by reason of the televising of the Infomercial, nor
shall Client seek to hold Campaign Manager liable with the respect thereto.
Campaign Manager has not made, and does not hereby make, any representation or
warranty with respect to the level of sales and revenue to be derived as a
result of the televising of the Infomercial. Client recognizes and acknowledges
that the level of revenues from sales of the Products of any kind contemplated
by this Agreement is speculative. Client agrees that it shall not make any claim
, nor shall it seek to impose any liability upon Campaign Manager based upon any
claim that more sales, revenues, media exposure, or customers could have been
obtained or better business could have been done than was actually made or done
by Campaign Manager or its successors, licensees and assigns, or that better
business terms, prices or opportunities could have been obtained.
<PAGE>
(Q) Representation by Counsel.
Each party hereby represents that it has consulted, or has knowingly waived
consulting, its own legal and tax counsel, accountants, or advisors concerning
the tax and legal consequences of this transaction contemplated by this
Agreement. Each party represents that it has relied solely upon the advice of
its own advisors and not on any representations or warranties of the other party
in connection with such consequences.
(R) Confidentiality.
Campaign Manager agrees that all financial marketing, sales, operation and other
commercially sensitive information, materials and knowledge acquired or learned
from Client in connection with this Agreement will be held as confidential, not
disclosed and preserved by Campaign Manager in strictest confidence. Campaign
Manager further agree that such information will be imparted to its employees,
agents, or third parties only on a "need to know" basis and that Campaign
Manager will inform each such employee, agents, or third parties of his or her
confidentiality obligations hereunder. Campaign Manager will return all
information provided by Client upon Completion/Termination of this Agreement.
The obligations of this paragraph do not apply to information which:
1. At the time of disclosure was previously known or in the public domain;
2. Subsequent to the time of disclosure became part of the public domain
through no fault of Campaign Manager, its agents, third parties, or
employee;
3. Is obtained by Campaign Manager from a third party not under obligation to
Client; or
4. Client, in writing, authorized Campaign Manager to release it.
Each party represents and warrants the authority of the undersigned to enter
into this Agreement and bind the respective parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
M2 MARKETING AND
MANAGEMENT SERVICES, INC. By: /s/ Adam T. MacDonald
A California Corporation Title: Senior Vice President
Date: 7/10/99
NATIONAL BOSTON MEDICAL By: /s/ Daniel Hoyng
A Nevada Corporation Title: CEO
Date: 7/13/99
<PAGE>
Addendum to M2 Marketing and Management Services, Inc.
Contract with National Boston Medical, Inc.
National Boston Medical, Inc. agrees to give and M2 agrees to accept the
following shares of National Boston Medical, Inc Common stock if the following
criteria are met:
<TABLE>
<CAPTION>
Infomercial Period Unit # of shares
<S> <C> <C> <C> <C>
July '99 to Sept. '99 50,000 25,000
75,000 27,500
Sept. '99 to Dec. '99 60,000 30,000
90,000 45,000
Jan. 2000 to March 2000 60,000 30,000
90,000 45,000
April 2000 to June 2000 50,000 25,000
75,000 37,500
</TABLE>
Retail: M2 will receive a bonus of 20% of NBM, Inc. Common stock of the actual
number of retail units sold. Example 100,000 retail units will result in the
awarding of 20,000 shares of NBM, Inc. stock.
Term of the agreement are strictly confidential and this agreement can be
terminated if shared with any third party without the express written consent of
National Boston Medical, Inc.
/s/ Daniel Hoyng /s/ Adam T. MacDonald
- ------------------- ----------------------
Daniel Hoyng for National Adam MacDonald for M2
Boston Medical, Inc.
June 19, 1999 6/17/99
Date Date
EXHIBIT 10.49
MARKETING AND DISTRIBUTION
AGREEMENT
BACKSTROKE BODY MASSAGER
This Agreement ("Agreement") is by and between NATIONAL BOSTON MEDICAL,
INC., a Nevada corporation ("National Boston"), and TRISTAR PRODUCTS, INC., a
Pennsylvania corporation ("Tristar"), both of which are sometimes referred to
herein as a "party" or the "parties".
WHEREAS, National Boston owns and/or controls all rights of manufacturing,
distribution and sale with respect to a body massager product as defined in
Exhibit A currently known as the "Backstroke", and all improvements, line
extensions and modifications thereof (the "Product", and when more than one -
"Products"); and
WHEREAS, National Boston is in the business, among other things, of
manufacturing, advertising, marketing and distributing products in various
media; and
WHEREAS, Tristar is also in the business, among other things, of
manufacturing, advertising, marketing and distributing products in various
media, including television, print, and retail; and
WHEREAS, the parties wish to set forth in this Agreement their
understanding of the terms, and conditions upon which National Boston will grant
to Tristar rights to use, distribute, sell, advertise, promote and otherwise
exploit the Products.
NOW THEREFORE, in consideration of the premises and the mutual promises and
undertakings set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
1. Marketing and Distribution Rights.
1.1 Grant of Rights. National Boston hereby grants to Tristar the following
rights which Tristar may, but is not obligated to, exercise alone or through any
one or more of its affiliates:
(a) Generally. The exclusive right, license and privilege during the Term
(as hereafter defined) throughout the United States and Canada and subject to
Section 1.7 below, the exclusive right, license and privilege during the Term
throughout the World (the "Territory") to use, distribute, sell, advertise,
promote and otherwise exploit the Products by any and all means and media, in
any and all markets, including but not limited to broadcast, cable, satellite
and all other forms of television transmission now existing or hereafter
developed, including without limitation, infomercials, commercial spots, promos,
television shopping programs such as QVC and HSN, radio, electronic and computer
retailing media (such as the Internet), all print media, direct mail
solicitation, package inserts, inbound and outbound telemarketing, credit card
syndication, CD-ROM, catalog sales, retail sales, and all other channels or
means of distribution now existing or hereafter developed;
(b) Use of Trademarks. The right to use any and all trademarks that
<PAGE>
National Boston may own or control with respect to the Products including
without limitation the trademark "Backstroke" U.S. Registration No. 1,841,759;
75-431833 and 75-431983 (the "Trademarks"), and the right to advertise, promote,
market, sell and distribute the Products under or in connection with such other
trademarks or identifying names or marks as Tristar may determine;
(c) Use of National Boston's Artwork. The right to copy and use any and all
artwork and promotional materials that National Boston may own or control with
respect to the Products ("National Boston's Artwork"), copies of all of which
National Boston shall provide to Tristar for this purpose;
(d) Names, Likenesses and Endorsements. The right to use the names,
likenesses (including, without limitation, photographs, illustrations, films and
videotapes), endorsements and testimonials of all endorsers and other persons
that National Boston may own or control with respect to the Products;
(e) Packages. The right to develop such groupings, ensembles,
configurations and packaging of the Products and other ancillary goods for sale
as Tristar may determine;
(f) Subdistributors. The right to appoint such subdistributors as Tristar,
in its sole judgment, may deem appropriate in order to market and distribute the
Products; and
(g) Existing Infomercial. The right to use an existing long form television
infomercial (the "Existing Infomercial") owned by National Boston in the conduct
of a television direct response marketing campaign, and to edit and modify the
infomercial as Tristar deems necessary and appropriate.
