<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
THE ROSE GROUP CORPORATION OF NEVADA
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
NEVADA 59-3575972
--------------------------------------------- ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2073 PORTER LAKE DRIVE, SARASOTA, FLORIDA 34240
--------------------------------------------- ---------------------
(Address of Principal Executive Offices) (Zip Code)
(941) 371-1622
- --------------------------------------------------------------------------------
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
------------------- ------------------------------
Not Applicable
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 Per Share
- --------------------------------------------------------------------------------
(Title of Class)
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. DESCRIPTION OF BUSINESS.........................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......6
ITEM 3. DESCRIPTION OF PROPERTY........................................10
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.11
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS...13
ITEM 6. EXECUTIVE COMPENSATION.........................................15
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................16
ITEM 8. DESCRIPTION OF SECURITIES......................................16
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS...........................19
ITEM 2. LEGAL PROCEEDINGS..............................................20
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS..................20
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES........................20
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS......................22
PART F/S
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................................24
PART III
INDEX TO AND DESCRIPTION OF EXHIBITS.......................................25
SIGNATURES.................................................................29
-i-
<PAGE>
FORWARD-LOOKING STATEMENTS
THIS REGISTRATION STATEMENT ON FORM 10-SB (THIS "REGISTRATION
STATEMENT") CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING, WITHOUT LIMITATION, STATEMENTS
REGARDING THE GROWTH STRATEGIES OF THE ROSE GROUP CORPORATION OF NEVADA (THE
"COMPANY") AND ANTICIPATED TRENDS IN THE BUSINESS AND DEMOGRAPHICS OF THE
COMPANY. THE COMPANY, A DEVELOPMENT STAGE COMPANY, CAUTIONS READERS THAT CERTAIN
FACTORS AND UNCERTAINTIES MAY AFFECT THE COMPANY'S ACTUAL RESULTS AND COULD
CAUSE SUCH RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS THAT
MAY BE DEEMED TO HAVE BEEN MADE IN THIS REGISTRATION STATEMENT OR THAT ARE
OTHERWISE MADE BY OR ON BEHALF OF THE COMPANY. FOR THIS PURPOSE, ANY STATEMENTS
CONTAINED IN THIS REGISTRATION STATEMENT THAT ARE NOT STATEMENTS OF HISTORICAL
FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, WORDS SUCH AS "MAY", "EXPECT", "BELIEVE",
"ANTICIPATE", "INTEND", "COULD", "ESTIMATE" OR "PLANS" OR THE NEGATIVE OR OTHER
VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS.
THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE BASED LARGELY
ON THE COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF FACTORS AND
UNCERTAINTIES. FACTORS THAT MAY AFFECT THE COMPANY'S RESULTS INCLUDE, BUT ARE
NOT LIMITED TO, THE COMPANY'S LIMITED OPERATING HISTORY, ITS ABILITY TO PRODUCE
ADDITIONAL PRODUCTS AND SERVICES, ITS DEPENDENCE ON KEY PERSONNEL, MARKET
ACCEPTANCE, ITS NEED FOR ADDITIONAL FINANCING AND COMPETITION FROM ITS
COMPETITORS. ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN SHOULD BE EVALUATED
IN LIGHT OF THE ABOVE FACTORS, AS WELL AS THE FACTORS AND UNCERTAINTIES
DESCRIBED ELSEWHERE IN THIS REGISTRATION STATEMENT.
-ii-
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
ORGANIZATION AND ACQUISITION ACTIVITIES. The Rose Group
Corporation of Nevada (the "Company") was originally organized as Vascular
International of Nevada, Inc. by the filing of Articles of Incorporation with
the Secretary of State of the State of Nevada on February 13, 1996. Pursuant to
an Exchange of Stock Agreement and Plan of Reorganization, dated as of December
15, 1997, the Company acquired The Rose Group Corporation ("Rose Group
Delaware"), a privately held Delaware subchapter S corporation formed for the
purpose of the acquisition. Concurrently with the closing of the acquisition,
the Company changed its name to "The Rose Group Corporation of Nevada" and also
changed its principal business and management to reflect its present operations.
As a consequence of the above transaction, effective March 13, 1997, the Company
became the holding company of its wholly-owned operating subsidiary, Rose Group
Delaware. In order to facilitate expansion of its E-Commerce business, on April
29, 1999, the Company incorporated another wholly-owned subsidiary, Rosebaby.com
of Utah, Inc. ("Rosebaby").
The Company is a development stage company as it is devoting
substantially all of its efforts to establishing a new business and has not yet
derived substantial revenue from its planned principal operations. The Company
is authorized to issue 50,000,000 shares of common stock, par value $.001 per
share (the "Common Stock"), of which 6,185,231 shares are currently issued and
outstanding (108,698 of such shares are held in treasury), and 2,000,000 shares
of Class A preferred stock, par value $.001 per share (the "Preferred Stock"),
of which no shares are currently issued and outstanding.
BUSINESS STRATEGY. The 1999 management plan of the Company is to
continue to develop the Company as a healthcare/selfcare manufacturer/
wholesaler, mass market seller to retail outlets and direct seller to consumers
through Internet E-Commerce facilities (rosebaby.com) of prenatal and postpartum
products and related consulting services which are marketed under the nationally
known trademark and brand name "Lamaze". The Company also intends to market
other nationally known brands of prenatal and postpartum products as well as
products for babies through Internet sales.
Additionally, the Company plans to establish marketing strength
through its unique relationship with Lamaze from AMI, Inc. which permits it to
use the "Lamaze" brand name on certain products. The Lamaze brand name provides
immediate recognition and acceptance by the consumer. The Company anticipates
reaching a projected 2,500,000 expectant mothers as well as family members who
attend Lamaze classes each year. It is estimated that approximately 150,000
Lamaze classes are taught each year. The expectant mothers and fathers who
attend such classes will be the target market for the Company. The plan is to
invite expectant mothers and other members of the family who are participants in
the Lamaze method of childbirth and childcare to visit the Company's website,
rosebaby.com, to review the various products that will be offered on an
E-Commerce basis. The existence of the Company's website also is contemplated to
be highlighted by distribution through nurses and lactation consultants of the
Company's rosebaby.com/Lamaze products brochure. This will enable the targeted
consumer market to easily locate the variety of prenatal and postpartum products
to be offered by the Company.
<PAGE>
Copies of the Company's rosebaby.com/Lamaze products brochure will
be distributed to 11,000 certified childbirth educators in the United States,
7,000 maternity nurses in hospitals throughout the country and an additional
5,000 Spanish-speaking childbirth educators. In total, the Company will
distribute 25 copies of its rosebaby.com/Lamaze products brochure to each of the
identified associates and distributors. In addition, the Company intends to be
an advertiser in LAMAZE PARENTS MAGAZINE and LAMAZE BABY MAGAZINE which will be
handed out and/or mailed to all Lamaze classroom attendees. The Company does not
believe that the recently announced acquisition of Lamaze Publishing, which
publishes magazines and videos under the Lamaze label, will adversely effect its
program to be an advertiser in the various Lamaze magazines. Rather, the Company
intends to work with the new publisher to determine what synergy there can be to
increase recognition of the rosebaby.com website as a source of high quality,
specialty maternity/new baby products.
Additionally, during the next twelve months, the Company's plan of
operation is to look to further expansion on the World Wide Web, through its
website, rosebaby.com, where some 20,000,000 potential customers are looking to
find the products and services they need. The Company believes that the World
Wide Web will become the major resource for the Company's future growth and
expansion.
Accordingly, the Company's primary current focus is on developing
a sophisticated website for the maternity/new baby market. Management will
incorporate an on-line ordering service and offer a secured website to increase
the Company's on-line E-Commerce. To facilitate the on-line ordering process,
the Company has applied for and established accounts with the following credit
facilities: American Express, Visa and MasterCard.
The Company also plans to seek Fortune 1000 company sponsors for
its website such as car, camcorder, and diaper manufacturers, as well as banking
facilities. It is anticipated that as the Company develops its target market of
new mothers/babies it will develop an array of sponsors who will pay for the
privilege of reaching the same targeted consumer market, which is the strategic
business goal of the Company.
SELFCARE/HEALTHCARE, PRENATAL AND POSTPARTUM PRODUCTS. The
Company's primary business is to be a healthcare/selfcare manufacturer/
wholesaler, mass market seller to retail outlets and direct seller to
consumers through Internet E-Commerce facilities (rosebaby.com) of
prenatal/maternity products, postpartum/mother and baby products and related
lactation consulting services, specializing in fulfilling the needs of
expectant and breastfeeding women as well as infant needs. The principal
products marketed by the Company are various types of breast pads, breast
shells, pad holders, nursing shawls, nursing pillows, foot rests, breast
pumps, lumbar supports, compression hose, support garments and other related
products. Generally, these products are being marketed under the brand name
"Lamaze" and in some cases "The Natural Choice".
BUSINESS DIVISIONS OF THE COMPANY. The Company has organized
itself into three main divisions each of which supplements the activities of the
others. Those divisions can be described as follows:
-2-
<PAGE>
E-COMMERCE DIVISION:
By way of an agreement with Sun Remarketing, Inc. of Smithfield,
Utah ("Sun Remarketing"), an Internet designer of E-Commerce websites, which has
experience in the processing and fulfillment of orders placed through the
Internet, the Company is allocating and focusing a substantial portion of its
resources on Internet sales of its prenatal and postpartum products. Sun
Remarketing is receiving $5,000 per month for the months of July, August and
September, in addition to share and option issuances, as compensation for its
development services. See "Recent Sales of Unregistered Securities". Upon
finalizing the website development, the Company plans to duplicate the technical
system so that it may operate and utilize same directly from its main facility.