1.2 Non-Compete. During the term of this Agreement and for one year
thereafter, neither National Boston nor Tristar shall directly or indirectly,
either alone or in participation with any other person or entity, engage in or
be involved with manufacturing, marketing or distributing any other back
massaging products similar in design, composition, content or function to the
Product. Further, Tristar agrees to purchase the Products only from National
Boston. This Section shall not be construed to impeed National Boston's
commitments to deliver Product to Fredricksen TV per Section 1.7. This section
shall not apply in the event of the insolvency, committing any act of
bankruptcy, including, but not limited to the appointment of a trustee or
receiver for any part of the property, or the commencement of any proceedings by
or against either of the parties hereto under any law having to do with the
relief of debtors or in the event that National Boston shall no longer have
rights to the license to the Product.
1.3 Minimum Sales Requirements. Tristar shall not have any minimum
purchace/sales requirement under this Agreement. However, Tristar's rights of
exclusivity and right to use the Existing Infomercial or any newly created
Infomercial/Commercial whether created by Tristar or National Boston within the
Territory, are subject to Tristar's maintaining certain minimum order
quantities, as described in Section 8 hereof.
1.4 Resale Prices. Tristar, in its sole judgment, shall have the right to
sell and distribute the Products at such prices, and on such terms and
conditions (including shipping and handling charges), as Tristar may establish.
<PAGE>
1.5 Quality Control. Tristar shall adhere to any reasonable requests and
directions of National Boston relating to warranties and the Trademark applied
to such Products, pursuant to the terms of this Agreement. Tristar will make no
representation whether written or oral as to the Products except as specifically
set forth in materials provided by National Boston in respect of the Products;
or assume liability and responsibility for representations not so approved by
the Company in advance.
1.6 Advertising Costs. Tristar will be responsible for all costs associated
with the marketing and distribution of the Products. Except as by National
Boston Section 1.7
1.7 Rights Reserved to National Boston. Notwithstanding anything to the
contrary contained in Section 1.1 hereof, Tristar shall have no marketing and
distribution rights for the Products in countries which have already been
assigned or licensed to Frederiksen Television, Inc. until such rights
terminate. A copy of National Boston's agreement with Frederiksen Television
will be provided to Tristar.
2. Sale of Product and Quantity The Company agrees to sell to TRISTAR, and
TRISTAR in order to maintain its' exclusivity within the specified
territory/channel, agrees to purchase and pay for such minimum units of the
Product on an annual basis as is specified in Section 8 attached hereto,
PROVIDED THAT orders for Products shall not be effective until accepted by the
Company and the Company may in its sole discretion reject any order which does
not comply with Exhibits B and/or C of this Agreement or their subsequent
modifications.
All sales of Products to TRISTAR shall be subject to National Boston's
conditions of sale except where excluded by law, INCLUDING THOSE LIMITING
WARRANTIES OF MERCHANTABILITY AND FITNESS from time to time in effect. National
Boston's current conditions of sale are attached hereto as Exhibit B and made a
part hereof. TRISTAR will inspect all Product shipments from National Boston
according to TRISTAR's usual procedures. TRISTAR may reject any goods, which are
shipped contrary to the terms of this Agreement, or are not in compliance with
purchase orders accepted from TRISTAR. TRISTAR's sole remedy for receipt of
defective Products including customer warranty returns or for Products not
delivered shall be as stated in said conditions of sale. National Boston shall
in no event be responsible for special or consequential damages.
2.1. Prices, Delivery, Title and Risk of Loss TRISTAR shall pay for the
Products purchased hereunder at the prices as set forth in Exhibit C attached
hereto and made a part hereof. Prices will not change without the agreement of
both parties. All orders accepted by National Boston prior to the effective date
of any price changes shall remain at the price in effect at the time of order
acceptance, regardless of actual ship dates for such orders. Delivery of all
Products shall be F.O.B. Longbeach, CA. If delivery is required at a location
other than as stated in this Section 2.1 or in the event of changes in shipping
and duty costs subsequent to the date of this agreement, then National Boston
May pass on to Tristar any cost difference for such delivery. Risk of loss of
the Products shall pass to Tristar upon such delivery. Tristar acknowledges that
National Boston requires additional advance notice to specially package and
deliver the Products. Lead time required for orders shall be not less than 45
days from the time of order placement to the required time of delivery at
Tristar's warehouse. To the extent that National Boston is unable to deliver
products within the specified time frame then such units not delivered on a
timely basis shall be deemed to have been included in Tristars monthly minimum
requirements to maintain exclusivity as though they had been delivered on time.
<PAGE>
2.2. Payment. Payment shall be made in United States dollars on the
following terms: an irrevocable letter of credit, or other arrangement as agreed
by both parties. At National Boston's discretion, credit terms may be changed.
If TRISTAR shall fail to fulfill the terms of payment, the Company, may, at its
option and without prejudice to any other lawful remedy, defer further shipments
hereunder until such default is made good, treat such default as a breach of
this entire Agreement, and/or terminate this Agreement.
The initial order for the purpose of this agreement shall be not less than
22,500 units (July and August exclusivity minimums) at $16.50 per unit. The
payment terms for this order shall be $92,812.50 (25%) wired to National
Boston's account upon execution of this agreement. The remaining value of the
order in the amount of $278,437.50 shall be covered by an irrevocable letter of
credit for the benefit of National Boston. The entire letter of credit shall be
drawn down by National Boston immediately upon shipment by National Boston of
the initial 15,000 units.
2.3 Reporting and Remittances; Review of Tristar's Books Tristar will
provide National Boston with quarterly reports of its sales activities,
quantities sold and such other information as the National Boston shall
reasonably require. National Boston shall have the right to review at Tristar's
premises the books and records of Tristar that pertain to the sale and other
commercial exploitation of the Products on reasonable advance notice and at
reasonable intervals not to exceed twice in each calendar year. Such reports
shall be Media Spending, Inventory and Sales reports by Customer.
3. Television Direct Response Advertising
3.1 Existing Infomercial.
(a) Revisions/Editing. Tristar may edit and revise the Existing Infomercial
at its own cost and expense as it determines in its sole discretion.
(b) Substantiation. The Existing Infomercial shall be based upon such
attributes of and claims made about the Product as shall have been documented
and substantiated by National Boston to Tristar's satisfaction in compliance
with all applicable laws and regulations relating to the advertising and sale of
the Product. National Boston shall provide to Tristar all such documentation and
substantiation as Tristar shall determine may be necessary to ensure or
facilitate compliance with all such laws and regulations, to the extent such
information is in National Boston's possession, custody or control.
3.2 Broadcast of Commercial. Tristar shall have exclusive control over and
shall be responsible for the broadcast, performance and transmission of the
Existing Infomercial as well as any other commercials or infomercials (all of
which are collectively referred to herein as "Commercials") via broadcast, cable
and satellite television, at such times, with such frequency, in such markets,
and on such networks and stations as Tristar, in its sole judgment, may
determine.
3.3 Media and Product Fulfillment Costs. Beginning with the effective date
of the Agreement, Tristar shall bear all Media Costs incurred in connection with
the advertising, marketing and distribution of the Products ordered by Tristar
and all costs of order processing, payment processing, order fulfillment and
customer service. Tristar shall not be responsible for any such costs incurred
by National Boston prior to the effective date of this agreement. At the request
of National Boston, Tristar at its option, may but is not required to take
customer service responsibility for National Boston's existing customer base for
<PAGE>
a fee to be mutually agreed to by both parties. Tristar will assume the cost to
re-shoot the instructional video and any revisions requested by Tristar to the
retail display box or instructional booklet.
4. Proprietary Rights.
4.1 National Boston's Intellectual Property.
(a) Generally. Subject to the rights granted to Tristar under this
Agreement, all right, title and interest in and to the design of the Products
and/or its derivatives, the Patents, Trademarks, and National Boston's Artwork
(collectively, "National Boston's Intellectual Property"), is and shall remain
the sole property of National Boston, and neither Tristar nor any third party
shall acquire any right, title or interest in National Boston's Intellectual
Property by virtue of this Agreement or otherwise, except as expressly provided
herein. Any trademarks developed by Tristar to be used in conjunction with sales
of the Product shall be owned by Tristar. Any unauthorized use of National
Boston's Intellectual Property by Tristar shall be deemed an infringement of the
rights of National Boston therein. Tristar shall not in any way or at any time
dispute or attack the validity or contest the rights of National Boston in or to
any of National Boston's Intellectual Property. The provisions of this Section
4.1(a) are subject in all respects to the accuracy of the representations and
warranties of National Boston given pursuant to Section 5.2.
b) Enforcement of Rights. National Boston may at its expense enforce
National Boston's rights in National Boston's Intellectual Property against
infringement thereof. If Tristar requests National Boston to enforce such rights
and National Boston declines to do so, Tristar shall have the right (but shall
not be required) to enforce such rights, and may do so in National Boston's name
with National Boston's written agreement which shall not be unreasonably
withheld. The party enforcing the rights shall be responsible for its own legal
fees and expenses incurred in such enforcement efforts, but shall first be
reimbursed for such expenditures from any recovery obtained. All monies
recovered in excess of such expenditures shall be paid to the party suffering
actual loss to the extent of such loss, and any amount remaining shall be shared
equally by Tristar and by National Boston. Tristar shall fully inform National
Boston of the status of any such enforcement efforts undertaken by Tristar.
4.2 Tristar's Intellectual Property. All right, title and interest in and
to the entire editorial, visual, audio, and graphic content of all
advertisements and promotional materials developed by Tristar in connection with
its activities under this Agreement, any new trademarks developed by Tristar to
be used in conjunction with sales of the Product, any Commercials other than the
Existing Infomercial that Tristar produces, and all related materials and the
contents thereof (collectively, "Tristar's Intellectual Property") shall be and
remain the sole property of Tristar, and neither National Boston nor any third
party shall acquire any right, title or interest in Tristar's Intellectual
Property by virtue of this Agreement or otherwise. Any unauthorized use of any
of Tristar's Intellectual Property by National Boston shall be deemed an
infringement of the rights of Tristar therein. National Boston shall not in any
way or at any time dispute or attack the validity or contest the rights of
Tristar in or to any of Tristar's Intellectual Property.
4.3 Customer List. Tristar may compile a list of the names and addresses of
persons and entities who order the Products through it or its affiliates or are
otherwise targeted by or on behalf of it or its affiliates as potential
customers of the Products (the "Customer List"). The Customer List shall be the
joint property of Tristar and National Boston. Proceeds from the sale or other
use of this list shall be shared equally by the parties.
<PAGE>
4.4 Future Patent Applications. Tristar shall have the right, but not the
obligation, to prosecute any patent application, United States and foreign, for
the Product, in National Boston's name and on behalf of National Boston with
National Boston's prior written approval, and National Boston shall cooperate
fully with Tristar with respect thereto, but all of such activity shall be at
the sole cost and expense of Tristar. Tristar shall have no liability under any
circumstances to National Boston for any decision or failure by Tristar to apply
for such patents or for any action, activity, neglect or failure by Tristar, its
representatives and agents, in connection therewith.
5. National Boston's Representations, Warranties and Covenants.
5.1 The Products. National Boston represents, warrants and covenants to
Tristar that:
(a) Information. All information provided to Tristar by National Boston
relating to the Products is and will be, to the best of National Boston's
knowledge and belief, true and correct, including without limitation all
information regarding the effectiveness, quality, characteristics or fitness of
the Products;
(b) Substantiation. National Boston will provide to Tristar all information
in National Boston's possession or control which substantiates all claims made
by the National Boston to Tristar about the Product; and
(c) Patent. The Product sample shown to Tristar conforms to the description
contained, and is consistent with the claims made, in the Patents.