The Company expects that its website will be its primary source of revenue for
the years 2000 and 2001. The projections for the first full year of Internet
operations are estimated at a minimum of $50,000,000 to as much as $125,000,000
based on a five percent penetration of the potential annual market of 2,500,000
middle-class expectant and breastfeeding mothers with access to Internet
facilities and through the Company's toll free order number (1-87-rosebaby). No
assurance can be given, however, that such projections will be realized. The
Company is currently developing the rosebaby.com internet website and
anticipates that the website will be fully operational by October 1st of this
year. The rosebaby.com website will be operated by personnel assigned to the
Company's separate wholly-owned subsidiary, Rosebaby. The E-Commerce Division
will market the Company's products and services directly to its targeted
consumer base, expectant and new mothers and other family members. The division
has not yet engaged in commercial activities, but is anticipated to have
revenues by the fourth quarter of 1999.
MASS MERCHANT DIVISION:
The Mass Merchant Division markets to retail outlets such as
Target Stores, Babies-R-Us, Eckerd Drug, and others, as well as to various food
and drug chains and specialty stores. This division is the only division
currently generating revenues for the Company. See "Financial Statements".
CORPORATE DIVISION:
While still in the development stage, it is intended that the
Corporate Division will market and consult directly to Fortune 1000 companies
and government facilities to offer "Turnkey Services" to help such organizations
establish acceptable, attractive and clean on-site nursing facilities to
accommodate nursing mothers while employed with those organizations. The
services contemplated to be offered by the Corporate Division include a national
lactation consultant hotline for employees of subscribing companies and monthly
support services for the corporate human resources department. This division has
not yet engaged in commercial activities, but is anticipated to have revenues by
the first quarter of 2000.
It is anticipated that enactment of federal legislation that is
geared to mandate the establishment of clean on-site breast feeding facilities
in the workplace may be a significant incentive for companies to utilize the
consulting expertise and products of the Company in the establishment of such
facilities. No assurance can be given, however, that such legislation will be
enacted although bills have been proposed and are pending in Congress.
-3-
<PAGE>
AGREEMENT WITH LAMAZE. The Company has entered into an exclusive
agreement which extends through December 31, 2001, (the "Lamaze Agreement") with
Lamaze from AMI, Inc. ("LAMI"), a for-profit affiliate of the Lamaze
Organization, the number one childbirth and infant care educator in the United
States. The Lamaze Agreement permits the Company, with prior approval from
Lamaze, to (i) use the "Lamaze" label on certain prenatal and postpartum,
maternity and nursing, selfcare and healthcare products, (ii) present its
rosebaby.com/Lamaze product brochure to participants in Lamaze classroom
training, and (iii) distribute Lamaze products through the rosebaby.com internet
website, its Mass Merchant Division and its Corporate Division.
Specifically, the Lamaze Agreement grants the Company the
exclusive rights to manufacture, supply, advertise, offer for sale, promote and
sell certain Lamaze products consisting of maternity support hose and a nursing
shawl (the "Authorized Products") within the United States. In consideration for
such rights, the Lamaze Agreement requires the Company to pay to LAMI a fee
equal to nine percent of the net sales of the Authorized Products to its
operating subsidiaries who in turn will sell the products to mass merchants or
ultimate consumers through the rosebaby.com website.
The Lamaze Agreement also requires the Company to pay LAMI a
minimum of $45,000 in 1999 against sales (the "1999 Payment"). Upon execution of
the Lamaze Agreement the Company paid a $14,000 installment payment of the 1999
Payment and made an additional $16,000 installment payment on May 15, 1999. The
remaining balance of the 1999 Payment shall be paid as follows: $10,000 on or
before August 15, 1999 and $5,000 on or before September 15, 1999. Beginning in
the year 2000, the Company shall pay a minimum of $45,000 against sales in the
sum of 22,500 on each January 15th and July 15th of every year. All of the above
payments shall be non-refundable advances on the fee due to LAMI upon same year
net sales of Authorized Products and shall therefore be credited against the
fees payable on such sales.
FUNDING ACTIVITIES. The Company is presently carrying out a
program of funding to finance its E-Commerce website. The Company believes that
funding in the approximate amount of $1,000,000 will provide the money required
to purchase and/or secure the level of inventory required to launch the
E-Commerce website on or about October 1, 1999. Those funds will also be used to
print the initial 1,000,000 rosebaby.com/Lamaze product brochures and to pay for
the initial print advertisements in LAMAZE PARENTS MAGAZINE and LAMAZE BABY
MAGAZINE as well as other consumer publications. Those funds will also be used
to finance exhibits and representatives of the Company at Lactation Consultants
in Scotsdale, Arizona, the Cologne Fair and other conferences/tradeshows where
the Company intends to meet and exchange marketing concepts with existing and
potential suppliers. The Company anticipates that its ultimate funding
requirements for fiscal 2000 will be an additional $1,000,000 to $3,000,000 to
meet inventory demands based on expanding sales.
SECURE MANUFACTURING RESOURCES AND SUPPLIERS/DISTRIBUTION. The
Company contracts for the manufacture of its prenatal and postpartum products
through a group of independent manufacturing suppliers. The Company currently
has ongoing relationships with several domestic and foreign manufacturers for
its products. As of the date hereof, the Company's principal manufacturers are
Mid-Town Sewing of Middletown, New York and T&T, Inc. (Thanh Nguyen) of
Sarasota, Florida. The Company has not entered into any formal contractual
relationship with such manufacturers. Rather, the Company ships the manufacturer
-4-
<PAGE>
the necessary raw materials for manufacture and negotiates the price thereof
on a per piece basis. Additionally, the Company currently manufacturers the
breast pads that it markets and distributes through its Mass Market Division
and could likewise purchase the equipment necessary to manufacture certain other
products offered by the Company.
In some instances, the manufacturers distribute the finished
products to the mass merchant customers, but, generally the Company packages
and istributes the products from its main facility. Though still finalizing the
process, the Company also intends to process and fulfill orders from its
E-Commerce division directly from its main facility. There can be no guarantee,
however, that the Company will be able to successfully secure adequate
distribution facilities or that upon securing same, will be able to successfully
implement the mass distribution process necessary to service its E-Commerce
customers. It is anticipated, however, that the Company can temporarily
outsource distribution requirements to meet any foreseeable product demand.
COMPETITION. The Company believes that, by virtue of its
contractual arrangements with Lamaze, it is in an excellent competitive
situation with other existing E-Commerce competitors that sell maternal and baby
products. As a consequence of the Lamaze Agreement, the Company has the
opportunity to have a one-on-one relationship with its targeted customer base
during the prenatal period through the Lamaze classroom programs and also has
the ability to target new mothers and infants through distribution of the
rosebaby.com/Lamaze product brochure. The product line to be offered by the
Company's website consists of products from preconception to postpartum and
addresses the needs of infants from the age of one day old to two years old. It
is intended that the products will be upscale, high quality products geared
toward an increasingly sophisticated, technically-oriented domestic and
international market.
While the Company believes it has a competitive edge as a
consequence of the Lamaze Agreement, it does face considerable, well-financed
competitors from existing websites such as Ibaby.com, Babycenter.com and
Etoys.com. With respect to the Mass Merchant business operations, the Company
has competition from several well-established distributors of
prenatal/post-partum products such as Gerber, Evenflo and Avent. Almost all of
the Company's competitors and potential competitors presently have considerably
greater financial and other resources, experience and market penetration than
does the Company. Having the Lamaze brand name on some of its products, however,
serves to level the Company's competitive position as against its competitors.
RAW MATERIALS. The only raw material which the Company
substantially utilizes in its operations is fabric. The Company purchases fabric
from a variety of suppliers based upon best price estimates. There are various
alternative suppliers which could either replace or supplement those which are
currently utilized by the Company.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS. Given the nature of
the E-Commerce business, the Company does not expect that any single customer
will account for a significant percentage of its E-Commerce business. The
Company does not anticipate that any one or a few customers of its Corporate
Division will account for a substantial portion of such division's revenues. The
Mass Merchant Division has historically relied on the major retailers in the
United States, such as Target Stores and Wal-Mart. At any given time, one of
those retailers may account for more than ten percent of the Company's mass
-5-
<PAGE>
merchant business. Specifically, the Company anticipates that it may enter into
sale/supply agreements with either Wal-Mart or another large retailer which may
constitute a substantial portion of its Mass Merchant Division revenue.
INTELLECTUAL PROPERTY RIGHTS. At this time, Rosebaby has applied
with the United States Patent and Trademark Office for the trademark
"ROSEBABY.COM". To date, the application is still pending and the trademark has
not been secured. The Company recently also filed to copyright its website,
rosebaby.com, as well as the "rosebaby" logo of a baby nestled within a single
red rose.
The Company has entered into a Licensing Agreement with Valda K.
Hemming, d/b/a Pretty/Private, dated January 9, 1998, whereby it is granted a
license to manufacture, arrange for the manufacture and sell a patented product
known as the "Privacy Shawl", Patent No. 5,008960. Pursuant to such agreement,
the Company pays Pretty/Private a royalty fee equal to 7.5% of the net selling
price of each shawl.
PERSONNEL. The Company currently has five employees (all of whom
are full-time) and two part-time consultants. In connection with the E-Commerce
website, rosebaby.com, the Company is currently interviewing technical persons
to duplicate the computer system being developed for the Company by Sun
Remarketing. The Company anticipates that hiring decisions will be made shortly.
Additionally, once the Company launches its website, an additional ten or more
marketing and support personnel will be hired to work on site at the Company's
main facility. It is anticipated that additional other employees will be hired
as the needs of the Company require.
REPORTS TO SHAREHOLDERS. The Company intends to furnish its
shareholders with annual reports containing audited financial statements and
such other periodic reports as the Company may determine to be appropriate or as
may be required by law. Upon the effectiveness of this Registration Statement,
the Company will be required to file annual and quarterly reports, proxy
materials and other reports required under the Securities Exchange Act of 1934
(the "Exchange Act") and regulations of the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements, and other information filed
by the Company will be available for inspection and copying at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 7 World Trade
Center, Suite 1300, New York, New York 10048, and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth St., N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a World Wide Website on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read in
conjunction with the Company's Financial Statements (and related notes thereto)
included elsewhere in this Registration Statement.