5.2 Proprietary Rights. National Boston represents, warrants and covenants
to Tristar that:
(a) National Boston's Intellectual Property. National Boston owns or
otherwise controls or shall own or otherwise control all right, title and
interest in and to National Boston's Intellectual Property, which constitutes
and shall constitute all of the intellectual property and other proprietary
rights necessary or appropriate for the manufacture, marketing, distribution and
sale of the Products;
(b) Power and Authority. National Boston has and shall have all necessary
power and authority to grant to Tristar all of the rights and privileges granted
pursuant to this Agreement;
(c) No Infringement. Neither the granting of the rights and privileges
granted hereunder nor the exercise thereof by Tristar in accordance with the
terms of this Agreement will infringe or otherwise violate the intellectual
property or other proprietary rights of any person or entity;
(d) No Adverse Claims. National Boston has not been and is not, as of the
date of this Agreement, a party to any litigation enforcing or defending
National Boston's rights in, to or with respect to the Products or any of
National Boston's Intellectual Property, and is not aware of any claims or
demands made or threatened by any person or entity involving the validity of
National Boston's rights in, to or with respect to the Products or any of
National Boston's Intellectual Property; and
<PAGE>
(e) Applicable Patents, Copyrights, Trademarks and Licenses. National
Boston will at the time of execution of this Agreement, and thereafter, provide
Tristar with copies of all patents, abstracts of all copyright registrations,
copyright applications, trademark registrations, trademark applications,
licenses and other agreements and instruments relating to the Products and
National Boston's Intellectual Property (and all amendments, supplements, and
modifications thereof) which are now in existence or which National Boston shall
obtain, file or enter into during the term of this Agreement.
5.3 Other Warranties. The warranties and representations of National Boston
set forth in this Section 5 and elsewhere in this Agreement are in addition to
and without prejudice to all other warranties expressed or implied by law.
5.4 No Warranty By Tristar. National Boston acknowledges that Tristar, by
executing this Agreement and exercising its rights hereunder, makes no
representation, warranty, endorsement or certification regarding the
effectiveness, quality, character or fitness of the Products.
6. Additional Representations and Warranties. Each party represents and warrants
to the other as follows:
6.1 Power and Authority. It has all requisite power and authority to enter
into this Agreement, and has duly authorized by all necessary action the
execution and delivery hereof by the officer or individual whose name is signed
on its behalf below.
6.2 No Conflict. The execution and delivery of this Agreement by it, and
the performance of its obligations hereunder, do not and will not conflict with
or result in a breach of or a default under its organizational instruments or
any other agreement, instrument, order, law or regulation applicable to it or by
which it may be bound.
6.3 Binding Effect. This Agreement has duly and validly executed and
delivered by it and constitutes its valid and legally binding obligation,
enforceable in accordance with it terms.
7. Indemnification.
7.1 By Tristar.
(a) Generally. Subject to Section 7.1 (b), Tristar shall defend, indemnify
and hold harmless National Boston and its affiliated companies and their
respective officers, directors, shareholders, employees, licensees, agents,
successors and assigns from and against any and all without limitation, claims,
damages, judgments, awards, settlements, investigations, costs, and reasonable
attorneys fees and disbursements (collectively "Claims") which any of them may
incur or become obligated to pay arising out of or resulting from (i) the breach
by Tristar of any of its representations, warranties, covenants, obligations,
agreements or duties under this Agreement, and (ii) any advertising claims made
by Tristar based on information not provided to it by National Boston.
(b) Exceptions. Tristar shall have no duty under Section 7.1(a) or
otherwise to defend, indemnify or hold harmless with respect to any Claims which
(i) arise out of or result from the breach by National Boston of any of its
representations, warranties, covenants, obligations, agreements or duties under
this Agreement; or (ii) are subject to National Boston's duty to defend,
indemnify and hold harmless pursuant to Section 7.2(a).
<PAGE>
7.2 By National Boston.
(a) Generally. Subject to Section 7.2(b), National Boston shall defend,
indemnify and hold harmless Tristar, its affiliated companies and their
respective officers, directors, shareholders, employees, licensees, agents,
successors and assigns from and against any and all without limitation, claims
which any of them may incur or become obligated to pay arising out of or
resulting from (i) the breach by National Boston of any of its representations,
warranties, covenants, obligations, agreements or duties under this Agreement,
(ii) any documentation or studies and any substantiation for advertising claims
provided by National Boston to Tristar (iii) the infringement of the proprietary
rights or any third party with respect to any of the Products or National
Boston's intellectual property in the course of the exercise by Tristar or the
rights granted to it under this Agreement, and (iv ) National Boston shall
provide product liability coverage in the amount of not less than five million
dollars and name Tristar as an additional insured.
(b) Exceptions. National Boston shall have no duty under Section 7.2(a) or
otherwise to defend, indemnify or hold harmless with respect to any Claims which
(i) arise out of or result from the breach by Tristar of any of its
representations, warranties, covenants, obligations, agreements or duties under
this Agreement; or (ii) are subject to Tristar's duty to defend, indemnify and
hold harmless pursuant to Section 7.1(a).
7.3 Procedure. Promptly after learning of the occurrence of any event which
may give rise to it rights under the provisions of this Section 7, any party
seeking to enforce such right (a "Claiming Person") shall give written notice of
such matter to the party against whom enforcement of such rights is sought (the
"Indemnifying Party"). The Claiming Person shall cooperate with the Indemnifying
Party in the negotiation, compromise and defense of any such matter. The
Indemnifying Party shall be in charge of and control such negotiations,
compromise and defense and shall have the right to select counsel with respect
thereto, provided that the Indemnifying Party shall promptly notify the Claiming
Person of all material developments in the matter. In no event shall the
Indemnifying Party compromise or settle any such matter without the prior
consent of the Claiming Person, which shall not be bound by any such compromise
or settlement absent its prior consent.
8. Term. This Agreement shall commence July 26, 1999 and shall continue so long
as Tristar makes reasonable commercial efforts to sell the Product. However,
Tristar's rights of exclusivity shall terminate, and Tristar's rights shall
continue at the discretion of National Boston on a non-exclusive basis except
that Tristar, at the discretion of National Boston shall have no further right
to use the Existing Infomercial after a 180 day DRTV sell-off opportunity, if
Tristar does not maintain Product orders to National Boston in at least the
following monthly minimum unit quantities:
<TABLE>
<S> <C> <C>
July, 1999 - 7,500 units
August, 1999 - 15,000 units
September, 1999 - 15,000 units
October, 1999
and each month thereafter 20,000 units
</TABLE>
All Product Orders shall be considered cumulative, so that if Tristar has taken
delivery on in excess of the minimum Order rate in one period, the minimum order
rate in subsequent periods will be correspondingly reduced to the extent of such
<PAGE>
excess. Further, Tristar may prepay orders in order to meet any minimums and
receive a credit therefor against future orders. Tristar, in consideration of
the rights granted herein, within the Territory, and regardless of other
performance, shall guarantee the order schedule defined in this Section 8 shall
be placed with and paid to National Boston for the initial six (6) month period.