-6-
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
SALES
Sales for the three months ended March 31, 1999 were $151,182, as
compared to $32,156 for the three months ended March 31, 1998, an increase of
$119,026 or 370%. This increase is primarily the result of the distribution of
Lamaze-branded products to Target Stores and Babies-R-Us.
COST OF SALES
Cost of sales for the three months ended March 31, 1999 was
$86,302 or 57.1% of sales as compared to $19,303 or 60% of sales for the same
period in 1998. The increase in cost of sales is due to the increase of sales
and the decrease in cost of sales as a percentage of sales is due to the change
in product mix.
As a result of the foregoing, the Company realized an increase in
gross profit in 1999 as compared to 1998, with a gross profit of $64,880 or
42.9% of sales in the three months ended March 31, 1999, as compared to $12,853
or 39.9% of sales achieved during the same period in 1998.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses amounted to $203,754 or 134%
of sales for the three months ended March 31, 1999 as compared to $127,265 or
395% of sales for the same period in 1998. The increase of $76,489 is primarily
due to an increase of salaries and other compensation for services rendered.
INTEREST EXPENSE
Interest expense for the three months ended March 31, 1999 was
$5,594 as compared to an interest expense of $6,200 in the three months ended
March 31, 1998. The primary reasons for the $606 decrease in interest expense
was due to obtaining better interest rates on debt.
LOSS BEFORE INCOME TAXES
The preceding factors combined to show a decrease in net income
totaling $24,006 in the three months ended March 31, 1999 as compared to the
three months ended March 31, 1998. There was a net loss of $146,118 in 1999 as
compared to a net loss of $122,112 for the comparable period in 1998.
-7-
<PAGE>
TWELVE MONTHS ENDED DECEMBER 31, 1998 AND 1997
SALES
Sales for the year ended December 31, 1998 were $195,364, as
compared to $467,199 for the year ended December 31, 1997, a decrease of
$271,835 or 58.2%. This decrease is primarily the result of the fact that
Company employees focused more upon development activities relating to the
Company's website and E-Commerce Division than selling activities during fiscal
1998.
COST OF SALES
Cost of sales for the year ended December 31, 1998 was $116,301 or
59.5% of sales as compared to $254,341 or 54.4% of sales for the year ended
December 31, 1997. The decrease in cost of sales was primarily the result of
lower sales. The increase in cost of sales as a percentage of sales is a result
of the product mix sold during 1998 versus 1997.
As a result of the foregoing, gross profit decreased in 1998 to
40.5% of sales from 45.6% of sales in 1997.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses amounted to $327,025 or 167%
of sales in 1998 as compared to $222,564 or 47.6% of sales in 1997. The increase
of $104,461 is primarily due to an increase in salaries from 25,000 to 102,000
due to the addition of employees in the first full year of operations. Such
expenses included payroll, rent and related overhead costs of $273,000.
INTEREST EXPENSE
Interest expense was $24,800 in 1998 as compared to $12,351 in
1997. The increase is the result of an increase in debt acquired to proceed with
the Company's development of its E-Commerce Division.
LOSS BEFORE INCOME TAXES
The preceding factors combined to produce a loss before income
taxes of $278,747 as compared to a loss before income taxes of $31,230 in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit of $55,421 at March 31,
1999 which represented a decrease in the deficit of $136,296 from the working
capital deficit of $191,717 at December 31, 1998. The decrease in the deficit is
mainly due to raising working capital through a private placement of the
Company's Common Stock.
From inception, the Company's operations have been funded by
operating revenue, capital contributions, loans from corporate officers and a
bank line of credit. In addition, in March 1999, the Company consummated private
placements of 300,000 shares of its Common Stock. The Company's operating
activities used cash of $229,714 and $69,314 for the years ended December
-8-
<PAGE>
31, 1998 and 1997, respectively and $80,871 for the three months ended March 31,
1999. The principal use of cash in 1998 and 1997 was to finance operating
expenses.
The Company's investing activities used cash of $6,821, $27,665
and $9,685 for the fiscal years ended December 31, 1998 and 1997 and the three
months ended March 31, 1999, respectively. The principal source of cash provided
in those periods was loans from the Company's President, Sheldon R. Rose, in the
approximate amount of $400,000. The principal use of cash in those periods was
for the acquisition of various types of equipment.
The Company's financing activities provided cash of $188,899,
$145,623 and 238,247 for the years ended December 31, 1998 and 1997 and the
three months ended March 31, 1999, respectively. Loans from Sheldon R. Rose and
utilization of the Company's line of credit were the principal sources of cash
in those periods. The cash provided by the Company's financing activities for
the three months ended March 31, 1999 primarily resulted from the proceeds of
the sale of Common Stock of $150,000 and from the bridge loan described below.
See "Recent Sales of Unregistered Securities".
In January 1999, the Company, through Rose Group Delaware, using
the State of Florida corporate assumed name "Fresh Babies, Inc.", obtained a
line of credit facility of $30,000 from AmSouth Bank of Florida. Such line bears
interest at a rate of 2% over prime (7.02% at March 31, 1999), is due on demand
and is secured by a pledge of all inventory and is personally guaranteed by a
majority shareholder.
In March 1999, a bridge loan in the amount of $100,000 was
obtained from one investor. The loan bears interest at the rate of six percent
per annum and is due on March 15, 2000. In connection with this bridge loan, the
Company issued options to purchase 100,000 shares of Common Stock to the
investor. See "Recent Sales of Unregistered Securities".
In March 1999, a series of private placements totaling 300,000
shares of Common Stock at a purchase price of $.50 per share was completed by
the Company (the "504 Private Placements"). The Company received net proceeds of
$150,000 from the 504 Private Placements and such proceeds were utilized to
defray the cost of developing the Company's E-Commerce website and other working
capital costs.
The Company has entered into a Factoring Agreement with Bay View
Funding whereby Bay View Funding purchases certain receivables of the Company
for an advance price equal to eighty-five percent of the face value of
such receivable and receives a factoring and financing fee for such services.
During the next twelve months, the Company's cash requirements
will include, among other things, its lease payments on the Company's office
space, salaries payable, payments pursuant to contractual arrangements, as well
as miscellaneous overhead. Management believes that upon launching the website,
the Company's existing cash resources and cash generated from operations will be
sufficient to fund the Company's ongoing operations and provide for the
foregoing cash requirements for day-to-day operations. Management believes that
it will be able to achieve a positive cash flow from its E-Commerce operations
when it reaches monthly sales of approximately $1,000,000. However, the Company
-9-
<PAGE>
has no guaranty that it will be able to achieve this goal prior to December 31,
1999.
As previously stated, the Company believes that a funding in the
approximate amount of $1,000,000 will provide the money required to purchase
and/or secure the level of inventory required to launch the E-Commerce website
on or about October 1, 1999 and to pay the initial print costs for various
formats of marketing advertisements, as well as fund the Company's attendance
and presentation at various trade shows. The Company anticipates that funding
its expanded operations during fiscal 2000 will be in the range of $1,000,000 to
$3,000,000. In addition to the foregoing proposed financing, the Company may
require additional funding for expansion. In such event, there can be no
assurance that such funds will be available to the Company on terms satisfactory
to the Company when needed. If the Company is not successful in raising the
above-described funding, it may be forced to cease operations.
YEAR 2000 COMPLIANCE ISSUES
The Company has established a plan to address Year 2000 issues.
This plan encompasses the phases of awareness, assessment, renovation,
validation and implementation. These phases will enable the Company to identify
risks, develop action plans, perform adequate testing and determine if its
processing systems will be Year 2000 ready. Successful implementation of this
plan are expected to mitigate any extraordinary expenses related to the Year
2000 issue. The Company has a reasonable basis to conclude that the Year 2000
issue will not materially affect future financial results, or cause reported
financial information not to be necessarily indicative of future operating
results or future financial conditions. This basis is due to the fact that the
Company has or is installing all new information technology systems, including
computer hardware and software which are Year 2000 compliant. This is the first
generation of equipment and software for the Company since it has just recently
commenced operations.
The Company plans to contact all material customers, vendors,
suppliers and non-information technology suppliers (if any) regarding their Year
2000 state of readiness. This process will be completed within the next four
months. No assurance can be given that the Year 2000 compliance plan will be
completed successfully by the Year 2000. The Company's current contingency plan
is simplistic and involves operating on a manual basis for a short period of
time without interruption of service or quality.
Successful and timely completion of the Year 2000 project is based
on management's best estimates derived from various assumptions of future
events. These events are inherently uncertain, including the progress and
results of vendors, suppliers and customers' Year 2000 readiness.
ITEM 3. DESCRIPTION OF PROPERTY.
(a) LOCATION, OWNERSHIP STATUS AND DESCRIPTION OF PRINCIPAL
PROPERTIES. The Company's principal facility is located at 2073 Porter Lake
Drive, Suite E, Sarasota, Florida 34240. The Company leases approximately 2000
square feet of space at such location pursuant to a written lease agreement at a
rental cost of $1,043.25 per month, inclusive of taxes. The lease expires on
-10-
<PAGE>
August 31, 1999. The facility is currently utilized for both the administrative
and distribution aspects of the Company's business.
Management believes that the facilities are adequately insured but
are not currently suitable as the main administrative office and distribution
facilities. Accordingly, management has negotiated a lease for new facilities
totaling 10,000 square feet located at 6235 South McIntosh Road, Sarasota,
Florida at an approximate monthly rental cost of $6,000. Should a formal
agreement not be effected, management believes that replacement space is readily
available in the same general area.
The Company does not have any additional facilities, and there are
currently no proposed plans for the renovation, improvement or development of
the facilities currently being leased by the Company.
(b) INVESTMENT POLICIES. Currently, the Company does not have
policies regarding the acquisition of assets primarily for possible capital gain
or income. The Company does not presently hold any investments in real estate,
interests in real estate, real estate mortgages or securities of or interests in
persons primarily engaged in real estate activities.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock by each person or group that
is known by the Company to be the beneficial owner of more than five percent of
its outstanding Common Stock, each director of the Company, each person named in
the Summary Compensation Table, and all directors and executive officers of the
Company as a group as of July 14, 1999. Unless otherwise indicated, the Company
believes that the persons named in the table below, based on information
furnished by such owners, have sole voting and investment power with respect to
the Common Stock beneficially owned by them, subject to community property laws,
where applicable.
-11-
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES OF COMMON PERCENTAGE OWNERSHIP OF
BENEFICIAL OWNER STOCK BENEFICIALLY OWNED COMMON STOCK OUTSTANDING
------------------- -------------------------- ------------------------
<S> <C> <C>
Sheldon R. Rose 4,250,000(1) 63.10%
8990 Wembley Court
Sarasota, FL 34238
Robert H. Jaffe 849,900(2) 13.42%
8 Mountain Avenue
Springfield, NJ 07081
Dr. Francine H. Nichols 150,000(3) .024%
2138 California Street, N.W.
Suite 203
Washington, D.C. 20008
Steven H. Rose 150,000(3) .024%
483 Alexander Palm Road
Boca Raton, FL 33432
Spencer Halper 100,000 .016%
15 Ardsleigh Place
Jamesburg, NJ 08831
All Directors and Officers 4,650,000(4) 68.03%
as a Group (4 Persons)
</TABLE>
- ------------------------------
(1) Includes currently exercisable options to purchase 550,000 shares of
Common Stock. The Option Agreements which govern the terms of the
noted options provide that the amount of shares which the holder may
purchase upon exercise shall double upon the Company reaching
$100,000,000 in gross sales provided the holder is still a key
employee, officer, director, consultant or legal counsel of the
Company.
(2) Includes currently exercisable options to purchase 150,000 shares of
Common Stock and 123,000 shares held by Portfolio Promotions
International, Ltd., of which Mr. Jaffe is the sole shareholder. The
Option Agreements which govern the terms of the noted options
provide that the amount of shares which the holder may purchase upon
exercise shall double upon the Company reaching $100,000,000 in
gross sales provided the holder is still a key employee, officer,
director, consultant or legal counsel of the Company.
(3) Includes currently exercisable options to purchase 50,000 shares of
Common Stock. The Option Agreements which govern the terms of the
noted options provide that the amount of shares which the holder may
purchase upon exercise shall double upon the Company reaching
$100,000,000 in gross sales provided the holder is still a key
employee, officer, director, consultant or legal counsel of the
Company.
(4) Includes an aggregate of 650,000 shares of Common Stock issuable
upon exercise of outstanding options and warrants. The Option
Agreements which govern the terms of the noted options provide that
the amount of shares which the holder may purchase upon exercise
shall double upon the Company reaching $100,000,000 in gross sales
provided the holder is still a key employee, officer, director,
consultant or legal counsel of the Company.
The Company currently has no arrangements which may result in a
change of control.
-12-
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors, executive officers and significant employees of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
Sheldon R. Rose 60 Chief Executive Officer, President
and Chairman of the Board
Dr. Francine H. Nichols 62 Director
Spencer Halper 64 Director
Steven H. Rose 54 Director
Lori M. Majeski 42 Vice President - Marketing
Mark C. Nicholas 31 Vice President - Operations
</TABLE>
MR. SHELDON R. ROSE. Mr. Rose has had extensive business
experience with American Machine & Foundry Co. (1960-1964) where he completed
his services as the Manager of Long Range Planning for the Aerospace General
Engineering Division. Mr. Rose also worked for Cutler Hammer as a Sales Engineer
from 1964-1968. From 1969-1972, he was Vice President of Marketing for Computer
Solutions, Inc., where he provided computer hardware and software related
services to accountants, distributors and small to medium size business
organizations. From 1972-1975, he was Corporate Acquisition Marketing Manager
for Teleprocessing Industries, a division of Western Union. In 1975-1982, he was
President of Ambassador Corporation, a prenatal and postpartum product services
company. From 1982 through approximately March, 1997, he was affiliated with
Diplomat Corporation as its founder, Chairman and Chief Executive Officer.
DR. FRANCINE H. NICHOLS. Dr. Nichols currently acts as an outside
director and consultant to the Company. Dr. Nichols obtained her Ph.D. degree in
nursing from the University of Texas in 1984, with an emphasis on parent/child
research and child health issues. Dr. Nichols presently serves as President of
MCH Consultants specializing in maternal and child health care. She is also the
author of numerous books, articles and film productions related to "How To's" on
infant care with particular emphasis on infant products. She was a Visiting
Associate Professor in the School of Nursing at the Catholic University of
America in Washington, D.C. from 1991 through 1993. Dr. Nichols has also had
extensive affiliations with The University of Kansas School of Medicine and
Wichita State University where she has been a Clinical Assistant Professor of
Pediatrics (School of Medicine) and Associate Professor (School for Nursing) in
charge of The Maternal Child Nursing Graduate Program. She was also President
and board member of ASPO/LAMAZE from 1984 through 1991, the National LAMAZE
Childbirth Organization headquartered in Washington, D.C.
MR. SPENCER HALPER. Mr. Halper has had extensive business
experience in developing business into leading national brands in the specialty
catalog industry. He started Consumer Distributing Catalog Showrooms in 1973
through 1976 as director of advertising and marketing. Mr. Halper worked for
Haliover Direct (1976-1995) in various capacities, including Executive Vice
President of the Specialty Catalog Division.
-13-
<PAGE>
MR. STEVEN H. ROSE. Chairman and President of Rose Research, Mr.
Rose has been actively engaged in the marketing research field for more than
twenty-five years. Mr. Rose is an Executive Member of the American Marketing
Association and has made numerous speeches to various client and trade
organizations. In addition, he has been quoted in a number of marketing books
and publications pertaining to research and new methodological applications in
the 1990's. Prior to forming Rose Research, Mr. Rose has been associated with
Daniel Yankelovich for nearly twenty years. From the early days of Yankelovich,
Skelly and White, to becoming a founding partner of the Daniel Yankelovich
Group/DYG, Mr. Rose has been at the forefront of the marketing research
industry.
MS. LORI M. MAJESKI. Ms. Majeski has been actively engaged in the
marketing and product development field for over twenty years, and has spent the
past four years operating her own consulting company. Her consulting activities
focus upon retail, marketing, merchandising and product development services for
children's educational toys, juvenile accessories and infant and children's
apparel. Prior to founding her own consulting company, Ms. Majeski worked for
Mamiye Brothers, Inc. (1994-1995) and Donnkenny, Inc. (1993-1994) where she was
directly responsible for the design, product development, production and
merchandising of high-end children's wear apparel lines for the Walt Disney
Company and affiliated entities thereof.
MR. MARK C. NICHOLAS. Mr. Nicholas began his career with a NASDAQ
Publicly Traded Corporation (Diplomat Corporation). His responsibilities over
the last seven years included the directing of all warehouse and distribution
functions of over 150 products. Upon leaving, he was Director of Operations for
more than $30,000,000 of revenue distributed to mass merchants and a National
LAMAZE Premie Catalogue. Mr. Nicholas has an Associates Degree in Business
Management from Rockland Community College, Suffern, New York.
All of the above individuals, with the exception of Ms. Majeski,
have held their respective positions since March 13, 1997. Ms. Majeski has been
the Vice President-Marketing since July 6, 1999.
FAMILY RELATIONSHIPS. Sheldon R. Rose and Steven H. Rose are
brothers and Mark C. Nicholas is the son-in-law of Sheldon R. Rose. There are no
other family relationships among the Company's directors and/or executive
officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. To the best of
management's knowledge, during the past five years, no present or former
director or executive officer of the Company:
(1) has filed a petition under federal bankruptcy laws or any
state insolvency law, had a receiver, fiscal agent or similar officer appointed
by a court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he was an executive
officer at or within two years before the time of such filing;
(2) was convicted in a criminal proceeding or named the subject of
a pending criminal proceeding (excluding traffic violations and other minor
offenses);
-14-
<PAGE>
(3) was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction in a civil
action, by the Commission or the Commodity Futures Trading Commission to have
violated any federal or state securities law.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth the cash compensation paid by the
Company to, as well as any other compensation paid to or earned by, the Chief
Executive Officer of the Company and those executive officers compensated at or
greater than $100,000 for services rendered to the Company in all capacities
during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------- -----------------------------------------
NAME OF INDIVIDUAL RESTRICTED STOCK SECURITIES UNDERLYING
AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS
- ---------------------- ---- ------ ----- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Sheldon R. Rose, Chief 1998 $120,000 - - -
Executive Officer, 1997 14,381 - - -
President and Chairman of
the Board
</TABLE>
The Company has reserved 250,000 shares of Common Stock for
issuance upon exercise of options that may be granted to retain future
management professionals.
COMPENSATION OF DIRECTORS. Outside directors of the Company are
currently entitled to receive $500 per diem for attendance at meetings of the
Board of Directors.
COMPENSATION AGREEMENTS. The Company has entered into an
employment agreement effective July 1, 1999 with Sheldon R. Rose. Pursuant to
such employment agreement, Mr. Rose will act as Chairman, Chief Executive
Officer and President of the Company and will be entitled to an annual salary of
$120,000. Upon the Company achieving gross sales in an amount equal to
$50,000,000, Mr. Rose's base salary shall be increased to $180,000 per annum.