Thereafter, orders will continue consistent with Section 2 and as necessary to
maintain exclusivity.
9. Termination.
9.1 Termination Events.
(a) Election by Tristar. Tristar may terminate this Agreement at any time
upon 30 days prior written notice by so notifying National Boston and this
Agreement, subject to the provisions of Section 9.2, shall terminate 30 days
following National Boston's receipt of such notice.
(b) Election By National Boston. National Boston may terminate this
Agreement upon 30 days prior written notice to Tristar, subject to Section 9.1
(c) and Section 9.2 if Tristar fails after 12 months to maintain the
requirements for exclusivity. Such termination will be effective 30 days
following Tristar's receipt of such notice if the situation remains uncured.
(c) Termination Upon Breach. Either party may terminate this Agreement upon
30 days written notice to the other party upon the breach by the other party of
any of its material representations, warranties, covenants or agreements
contained in this Agreement. Upon the expiration of such notice period, this
Agreement shall terminate without the need for further action by either party;
provided, however, that if the breach upon which such notice of termination is
based shall (i) have been fully cured to the reasonable satisfaction of the non-
breaching party within such 30 day period, or (ii) not be capable of cure within
such 30 days, but can be cured within a reasonable time thereafter, and the
breaching party is taking reasonable steps to effect such a cure, then such
notice of termination shall be deemed rescinded, and this Agreement shall be
deemed reinstated and in full force and effect. Such right of termination shall
be in addition to such other rights and remedies as the terminating party may
have under applicable law.
9.2 Obligations Deemed Fulfilled in the Event of Early Termination. Any
early termination pursuant to Section 9.1(a) of this Agreement shall not be
viewed to be a breach of this Agreement. Unless either of the parties has
separately breached a commitment made elsewhere in this Agreement, such parties
shall be deemed to have fulfilled all of their obligations hereunder, except
those which by their nature survive the termination of the Term (e.g. warranties
and representations, payment obligations, confidentiality and indemnifications,
etc.). Early termination by Tristar shall not relieve its obligations to
National Boston under Section 8.
9.3 Limited Sales Rights After Termination. For a period of six months
following the termination of this Agreement, Tristar shall retain non-exclusive
rights to advertise, market, and sell the Products in the same manner as
provided for in this Agreement, until Tristar has sold all of its existing
inventory of the Product. To assist Tristar in liquidation of inventory in the
event of termination, National Boston agrees that any subsequent licensee will
be directed at Tristar's option, to first acquire existing stocks of unsold new
inventory, held by Tristar at the time of the termination, until such inventory
is liquidated provided such inventory is in saleable condition as reasonably
determined by National Boston. Such sales to the new licensee by Tristar will be
at a price not to exceed that paid by Tristar to National Boston for such
inventory. Tristar agrees that such sales will be transacted and delivered in a
timely manner.
<PAGE>
9.4. Effect of Termination. Upon termination or expiration of this
Agreement for any reason whatsoever:
(a) National Boston shall be entitled, but not obligated to, buy all or
part of any remaining Products which TRISTAR may have in stock (subject to
applicable law); all costs of shipment of repurchased product will be at the
expense of National Boston. Should National Boston elect not to repurchase
TRISTAR's existing stocks of the Products, then TRISTAR may sell the remaining
stock without further compensation to National Boston excluding any then
existing liabilities on the part of TRISTAR to National Boston.
(b) TRISTAR shall, at its own expense, return any remaining technical,
marketing or promotional materials obtained from National Boston and
(c) Each party shall immediately pay to the other all amounts due,
regardless of whether such amounts are then or thereafter payable.
(d) Tristar acknowledges and agrees that National Boston shall not by
reason of the termination or non-renewal of this Agreement be liable to Tristar
pursuant to any law, rule or regulation, domestic or foreign, for reimbursement,
compensation, or damages in the nature of loss of profit, or opportunity, or
otherwise, and Tristar hereby irrevocably waives any and all such rights and
releases and discharges National Boston from any and all such liabilities.
(f) Each party shall retain any and all rights and remedies available to it
at law or equity.
10. Confidentiality.
10.1 Generally. All customer lists, price lists, written and unwritten
marketing plans, techniques, methods and data, sales and transaction data, all
technology and know-how relating to the manufacture of the Products, and other
information provided by either party shall constitute confidential information
of such party ("Confidential Information"). Either party receiving Confidential
Information (a "Receiving Party") from the other party (a "Conveying Party")
shall hold all Confidential Information in the strictest confidence and shall
protect all Confidential Information of the Conveying Party with at least the
same degree of care that the Receiving Party exercises with respect to its own
propriety information. Without the prior written consent of the Conveying Party,
the Receiving Party shall not use, disclose, divulge or otherwise disseminate
any Confidential Information of the Conveying Party to any person or entity,
except for the Receiving Party's attorneys, accountants and such other
professionals as the Receiving Party may retain in order for it to perform and
enforce the provisions of this Agreement.
10.2 Exceptions. Notwithstanding Section 10.1, the Receiving Party shall
have no obligation with respect to any Confidential Information of the Conveying
Party which (i) is or becomes within the public domain through no act of the
Receiving Party in breach of this Agreement, (ii) was lawfully in the possession
of the Receiving Party without any restriction on use or disclosure prior to its
disclosure in connection with this Agreement and the negotiations leading to
this Agreement, (iii) is lawfully received from another source subsequent to the
<PAGE>
date of this Agreement without any restriction on use or disclosure, or (iv) is
required to be disclosed by order of any court of competent jurisdiction or
other governmental authority (provided in such latter case, however, that the
Receiving Party shall timely inform the Conveying Party of all such legal or
governmental proceedings so that the Conveying Party may attempt by appropriate
legal means to limit such disclosure, and the Receiving Party shall further use
its best efforts to limit the disclosure and maintain confidentiality to the
maximum extent possible).
10.3 Communication Either party shall be entitled to communicate the
existence of this agreement.
11. Injunction. Each party acknowledges that a breach of the obligations not to
compete under Section 1.2, and/or of confidentiality under Section 10 will
result in irreparable and continuing damage to the non-breaching party for which
there will be no adequate remedy at law. Accordingly, in the event of any such
breach, the non-breaching party shall be entitled to temporary and/or permanent
injunctive relief and/or an order for specific performance, without bond, with
respect to such breach. Neither party shall oppose such relief on the grounds
that there is an adequate remedy at law, and such right shall be cumulative and
in addition to any other remedies at law or in equity (including monetary
damages) which the non-breaching party may have upon the breach of either of the
other party's obligation of exclusivity or confidentiality hereunder.