Mr. Rose's salary shall again be increased to $240,000 per annum upon the
Company achieving gross sales equal to $100,000,000. Thereafter, Mr. Rose shall
receive an additional $30,000 per annum for every $50,000,000 increase in gross
sales. The employment agreement shall remain in effect until July 1, 2004, at
which time such agreement will be automatically extended for successive one year
periods unless either party notifies the other to the contrary by not less than
sixty days written notice.
-15-
<PAGE>
In the event of a change of control of the Company, the successor
entity has the right to terminate the Employment Agreement, in which instance
such entity shall make payment to Mr. Rose in an amount equal to two times his
then current annual salary.
The Company has entered into consulting arrangements with Dr.
Francine H. Nichols and Spencer Halper, each of whom is a director of the
Company. Pursuant to those arrangements, the Company pays, on a retainer basis,
consulting fees of $1,000 per month, plus reimbursement of expenses to Dr.
Nichols and Mr. Halper.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
LOANS. As of December 31, 1998 the Company issued a promissory
note to Sheldon R. Rose, the Chairman, Chief Executive Officer and President of
the Company, in the principal amount of $350,000 in order to evidence its
obligation to repay certain advances made by Mr. Rose to the Company for the
payment of various business expenses. Such promissory note bears interest at a
rate of six percent per annum, payable annually, and the principal amount
thereof is due and payable in full, on December 31, 2001. In addition, the
Company also owes Mr. Rose an additional $13,454 as reimbursement for certain
other cash advances. Such amount does not bear interest and is payable on
demand.
INDEMNIFICATION AGREEMENTS. The Company has entered into two
indemnification agreements with Robert H. Jaffe, a shareholder of the Company,
whereby the Company agrees to indemnify Mr. Jaffe for any cost and expenses that
may be incurred by him in the future as a consequence of his obligation to
repurchase all or a portion of certain shares of the Company's Common Stock sold
to two investors in March 1999. Pursuant to the agreements with these investors,
Mr. Jaffe is obligated to repurchase all or a portion of 150,000 shares of
Common Stock at a price of seventy-five cents ($.75) per share, upon the request
of the investor, at any time during the period commencing March 25, 2000 and
ending September 30, 2000. If Mr. Jaffe is required to repurchase any such
shares or shall forfeit all or a portion of the collateral pledged in
connection therewith, the Company is required to indemnify Mr. Jaffe
for all costs and expenses relating thereto.
ITEM 8. DESCRIPTION OF SECURITIES.
QUALIFICATION. The following statements constitute brief summaries
of the Company's Articles of Incorporation and Bylaws, as amended. Such
summaries do not purport to be complete and are qualified in their entirety by
reference to the full text of the Articles of Incorporation and Bylaws.
The Company's Articles of Incorporation authorize it to issue up
to 50,000,000 shares of Common Stock, $.001 par value per share and 2,000,000
shares of Preferred Stock, $.001 par value per share. As of July 14, 1999, there
were 6,185,231 shares of Common Stock issued and outstanding, 108,698 of such
shares being held in treasury. None of the Company's 2,000,000 shares of
Preferred Stock are currently issued or outstanding.
-16-
<PAGE>
COMMON STOCK. The Company's Articles of Incorporation authorize
it to issue up to 50,000,000 shares of Common Stock, $.001 par value per share.
All outstanding shares of Common Stock are legally issued, fully paid and
non-assessable.
LIQUIDATION RIGHTS. Upon liquidation or dissolution, each
outstanding share of Common Stock will be entitled to share equally in the
assets of the Company legally available for distribution to shareholders after
the payment of all debts and other liabilities.
DIVIDEND RIGHTS. Except with regard to the Preferred Stock,
there are no limitations or restrictions upon the rights of the Board of
Directors to declare dividends out of any funds legally available therefor. The
Company has not paid dividends to date and it is not anticipated that any
dividends will be paid in the foreseeable future. The Board of Directors
initially may follow a policy of retaining earnings, if any, to finance the
future growth of the Company. Accordingly, future dividends, if any, will depend
upon, among other considerations, the Company's need for working capital and its
financial condition at the time.
VOTING RIGHTS. Holders of shares of Common Stock of the
Company are entitled to cast one vote for each share held at all shareholders
meetings for all purposes.
OTHER RIGHTS. Shares of Common Stock are not redeemable, have
no conversion rights and carry no preemptive or other rights to subscribe to or
purchase additional shares of Common Stock in the event of a subsequent
offering.
Nevada law does not require shareholder approval for the issuance
of authorized but unissued shares of Common Stock. Such issuances may be made
for a variety of corporate purposes, including future private and public
offerings to raise additional capital or to facilitate corporate acquisitions.
PREFERRED STOCK. The Company currently has no plans to issue any
of its Preferred Stock. The Company's Board of Directors does, however, have the
authority, without action by the shareholders, to issue all or any portion of
the authorized but unissued Preferred Stock.
The Preferred Stock is non-voting and non-assessable and it is not
subject to recall. The Preferred Stock, when issued, shall be entitled to
priority over the Common Stock in the payment of any dividends, such that no
dividend may be paid on the Common Stock until any declared dividend is paid
upon all Preferred Stock. Further, no dividend shall be paid on the Common
Stock, unless and until a dividend at least one percent higher than that paid on
the Common Stock for the equivalent period is paid on the Preferred Stock. The
Preferred Stock, when issued, shall also have priority over the Common Stock in
the event of a dissolution and in all other manners and events as Nevada
corporate law shall now or hereafter provide.
The Company considers it desirable to have Preferred Stock
available to provide increased flexibility in structuring possible future
financings and in meeting corporate needs which may arise. If opportunities
arise that would make it desirable to issue Preferred Stock through either
public offerings or private placements, the provision for Preferred Stock in the
Company's Articles of Incorporation would avoid the possible delay and expense
-17-
<PAGE>
of a shareholders' meeting, except as may be required by law or regulatory
authorities. Issuance of the Preferred Stock will result, however, in a
class of securities outstanding that would have certain preferences with
respect to dividends and liquidation over the Common Stock which would result
in dilution of the income per share and net book value of the Common Stock.
The Board of Directors does not intend to issue any Preferred Stock except in
circumstances which it deems to be in the best interest of the Company and its
shareholders.
DEBT AND OTHER SECURITIES. The Company is not registering any
security other than its Common Stock.
CHANGE OF CONTROL. There are currently no provisions in the
Company's Articles of Incorporation or Bylaws that would delay or prevent a
change of control of the Company.
TRANSFER AGENT. Atlas Stock Transfer of Salt Lake City, Utah
serves as the Company's transfer agent.
-18-
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS.
MARKET INFORMATION. The Company has no public trading market for
its Common Stock. Although the Company intends to seek a quotation for its
shares of Common Stock on the NASDAQ Over-the-Counter ("OTC") Bulletin Board in
the future, there is no assurance the Company will do so, nor is there any
assurance that should the Company succeed in obtaining a listing for its
securities on the OTC Bulletin Board or on some other exchange, that a trading
market for the Company's Common Stock will develop. The amount of Common Stock
that is subject to outstanding options or warrants to purchase or securities
convertible into Common Stock is 1,050,000 shares. The amount of Common Stock
that could be sold pursuant to Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act") is 5,135,000 shares. Also, there is currently no
Common Stock that is being or is proposed to be publicly offered by the Company,
the offering of which could have a material effect on the market price of the
Company's Common Stock. However, the Company does intend to raise, by way of a
private placement of its Common Stock, the sum of $1,000,000 during the next
four months at prices ranging from fifty cents ($.50) to $1.00 per share. As
part of that private placement, the Company intends to enter into agreements
whereby it will agree to register all or a portion of the shares sold in that
private placement, as well as shares held by then current shareholders, pursuant
to a registration statement of Form SB-2 or such other appropriate registration
form.
STOCKHOLDERS. The Company's transfer agent, Atlas Stock Transfer
of Salt Lake City, Utah, confirms that as of July 14, 1999, there were 226
shareholders of record holding Common Stock. However, the Company believes that
there are at least another 100 shareholders whose shares are held in street
name.
DIVIDENDS. To date, the Company has not paid any dividends on its
Common Stock. The payment of dividends, if any, in the future is within the
discretion of the Board of Directors and will depend upon the Company's
earnings, its capital requirements and financial condition and other relevant
factors. The Board does not intend to declare any dividends in the foreseeable
future, but instead intends to retain all earnings, if any, for use in the
Company's business operations. Under Nevada corporate law, dividends may be paid
out of surplus or, in case there is no surplus, out of net profits for the
fiscal year in which the dividend is declared and/or the proceeding fiscal year.
-19-
<PAGE>
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings, and
to the best of management's knowledge, no such proceeding by or against the
Company has been threatened. To management's knowledge, no governmental
authority is contemplating the institution of a proceeding against the Company.
None of the Company's directors, officers, affiliates or beneficial owners of
five percent or more of any class of the Company's voting securities are a party
adverse to the Company nor do any of the foregoing individuals have a material
interest adverse to the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
During the Company's two most recent fiscal years or any later
interim period, there have been no changes in or disagreements with the
Company's principal independent accountants or a significant subsidiary's
independent accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In March 1996, the Company (operating as Vascular International of
Nevada, Inc.) initially issued 14,000,000 shares to the shareholders of its then
public parent corporation, Vascular International, Inc., as a 1:1 share
dividend, whereby the assets and shareholders of the parent corporation were
effectively transferred to the Company. Such issuance was made pursuant to
Section 4(2) of the Securities Act.
In December 1997, the Company issued 30,000,000 shares to its then
present management and affiliates for the purpose of securing interim
capitalization of $14,500 and reorganizational services. Such issuance was made
pursuant to Section 4(2) of the Securities Act.
On December 15, 1997, the Company authorized a 50:1 reverse stock
split and issued 20,000 post-reverse split shares to a director, 20,000 to its
legal counsel and 25,000 to its President. Such issuance was made pursuant to
Section 4(2) of the Securities Act.
On December 15, 1997, the Company entered into an Exchange of
Stock Agreement and Plan of Reorganization with Rose Group Delaware whereby the
Company issued, effective March 13, 1997, 4,500,000 shares to the sole
shareholder of Rose Group Delaware, in exchange for all of his shares in Rose
Group Delaware. Such issuance was made pursuant to Section 4(2) of the
Securities Act.
Pursuant to a letter termination agreement, dated November 17,
1998, the Company agreed to issue a total of 75,000 shares of its Common Stock
and to repay an outstanding advance to a consulting company as compensation for
services rendered and in full release of all obligations under a Financial
Consulting Agreement, by and between the Company and the consulting company
dated January 22, 1998, as amended by letter agreement dated May 8, 1998.
Subsequent to March 31, 1999, the subject 75,000 shares were issued pursuant to
Section 4(2) of the Securities Act.
-20-
<PAGE>
On March 24, 1999, the Company sold and issued 200,000 shares of
its Common Stock to a sophisticated corporate investor, at a purchase price of
fifty cents per share and an aggregate price of $100,000. Upon issuance, the
Company agreed that it would not issue shares of Common Stock in excess of ten
percent of the amount outstanding on March 24, 1999 for a price less than fifty
cents per share without the prior approval of the investor. In connection with
the issuance of these shares, Mr. Jaffe, a shareholder of the Company, has
agreed to repurchase 100,000 of these shares at a price of seventy-five cents
per share and the Company has agreed to indemnify Mr. Jaffe for his costs and
expenses related thereto. See "Certain Relationships and Related Transactions".
Such issuance was made pursuant to Rule 504 of Regulation D under the Securities
Act.
On March 24, 1999, in consideration for a $100,000 bridge loan,
the Company sold and issued options to purchase 100,000 shares of its Common
Stock at a purchase price of fifty cents ($.50) per share to Andrew Freundlich.
Such option is exercisable at any time until June 30, 2001, and is subject to
adjustments for stock splits, exchange of shares or otherwise. The $100,000
bridge loan is evidenced by a promissory note, which bears interest at a rate of
six percent per annum and is due and payable on March 15, 2000, with interest to
be paid quarterly. Upon default, such note will bear interest at eighteen
percent. Robert H. Jaffe, a five percent beneficial owner of the Company's
Common Stock, received a $5,000 finder's fee in connection with the bridge loan
and related issuance and Mr. Freundlich received a $15,000 placement fee. Such
issuance was made pursuant to Section 4(2) of the Securities Act.
On March 26, 1999, the Company issued 50,000 shares of its
Common Stock to Robert H. Jaffe in payment for services rendered thereby in
connection with the (i) negotiation of reductions in various outstanding
Company obligations, and (ii) introduction to companies that could aid in the
preparation of an E-Commerce website. Such issuance was made pursuant to
Section 4(2) of the Securities Act.
On March 26, 1999, the Company issued 50,000 shares of its Common
Stock to each of Steven H. Rose, Dr. Francine H. Nichols, Spencer Halper and
Mark C. Nicholas for services rendered to the Company during the first quarter
of 1999. Such issuance was made pursuant to Section 4(2) of the Securities Act.
On March 30, 1999, the Company sold and issued 100,000 shares of
its Common Stock to a sophisticated individual investor, at a purchase price of
fifty cents per share or an aggregate price of $50,000. In connection with the
issuance of these shares, Mr. Jaffe, a shareholder of the Company, has agreed to
repurchase 50,000 of these shares at a price of seventy-five cents per share and
the Company has agreed to indemnify Mr. Jaffe for his costs and expenses related
thereto. See "Certain Relationships and Related Transactions". Such issuance was
made pursuant to Rule 504 of Regulation D under the Securities Act.
On April 8, 1999, the Company sold and issued 100,000 shares of
its Common Stock to a sophisticated individual investor, at a purchase price of
fifty cents ($.50) per share or an aggregate price of $50,000. Such issuance was
made pursuant to Rule 504 of Regulation D under the Securities Act.
-21-
<PAGE>
On July 14, 1999, in recognition of their efforts on behalf of the
Company, the Company privately issued options to purchase 550,000 shares of
Common Stock at $1.00 per share to Sheldon R. Rose, options to purchase 150,000
shares at $1.00 per share to Robert H. Jaffe and options to purchase 50,000
shares at $1.00 per share to each of Steven H. Rose, Dr. Francine H. Nichols,
Lori M. Majeski, Mark C. Nicholas and Jared Rose. The amount of shares
underlying each of the above-noted options shall double upon the Company
achieving gross sales in excess of $100,000,000 provided the individual is still
a key employee, officer, director, consultant or legal counsel of the Company.
Such issuance was made pursuant to Section 4(2) of the Securities Act.
In July 1999, the Company issued (i) 50,000 shares of Common
Stock, and (ii) options to purchase 50,000 shares of Common Stock at twenty five
cents per share to Sun Remarketing. Such issuance was made pursuant to
Section 4(2) of the Securities Act.
All of the above purchasers acquired the securities for investment
and there was no general advertising or general solicitations in connection with
the offer and sale of the securities. The Company believes that each purchaser
was given access to financial and other information with respect to the Company
and in connection with these sales. Other than the transactions listed above,
the Company has carried out no other unregistered sales of securities since its
incorporation.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Nevada law, director immunity from liability to a
corporation or its shareholders for monetary liabilities applies automatically
unless it is specifically limited by a corporation's Articles of Incorporation
(which is not the case with the Company's Articles of Incorporation). Excepted
from that immunity are: (i) a willful failure to deal fairly with the
corporation or its shareholders in connection with a matter in which the
director has a material conflict of interest; (ii) a violation of criminal law
(unless the director had reasonable cause to believe that his or her conduct was
lawful or no reasonable cause to believe that his or her conduct was unlawful);
(iii) a transaction from which the director derived an improper personal profit;
and (iv) willful misconduct.
Under certain circumstances, Nevada law provides for
indemnification of the Company's officers, directors, employees and agents
against liabilities that they may incur in such capacities. In general, any
officer, director, employee or agent may be indemnified against expenses, fines,
settlements or judgments arising in connection with a legal proceeding to which
such person is a party, if that person's actions were in good faith, were
believed to be in the Company's best interest, and were not unlawful. Unless
such person is successful upon the merits in such action, indemnification may be
awarded only after a determination by independent decision of the Board of
Directors, by legal counsel, or by a vote of the shareholders, that the
applicable standard of conduct was met by the person to be indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally the same
as those set forth above; however, with respect to such actions, indemnification
is granted only with respect to expenses actually incurred in connection with
the defense or settlement of the action. In such actions, the person to be
indemnified must have acted in good faith and in a manner believed to have
-22-
<PAGE>
been in the Company's best interest, and must not have been adjudged liable for
negligence or misconduct.
The foregoing is only a summary description and is qualified in
its entirety by reference to the applicable Nevada Revised Statutes,
specifically Sections 78.037, 78.295, 78.300, 78.7502, 78.751 and 78.752
thereof.
Section 4.3 of the Company's Articles of Incorporation limits
directors' personal liability to the Company or its shareholders to acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law, including repayment of distributions made in violation of Nevada Corporate
law. Article V of the Company's Bylaws provides for indemnification of corporate
agents in certain instances and authorizes the purchase of liability insurance
with regard thereto. The statutory provisions also grant the Company the power
to purchase and maintain insurance which protects its officers and directors
against any liabilities incurred in connection with their services in such
positions, and such a policy may be obtained by the Company.
Except as otherwise disclosed in "Certain Relationships and
Related Transactions", as of the date hereof, the Company has no contracts in
effect providing any person or entity with any specific rights of
indemnification although the Company's Bylaws may authorize its Board of
Directors to enter into and deliver such contracts to provide a person or entity
with specific rights of indemnification in addition to the rights provided in
the Articles of Incorporation and Bylaws to the fullest extent provided under
Nevada law. The Company has no special insurance against liability although the
Company's Bylaws provide that the Company may, unless prohibited by Nevada
law, maintain such insurance.
Insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to directors, officers and controlling persons
of the Company, the Company has been advised that in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceedings) is
asserted by such director, officer or controlling person in connection with any
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issues.
INDEMNIFICATION OF DIRECTORS, OFFICERS OR OTHER PERSONS
CONTROLLING THE COMPANY FOR LIABILITIES ARISING UNDER THE SECURITIES ACT IS
HELD TO BE AGAINST PUBLIC POLICY BY THE COMMISSION AND IS, THEREFORE,
UNENFORCEABLE.