12. Independent Contractor. No party or any of its officers, employees, agents
or representatives is a partner, employee or agent of any other party for any
purpose whatsoever. Rather, each party is and shall at all times remain an
independent contractor. No party has, nor shall it hold itself out at as having,
any right, power or authority to create any contract or obligation, either
express or implied, on behalf of, in the name of, or binding upon the other
party, unless such other party shall consent thereto in writing. Each party
shall have the right to appoint and shall be solely responsible for its own
employees, agents and representatives, who shall be at such party's own risk,
expense and supervision and shall not have any claim against any other party for
compensation or reimbursement.
13. Force Majeure. In the event of war, fire, flood, labor troubles, strike,
riot, act of governmental authority, acts of God, or other similar contingencies
beyond the reasonable control of either of the parties interfering with the
performance of the obligations of such party, the obligations so affected shall
be deferred to the extent necessitated by such event or contingency without
liability, but this Agreement shall otherwise remain unaffected. Notice with
full details of any circumstances referenced herein shall be given by the
affected party to the other party, promptly after its occurrence. The affected
party shall use due diligence, where practicable, to minimize the effects of or
end any such event.
14. Further Actions. The parties agree to execute such additional documents and
to perform all such other and further acts as may be necessary or desirable to
carry out the purposes and intentions of this Agreement.
15. Supply of Product to Tristar. National Boston will be the exclusive supplier
of the Product to Tristar. To insure most favorable manufacturing rates,
National Boston will utilize the contract manufacturer of choice as indicated by
Tristar so long as the manufacturer is able to meet acceptable cost, quality
<PAGE>
and delivery standards as mutually established by National Boston and Tristar.
16. Royalties Owing to Third Parties. National Boston shall be responsible to
pay all third parties that are entitled to royalties from sale of the Product
and or airing of the infomercial by reason of agreements entered into prior to
the date of execution of this Agreement. Such third parties include the producer
of the Existing Infomercial, Banyon Productions in Philadelphia.
17. Third Party Media Reports. Tristar shall instruct its third party media
purchasers to furnish National Boston on a timely basis with weekly media
reports on television direct response sales. The failure of the third party to
provide the reports shall not constitute a material breach of this Agreement.
18. Stock in National Boston. National Boston shall issue to Tristar its common
stock, a total of 500,000 shares uponn execution. The shares will be subject to
piggyback registration rights and any restrictions that may be imposed by
current SEC rules and regulations.
19. Miscellaneous.
19.1 Notices. All notices, requests, instructions, consents and other
communications to be given pursuant to this Agreement shall be in writing and
shall be deemed received (i) on the same day if delivered in person, by same-day
courier or by telegraph, telex or facsimile transmission, (ii) on the next day
if delivered by overnight mail or courier, or (iii) on the date indicated on the
return receipt, or if there is no such receipt, on the third calendar day
(excluding Sundays) after being sent by certified or registered mail, postage
prepaid, to the party for whom intended to the following addresses:
If to National Boston:
National Boston Medical, Inc.
43 Taunton Green, Suite 5
Taunton, Massachusetts 02780
Attn: Daniel Hoyng, President
Tel. (508) 884-8820
If to Tristar:
Tristar Inventions, Inc.
4 Century Drive, 2nd Floor
Parsippany, New Jersey 07054
Attn: Keith Mirchandani, President
Fax No.: (973) 683-1001
Each party may by written notice given to the other in accordance with this
Agreement change the address to which notices to such party are to be delivered.
19.2 Entire Agreement. This Agreement contains the entire understanding of' the
<PAGE>
parties and supersedes all prior agreements and understandings, whether written
or oral, between them with respect to the subject matter hereof. Each party has
executed this Agreement without reliance upon any promise, representation or
warranty other than those expressly set forth herein.
19.3 Amendment. No amendment of this Agreement shall be effective unless
embodied in a written instrument executed by both of the parties.
19.4 Waiver of Breach. The failure of any party hereto at any time to
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provisions, or in any way to affect the validity of
this Agreement or any provisions hereof or the right of any party to thereafter
enforce each and every provision of this Agreement. No waiver of any breach of
any of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party against which enforcement of such
waiver is sought; and no waiver of any such breach shall be construed or deemed
to be a waiver of any other or subsequent breach.
19.5 Assignability. This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns. Neither of the parties hereto can assign their
respective rights under this Agreement without the prior written consent of the
other party, but any such assignment shall not relieve such parties from their
obligations contained herein.
19.6 Governing Law; Venue; Waiver of Jury Trial. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New Jersey without regard to conflict of law principles. All disputes relating
to or arising out of this Agreement shall be resolved in the state courts of New
Jersey located in the Morris County. The parties hereto waive any right to a
jury trial with respect to any matter arising out of or related to this
Agreement.
19.7 No Representation as to Extent of Sales. Notwithstanding the minimums
required to maintain the exclusivity of the license, Tristar has not made and
does not hereby make any representation or warranty with respect to the extent
or volume it may achieve in the sale or other exploitation of the Product
hereunder. Tristar shall make such effort to exploit successfully the Product
and the related rights herein granted as it may determine in accordance with its
business judgment; however, National Boston recognizes and acknowledges that
such matters are speculative and agrees that the judgment of Tristar and its
related companies or licensees in regard to any such matters shall be binding
and conclusive upon National Boston. National Boston agrees that it will not
make any claim nor shall any liability be imposed upon Tristar based upon any
claim that more or better business could have been done than was actually
obtained or done by Tristar or any of its related companies or licensees, or
that better prices or terms could have been obtained.
19.8 Severability. All of the provisions of this Agreement are intended to
be distinct and several. If any provision of this Agreement is or is declared to
be invalid or unenforceable in any jurisdiction, it shall be ineffective in such
jurisdiction only to the extent of such invalidity or unenforceability. Such
invalidity or unenforceability shall not affect either the balance of such
provision, to the extent it is not invalid or unenforceable or the remaining
provisions hereof, or render invalid or unenforceable such provision in any
other jurisdiction.
19.9 Headings. The headings of sections and subsections have been included
for convenience only and shall not be considered in interpreting this Agreement.
19.10 Counterparts; Facsimiles. This Agreement may be executed in one or
<PAGE>
more counterparts, each of which shall be deemed to be an original, and all of
which together shall constitute one and the same Agreement. This Agreement may
be executed and delivered by electronic facsimile transmission with the same
force and effect as if it were executed and delivered by the parties
simultaneously in the presence of one another, and signatures on a facsimile
copy hereof shall be deemed authorized original signatures.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date last written below.
TRISTAR PRODUCTS, INC.
By: /s/Keith Mirchandani
- -------------------------------
Keith Mirchandani Date
President
NATIONAL BOSTON MEDICAL, INC.
By: /s/Daniel J Hoyng
- -------------------------------
Daniel Hoyng Date
President
<PAGE>
EXHIBIT A
PRODUCTS
As defined in this Agreement, "Products" shall mean the following:
Complete Backstroke Back Massager(TM) with seven massaging elements.
Neck roller assembly.
Instructional booklet and Video
Packaging for the above shall be a craft box for "Infomercial Sales" and a
display box for "Retail Sales".
Improvements, modifications and line extensions of the above are included
(pricing of modified "Product" may be effected as mutually agreed by both
parties)
<PAGE>
EXHIBIT B
TERMS AND CONDITIONS OF SALE
National Boston warrants that its' products will be shipped in salable
condition, free from defects and conforming to its' manufacturing standards then
in effect for product specification and quality. The sole remedy of Tristar for
any product shipped by National Boston which does not meet the conditions stated
above at the time of shipment by National Boston, including customer warranty
issues, shall be return of defective goods to National Boston for refund of
amounts paid by Tristar for the defective product including freight and customs
clearance charges.
THE EXPRESS WARRANTY SET FORTH ABOVE IS THE ONLY WARRANTY MADE BY NATIONAL
BOSTON WITH RESPECT TO ITS' PRODUCTS. NATIONAL BOSTON MAKES NO OTHER WARRANTIES,
EXPRESS OR IMPLIED OR ARISING BY CUSTOM OR TRADE USAGE, AND SPECIFICALLY, MAKES
NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. NATIONAL
BOSTON'S EXPRESS WARRANTY SHALL NOT BE ENLARGED, DIMINISHED OR AFFECTED BY, AND
NO OBLIGATION OR LIABILITY SHALL ARISE OUT OF NATIONAL BOSTON'S RENDERING OF
TECHNICAL OR OTHER ADVICE OR SERVICES IN CONNECTION WITH THE PRODUCTS OR
OTHERWISE HEREUNDER.
The liability of either party, whether in contract, tort (including
negligence, fraud and willful misconduct), or otherwise, arising out of or in
connection with the products or this Agreement shall not exceed the amounts paid
to such party by the other hereunder. IN NO EVENT SHALL NATIONAL BOSTON BE
LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL OR TORT DAMAGES, INCLUDING,
WITHOUT LIMITATION, ANY DAMAGES RESULTING FROM LOSS OF USE, LOSS OF PROFIT OR
LOSS OF BUSINESS ARISING OUT OF OR IN CONNECTION WITH THE PERFORMANCE OR LACK OF
PERFORMANCE OF THE PRODUCTS OR NATIONAL BOSTON'S PERFORMANCE OF SERVICES OR OF
ANY OTHER OBLIGATIONS RELATING TO THIS AGREEMENT OR THE PRODUCTS,
<PAGE>
WHETHER OR NOT NATIONAL BOSTON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
Tristar understands and agrees that it shall not recover special or
consequential damages from National Boston. However, National Boston understands
and agrees that it shall stand behind its Product(s) vis-a-vis the ultimate
consumer to whom each Product is sold. Therefore, notwithstanding anything to
the contrary set forth within this Agreement (including, without limitation
Paragraph 2 and/or Exhibit B), National Boston shall indemnify and hold Tristar
harmless (consistent with the scope of indemnity set forth in Paragraph 7) from
any and all claims of ultimate consumers of the Product(s) except where such
claims result from unauthorized changes by Tristar to Product claims.
<PAGE>
EXHIBIT C
PRICES
Backstroke Back Massager(TM) Pricing
June 30, 1999
(a) The pricing for the Backstroke Back Massager(TM) as defined in Exhibit "A"
is $20.00 per unit of Product sold by any means and media other than television
or print direct response.
(b) The pricing for the Backstroke Back Massager(TM) as defined in Exhibit "A"
for sales and exploitation of the Product made in direct response to the airing
of a television direct response commercial or infomercial, including the
Existing Infomercial, or any new Infomercial/Commercial whether produced by
National Boston or Tristar, or direct response print media is $16.50 per unit.
Sales on home shopping networks such as QVC and HSN are considered sales made in
direct response to a television commercial or infomercial for purposes of this
Agreement.
All prices are quoted F.O.B. Longbeach, CA and are to be paid in US Dollars.
If NATIONAL BOSTON MEDICAL INC. on its own or through Tristar, improves its
production process so as to, and/or if quantity production is such so as to,
materially lower NATIONAL BOSTON MEDICAL Inc's. cost of production, 50% of the
cost savings on a per unit basis will be passed on to Tristar.
Pricing for foreign countries will be determined as necessary (excluding Canada
which assumes US pricing).
<PAGE>
EXHIBIT D
Product Changes
In the event that National Boston or Tristar plans to change the current
version of the Product as described in Exhibit A, including packaging, notice of
such change must be given in writing, in advance, detailing such change to the
other party. Upon receipt of such notice, the notified party will respond to the
other party within 30 days of such receipt, regarding the perceived assessment
of the planned change for the Territory, and make a recommendation to the
proposing party regarding such change. The foregoing not withstanding, no
changes to the Product will be undertaken without the agreement of both parties.
Tristar Inventions shall have the ability to select and at its option source
upsells.
<PAGE>
Exhibit E
Product Sample
This Agreement is subject to Tristar's approval of the Taiwan sample, which
needs to be provided by National Boston.
Sample is required to be of equal quality, design, function and looks as USA
sample provided by National Boston.
EXHIBIT 10.50
AGREEMENT
THIS AGREEMENT, made and entered into this 30th day of June, 1999, by and
between the undersigned, THE DAVID ARDEN GROUP, its agents, representatives,
members, affiliates and assigns (hereinafter collectively referred to as
"Group"), and NATIONAL BOSTON MEDICAL, INC.(hereinafter referred to as "NBM"), a
Nevada corporation.
For a good and valuable consideration, including the sum of $10.00 cash and
hand paid, and the mutual promises, covenants, and conditions contained herein,
the receipt and sufficiency of which is hereby acknowledged, it is agreed by the
parties as follows:
1. To date, Group has received a total of 1,350,000 of NBM stock and
$1,291,372 from NBM for consulting services.
2. Any and all prior agreements between the parties, jointly or severally, are
hereby declared null and void ab initio, and shall be and are of no force
and effect as of the date of such agreements.
IN TESTIMONY WHEREOF, witness the signatures of the parties hereto.