-23-
<PAGE>
PART F/S
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditor's Report dated April 8, 1999..........................................F-1
Consolidated Balance Sheet as of December 31, 1998 (audited) and March 31, 1999
(unaudited)...............................................................................F-3
Consolidated Statements of Operations for the Years Ending December 31, 1998 and 1997
(audited) and Quarters Ending March 31, 1999 and 1998 (unaudited).........................F-5
Consolidated Statements of Changes in Stockholder's Deficit for the Years Ending
December 31, 1998 and 1997 (audited) and Quarters Ending March 31, 1999 and 1998
(unaudited)...............................................................................F-6
Consolidated Statements of Cash Flows for the Years Ending December 31, 1998 and 1997
(audited) and Quarters Ending March 31, 1999 and 1998 (unaudited).........................F-7
Notes to Consolidated Financial Statements................................................F-11
</TABLE>
-24-
<PAGE>
PENDER NEWKIRK & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
100 SOUTH ASHLEY DRIVE
SUITE 1650
TAMPA, FL 33602
Independent Auditors' Report
Board of Directors
The Rose Group Corporation of Nevada and Subsidiary
(A Development Stage Enterprise)
Sarasota, Florida
We have audited the accompanying balance sheet of The Rose Group Corporation of
Nevada and Subsidiary (a development stage enterprise) as of December 31, 1998
and the related statements of operations, changes in stockholders' deficit, and
cash flows for the period March 13, 1997 (date of inception) to December 31,
1997 and the year ended December 31, 1998. These consolidated financial
statements are the responsibility of the management of The Rose Group
Corporation of Nevada and Subsidiary. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 financial position of The Rose Group
Corporation of Nevada and Subsidiary (a development stage enterprise) as of
December 31, 1998 and the results of its operations and its cash flows for the
period indicated above in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that The Rose Group Corporation of Nevada and Subsidiary will continue as a
going concern. As disclosed in Note 1 to the consolidated financial statements,
the operating losses of approximately $303,000 from inception to December 31,
1998, negative working capital of approximately $192,000 as of
F-1
<PAGE>
December 31, 1998, and stockholders' deficit of approximately $310,000 as of
December 31, 1998 raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Management plans to raise additional capital through a private placement of the
Company's common stock and a subsequent secondary public offering as more fully
discussed in Note 1 to the consolidated financial statements.
Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
April 8, 1999
F-2
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Consolidated Balance Sheet
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $148,699 $ 1,008
Accounts receivable, factor 29,336 7,797
Inventory 69,863 64,741
Prepaid loan costs 26,900
-------- --------
Total current assets 274,798 73,546
-------- --------
Equipment, net of accumulated depreciation 27,337 19,302
-------- --------
Other assets:
Catalogue 214,422 199,972
Offering costs 29,721 47,970
Other assets 2,937 2,937
-------- --------
Total other assets 247,080 250,879
-------- --------
$549,215 $343,727
-------- --------
-------- --------
</TABLE>
READ INDEPENDENT AUDITORS' REPORT. THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. F-3
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable, trade, including related party of
$41,806 and $73,991 at March 31, 1999 and
December 31, 1998, respectively $ 144,229 $ 253,524
Accrued expenses 11,743 11,739
Notes payable and current portion of
long-term debt 174,247
----------- -----------
Total current liabilities 330,219 265,263
----------- -----------
Long-term liabilities:
Note payable, stockholder 350,000 350,000
Stock payable 37,500 37,500
----------- -----------
Total long-term liabilities 387,500 387,500
----------- -----------
Stockholders' deficit
Preferred stock; $.001 par value; 2,000,000 shares
authorized; no shares issued and outstanding 0 0
Common stock; $.001 par value; 50,000,000 shares
authorized; 6,013,670 shares issued and outstanding
at March 31, 1999 and 5,463,670 shares issued
and outstanding at December 31, 1998 6,014 5,464
Additional paid-in capital 286,100
Accumulated deficit during development stage (460,618) (314,500)
----------- -----------
Total stockholders' deficit (168,504) (309,036)
----------- -----------
$ 549,215 $ 343,727
----------- -----------
----------- -----------
</TABLE>
F-4
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
March 13,
1997 (Date of
Three Months Ended Period Ended Inception) to
March 31, December 31, March 31,
-------------------------- -------------------------- ------------
1999 1998 1998 1997 1999
----------- ----------- ----------- ----------- ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Sales $ 151,182 $ 32,156 $ 195,364 $ 467,199 $ 813,745
Cost of sales 86,302 19,303 116,301 254,341 456,944
----------- ----------- ----------- ----------- ------------
Gross profit 64,880 12,853 79,063 212,858 356,801
----------- ----------- ----------- ----------- ------------
Operating expenses:
General and administrative 203,754 127,265 327,025 222,564 753,343
Depreciation and
amortization 1,650 1,500 5,985 2,411 10,046
Interest expense 5,594 6,200 24,800 12,351 42,745
----------- ----------- ----------- ----------- ------------
Total operating expenses 210,998 134,965 357,810 237,326 806,134
----------- ----------- ----------- ----------- ------------
Net loss $ (146,118) $ (122,112) $ (278,747) $ (24,468) $ (449,333)
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
Loss per share $ (.10) $ (.25) $ (.06) $ (.07) $ (.15)
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
</TABLE>
READ INDEPENDENT AUDITORS' REPORT. THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. F-5
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders' Deficit
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
Accumulated
Capital In Deficit During
Common Stock Excess of Development Stock
Shares Amount Par Value Stage Subscription Total
--------- -------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stock issued for cash 100 $ 1,000 $ 1,000
(March 1997)
Net loss for the period $ (24,468) (24,468)
--------- -------- ---------- ----------- ----------- -----------
Balance, December 31, 1997 100 1,000 (24,468) $ (23,468)
--------- -------- ---------- ----------- ----------- -----------
Acquisition of company 5,463,670 5,464 $ 412,093 (404,414) $ (14,500) (1,357)
(March 1998)
Recapitalization of
company (March 1998) (100) (1,000) (412,093) 393,129 14,500 (5,464)
Net loss for year (278,747) (278,747)
--------- -------- ---------- ----------- ----------- -----------
Balance, December 31, 1998 5,463,670 5,464 (314,500) (309,036)
Sale of stock for cash, net of
offering cost of $21,750
(unaudited) (March 1999) 300,000 300 127,950 128,250
Stock options issued in
connection with loan
(unaudited) (March 1999) 5,400 5,400
Contribution of services
(unaudited) 250,000 250 152,750 153,000
Net loss for the three-month
period ended March 31,
1999 (unaudited) (146,118) (146,118)
--------- -------- ---------- ----------- ----------- -----------
Balance, March 31, 1999
(unaudited) 6,013,670 $ 6,014 $ 286,100 $ (460,618) $ 0 $ (168,504)
--------- -------- ---------- ----------- ----------- -----------
--------- -------- ---------- ----------- ----------- -----------
</TABLE>
READ INDEPENDENT AUDITORS' REPORT. THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. F-6
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1999 1998
(Unaudited) (Unaudited)
---------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (146,118) $ (122,112)
---------- ------------
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 1,650 1,500
Contribution of services 153,000
(Increase) decrease in:
Accounts receivable, factor (21,539) 18,114
Inventory (5,122) 4,232
Catalogue costs (14,450) (22,499)
Other assets (21,500)
Increase (decrease) in:
Accounts payable and other accrued expenses (26,792) 19,062
Stock payable
---------- ------------
Total adjustments 65,247 20,409
---------- ------------
Net cash used by operating activities (80,871) (101,703)
---------- ------------
INVESTING ACTIVITIES
Acquisition of equipment (9,685)
Acquisition of Vascular International of
Nevada, Inc., net (6,821)
---------- ------------
Net cash used by investing activities (9,685) (6,821)
---------- ------------
FINANCING ACTIVITIES
Net borrowings on line of credit 24,247
Proceeds from notes payable 100,000
Payments on notes payable (25,000)
Proceeds from note payable, stockholder 93,000
Payments on note payable, stockholder (19,271)
Payments on offering costs (11,000) (17,181)
Proceeds from issuance of common stock 150,000
---------- ------------
Net cash provided by financing activities 238,247 56,548
---------- ------------
NET INCREASE (DECREASE) IN CASH 147,691 (51,976)
CASH AT BEGINNING OF YEAR 1,008 48,644
---------- ------------
CASH AT END OF YEAR $ 148,699 $ (3,332)
---------- ------------
---------- ------------
</TABLE>
READ INDEPENDENT AUDITORS' REPORT. THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. F-7
<PAGE>
<TABLE>
<CAPTION>
March 13,
1997 (Date of
Period Ended Inception) to
December 31, March 31,
- ------------------------------- -------------
1998 1997 1999
- ------------- ------------ -------------
(Unaudited)
<S> <C> <C>
$ (278,747) $ (24,468) $ (449,333)
- ------------- ------------ -------------
5,985 2,411 10,046
153,000
18,680 (26,477) (29,336)
(143) (64,598) (69,863)
(124,422) (138,872)
(2,970) (24,470)
111,433 46,788 131,429
37,500 37,500
- ------------- ------------ -------------
49,033 (44,846) 69,434
- ------------- ------------ -------------
(229,714) (69,314) (379,899)
- ------------- ------------ -------------
(27,665) (37,350)
(6,821) (6,821)
- ------------- ------------ -------------
(6,821) (27,665) (44,171)
- ------------- ------------ -------------
24,247
100,000
(25,000)
322,138 417,265 739,403
(116,761) (272,642) (389,403)
(16,478) (27,478)
1,000 151,000
- ------------- ------------ -------------
188,899 145,623 572,769
- ------------- ------------ -------------
(47,636) 48,644 148,699
48,644
- ------------- ------------ -------------
$ 1,008 $ 48,644 $ 148,699
- ------------- ------------ -------------
- ------------- ------------ -------------
</TABLE>
F-8
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
--------- ----------
(Unaudited) (Unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
AND NONCASH INVESTING AND FINANCING ACTIVITIES
<S> <C> <C>
Cash paid during the year for interest $ 24,800 $ 0
--------- ------
--------- ------
</TABLE>
Included in accounts payable at March 31, 1999 and 1998 and December 31,
1998 are the approximate amounts of $0, $15,000, and $76,000 relating to
catalogue costs, and $7,500, $0, and $31,000 relating to offering costs,
respectively.
During the period ended March 31, 1999, the Company adjusted offering costs
and accounts payable by $7,500 for the recognition of various payables.
During the period March 31, 1999, the Company wrote off offering costs of
approximately $10,700 against proceeds from the sale of stock.
During the period March 31, 1999, the Company converted approximately
$75,000 of accounts payable with a vendor into a short-term note payable.
During the period March 31, 1999, the Company issued an option agreement for
100,000 shares of common stock as an incentive to a lender. The value of
these options as calculated by the Black-Scholes option-pricing model was
approximately $5,400, which is shown as a prepaid loan cost in the
accompanying balance sheet.