NATIONAL BOSTON MEDICAL, INC. THE DAVID ARDEN GROUP
By:/s/ David Woo By:/s/David Arden Group, Inc.
- ------------------
DAVID WOO /s/ Arden Schwartz
-------------------------
ARDEN SCHWARTZ
EXHIBIT 10.51
AGREEMENT
THIS AGREEMENT, made and entered into this 30th day of June, 1999, by and
between Dragons Forever, Ltd., a Bahamian corporation ("Dragons"), and NATIONAL
BOSTON MEDICAL, INC., ("NBM"), a Nevada corporation.
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of all of which is hereby acknowledged, it is agreed by
and between the parties as follows:
1. The Parties acknowledge that a transaction in the amount of $100,000.00
between Dragons and Richard Hernandez is currently outstanding. In addition
certain shares of stock held by Richard Hernandez are held in trust as
collateral to secure this indebtedness. The parties agree that these shares,
with the agreement of Richard Hernandez, shall be immediately released for sale
with any funds received to be applied against said indebtedness. Any remaining
outstanding indebtedness between said parties shall bear interest at ten percent
(10%) per annum until the outstanding principal has been paid in full. In the
event the sale of all stock held in trust is insufficient to satisfy the
indebtedness in full then NBM and Richard Hernandez shall be liable for the
balance, which shall be paid on or before 12 months from the date of this
agreement.
2. Dragons is entitled to 125,560 shares of the common stock of the Company at a
price of fifteen ($.15) cents per share for satisfaction of NBM's role
concerning Richard Hernandez and Dragons.
IN TESTIMONY WHEREOF, witness the signatures of the parties hereto.
DRAGONS FOREVER LTD. NATIONAL BOSTON MEDICAL, INC.
By: /s/ (illegible) By: /s/ Daniel J Hoyng
- --------------------- --------------------------
EXHIBIT 10.52
AGREEMENT
THIS AGREEMENT, made and entered into this 30th day of June, 1999, by and
between Evergreen Consulting Group, Ltd., a Bahamian corporation ("Evergreen"),
and NATIONAL BOSTON MEDICAL, INC., ("NBM"), a Nevada corporation.
WHEREAS, NBM is indebted in the amount of $126,700.00 to Evergreen, and is
desirous of satisfying said indebtedness;
WHEREAS, Evergreen is desirous of settling said claim of indebtedness
against NBM for a reasonable sum;
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of all of which is hereby acknowledged, it is agreed by
and between the parties as follows:
1. The aforementioned recitals are true and correct.
2. NBM is indebted to Evergreen in the amount of $126,700.00 for funds advanced
and services rendered. NBM shall pay Evergreen the sum of $20,000.00 within 45
days of the execution of this Agreement. NBM shall issue shares of its common
stock to Evergreen within 60 days from the date hereof, at the rate of fifteen
($.15) cents per share to satisfy remaining indebtedness. NBM shall have the
right to re-purchase said stock at any time prior to its disposition by
Evergreen at the rate of fifteen ($.15) cents per share at any time said
indebtedness is paid in full.
3. Any and all prior agreements between the parties, are hereby declared null
and void ab initio, and shall be and are of no force and effect as of the date
of such agreements.
IN TESTIMONY WHEREOF, witness the signatures of the parties hereto.
EVERGREEN CONSULTING GROUP LTD. NATIONAL BOSTON MEDICAL, INC.
By: /s/ (illegible) By: /s/ Daniel J Hoyng
- --------------------------- ---------------------------
EXHIBIT 10.53
AGREEMENT
THIS AGREEMENT, made and entered into this 30th day of June, 1999, by and
between Dragons Forever, Ltd., a Bahamian corporation ("Dragons"), and NATIONAL
BOSTON MEDICAL, INC., ("NBM"), a Nevada corporation.
WHEREAS, NBM is indebted in the amount of $518,000.00 to Dragons, and is
desirous of satisfying said indebtedness;
WHEREAS, Dragons is desirous of settling said claim of indebtedness against
NBM for a reasonable sum;
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of all of which is hereby acknowledged, it is agreed by
and between the parties as follows:
1. NBM is indebted to Dragons in the amount of $518,000.00 as of this date.
2. In full and final satisfaction of said indebtedness, NBM and Dragons agree as
follows:
(a.) NBM shall issue a total of 3,375,333 shares of its common stock (a
purchase price of fifteen cents [$.15] per share) to Dragons within 60 days from
the date hereof, in full and final satisfaction of said indebtedness, subject to
the credit set forth in paragraph 4(b); and the sum of $10,000.00 cash shall be
paid to Dragons by NBM on or before July 30, 1999.
(b.) NBM shall be entitled to repurchase all of said stock at a price of
fifteen cents ($.15) per share at any time on or before such stock is either
registered or otherwise becomes unrestricted under Rule 144. NBM agrees to file
a registration statement to register all shares within 90 days after the
effective date of its Form 10SB and completion of the SEC comment period.
(c.) NBM agrees to re-purchase a minimum of $90,000.00 worth of said stock
at the time the Company closes on any equity funding in excess of $500,000.00,
such shares to be repurchased at a price of fifteen ($.15) cents per share. Any
such equity funding closed in excess of $500,000.00 shall require an additional
repurchase of stock in proportion to the ratio of such excess funds raised to
such $500,000.00 3. In the event NBM obtains equity funding in any amount in
excess of $1,000,000.00, NBM shall re-purchase a minimum of $170,000.00 of said
stock at the time the Company closes on such equity funding, at a re-purchase
price of fifteen ($.15) cents per share.
4. NBM agrees to re-purchase the balance of said shares from Dragons starting
November 1, 1999, in twelve (12) equal monthly installments, at a purchase price
of fifteen ($.15) cents per share.
(a.) Dragons has agreed to the sale of its unrestricted stock of NBM in the
amount of $86,292.00, representing 283,256 shares at 30.4 cents per share; which
shall be credited against indebtedness currently owed to Dragons.
(b.) NBM shall issue to Dragons a total of 600,000 shares of its common
stock in payment for services provided to NBM since October 10, 1998.
5. Except for any and all agreements between Dragons and Richard Hernandez, any
and all prior agreements between the parties are hereby declared null and void
ab initio and shall be and are of no force and effect as of the date of
agreements.
<PAGE>
IN TESTIMONY WHEREOF, witness the signatures of the parties hereto.
DRAGONS FOREVER LTD. NATIONAL BOSTON MEDICAL, INC.
By: /s/ (illegible) By: /s/ Daniel J Hoyng
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<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-START> Jul-1-1998
<PERIOD-END> Jun-30-1999
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