READ INDEPENDENT AUDITORS' REPORT. THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. F-9
<PAGE>
<TABLE>
<CAPTION>
March 13,
1997 (Date of
Period Ended Inception) to
December 31, March 31,
- ------------------------
1998 1997 1999
- --------- --------- -------------
(Unaudited)
<S> <C> <C>
$ 0 $ 12,351 $ 37,151
- --------- ------------ -------------
- --------- ------------ -------------
</TABLE>
F-10
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
1. BACKGROUND INFORMATION AND GOING CONCERN
On March 10, 1998, The Rose Group Corporation of Nevada (the "Parent"), formerly
known as Vascular International of Nevada, Inc., acquired all of the outstanding
common stock of The Rose Group Corporation, a Delaware corporation, (the
"Subsidiary"). The consolidated entity will be referred to as the "Company." For
accounting purposes, the acquisition has been treated as a recapitalization of
The Rose Group Corporation with The Rose Group Corporation as the acquirer
(reverse acquisition). The historical financial statements prior to March 10,
1998 are those of The Rose Group Corporation. Pro forma information giving
effect to the acquisition as if the acquisition took place on March 13, 1997
(date of inception of The Rose Group Corporation) is as follows:
<TABLE>
<CAPTION>
March 13,
1997 (Date of
Three Months Ended Period Ended Inception) to
March 31, December 31, March 31,
1999 1998 1998 1997 1999
----------- ----------- ----------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $ 151,182 $ 32,156 $ 195,364 $ 467,199 $ 813,745
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Net loss $ (146,118) $ (122,112) $ (278,747) $ (31,230) $ (456,095)
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Basic loss per
common stock $ (.10) $ (.25) $ (.06) $ (.09) $ (.15)
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
</TABLE>
The Parent was incorporated in the state of Nevada on February 6, 1996 and was a
public shell corporation at the time of acquisition. The Subsidiary was
incorporated in the state of Delaware on March 13, 1997.
Management of the Company plans to continue to develop the Company as a prenatal
and postpartum selfcare and healthcare manufacturer, wholesaler, mass marketer
to retail outlets, and direct seller to consumers through its Internet
E-commerce facilities of certain products and related consulting services that
are marketed under the nationally known trademark and brand name "LAMAZE." The
Company also intends to market other nationally known brands of products for
newborns and toddlers through its ROSEBABY.COM internet e-commerce website and
supplemental catalogues.
The corporate headquarters is located in Sarasota, Florida.
READ INDEPENDENT AUDITORS' REPORT. F-11
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
1. BACKGROUND INFORMATION AND GOING CONCERN (CONTINUED)
The Company is considered a development stage enterprise devoting substantially
all of its efforts to establishing customers and vendor relationships,
establishing complete product lines, and raising capital through private
placement sales.
The Company had sales to a significant customer of $77,648 in 1998, $313,373 in
1997, $107,698 and $21,833 for the three months ended March 31, 1999 and 1998,
respectively, and $498,719 for the period March 13, 1997 to March 31, 1999,
which made up 39 percent, 67 percent, 71 percent, 68 percent, and 61 percent of
total sales for those periods, respectively.
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles which contemplate
continuation of the Company as a going concern. The Company incurred
operating losses of $449,333 since inception and has negative working capital
of $55,421 as of March 31, 1999. Total liabilities exceed total assets by
$168,504 as of March 31, 1999.
In view of these matters, realization of a major portion of the assets in the
accompanying consolidated balance sheet is dependent upon continued operations
of the Company, which, in turn, is dependent upon the Company's ability to meet
its financing requirements and the success of its future operations. Management
believes that actions presently taken to raise additional capital by means of a
private placement sale of its common stock and a subsequent secondary public
offering, to become a full SEC reporting company, and to revise the operating
methods of the Company to include substantial commerce over the Internet provide
the opportunity for the Company to continue as a going concern. Subsequent to
March 31, 1999, the Company issued an additional 100,000 shares of common stock
in exchange for $10,000 and a stock subscription receivable of $40,000.
READ INDEPENDENT AUDITORS' REPORT. F-12
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed are:
The accompanying consolidated financial statements include the accounts
of the Parent and its wholly owned subsidiary, The Rose Group
Corporation (a Delaware corporation). All significant intercompany
transactions have been eliminated in the consolidation.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of 1) the
results of operations for the three-month periods ended March 31, 1999
and 1998 and from inception to March 31, 1999, 2) the financial position
at March 31, 1999, and 3) cash flows for the three-month periods ended
March 31, 1999 and 1998 and from inception to March 31, 1999, have been
made.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Revenue is recognized once products are shipped. The Company sells to
its customers based on its standard credit policies and reviews accounts
receivable providing for any bad debts. At December 31, 1998 and March
31, 1999, management believes all accounts receivable are fully
collectible and no allowance for bad debt is required.
Inventory is stated at the lower of cost (first-in, first-out) or
market.
Equipment is recorded at cost. Depreciation is calculated by the
accelerated method over the estimated useful lives of the assets,
ranging generally from five to fifteen years. Additions to and major
improvements of equipment are capitalized. Maintenance and repair
expenditures are charged to expense as incurred. As equipment is sold or
retired, the applicable cost and accumulated depreciation are eliminated
from the accounts and any gain or loss is recorded.
READ INDEPENDENT AUDITORS' REPORT. F-13
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In connection with the Company's private placement, offering costs are
deferred and are offset against the proceeds of the offering or expensed
if the total offering is unsuccessful, both on a pro rata basis.
Costs to design and produce the Company's catalogue are deferred and
amortized over the expected useful life of the catalogue of five years.
No amortization expense has been recorded as of March 31, 1999 since the
catalogue is not yet in service. Non-direct response advertising costs
are charged to expense as incurred and amounted to $4,914, $6,288,
$2,082, $850, and $13,284 for 1998, 1997, the three months ended March
31, 1999 and 1998, and the period March 13, 1997 to March 31, 1999,
respectively.
The Financial Accounting Standards Board issued Statement No. 123 (FASB
No. 123), "Accounting for Stock-Based Compensation," effective for
fiscal years beginning after December 15, 1995. This statement provides
that expense equal to the fair value of all stock-based awards on the
date of the grant be recognized over the vesting period. Alternatively,
this statement allows entities to continue to apply the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," whereby compensation expense is recorded on the date the
options are granted to employees equal to the excess of the market price
of the underlying stock over the exercise price. The Company has elected
to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma disclosure of the provisions of FASB No. 123.
Basic loss per share (EPS) is computed by dividing loss available to
common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
from the exercise or conversion of securities into common stock. Diluted
EPS are not presented because they are anti-dilutive.
READ INDEPENDENT AUDITORS' REPORT. F-14
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
3. INVENTORY
Inventory consists of:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- -----------
(Unaudited)
<S> <C> <C>
Finished goods $ 37,055 $ 27,294
Raw materials 32,808 37,447
---------- ---------
$ 69,863 $ 64,741
---------- ---------
---------- ---------
</TABLE>
4. EQUIPMENT
Equipment consists of:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Office and computer equipment $ 3,559 $ 3,559
Die cutting and molding equipment 30,998 21,313
Leasehold improvements and other 2,793 2,793
---------- ----------
37,350 27,665
Less accumulated depreciation 10,013 8,363
---------- ----------
$ 27,337 $ 19,302
---------- ----------
---------- ----------
</TABLE>
READ INDEPENDENT AUDITORS' REPORT. F-15
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------- -----------
(Unaudited)
<S> <C> <C>
Line of credit payable; maximum borrowing $30,000; due on demand;
interest at 2.0% over prime (7.02% at March 31, 1999); collateralized
by inventory and personally
guaranteed by majority stockholder $ 24,247
Note payable; interest at 6.0%; interest only
payments due quarterly; due March 15,
2000; unsecured and personally
guaranteed by a stockholder 100,000
Note payable; interest at 9.8%; $5,226 payable
per month including interest; due January 25,
2000; unsecured 50,000
Note payable, majority stockholder; due
December 31, 2001; interest at 6.0% per
annum; unsecured 350,000 $350,000
-------- --------
524,247 350,000
Less amounts currently due 174,247 0
-------- --------
$350,000 $350,000
-------- --------
-------- --------
</TABLE>
The following is a schedule by year of the principal payments required on these
notes payable and long-term debt:
<TABLE>
<CAPTION>
<S> <C>
1999 $174,247
2000 $350,000
</TABLE>
READ INDEPENDENT AUDITORS' REPORT. F-16
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
6. LEASE COMMITMENTS
The Company rents office space under an operating lease with a remaining lease
term of less than one year. Monthly rent payments are $1,043.
Rent expense amounted to $20,081, $13,766, $4,550, $6,260, and $30,891 for 1998,
1997, the three months ended March 31, 1999 and 1998, and the period March 13
1997 through March 31, 1999, respectively.
7. ACCOUNTS RECEIVABLE, FACTOR
The Company entered into an agreement to sell its accounts receivable, with
recourse, to Bayview Growth Corporation (Bayview). The agreement calls for the
immediate payment of 85 percent and 75 percent of the face value of the accounts
receivable at March 31, 1999 and December 31, 1998, respectively, with the
remaining 25 percent payable upon collection of the receivable by Bayview. The
Company is charged various factoring and financing fees amounting to one percent
for each ten-day period the receivables are not collected by Bayview. The
amounts shown on the balance sheet at December 31, 1998 and March 31, 1999
represent the unfunded portion of the receivables not yet collected by Bayview.
In the event of a default, or 90 days from invoice date, the Company must
repurchase the accounts receivable from Bayview. Losses from defaults have not
been significant. The Company is contingently liable in the amounts of $37,962
and $118,569 at December 31, 1998 and March 31, 1999, respectively, relating to
such receivables sold with recourse.
READ INDEPENDENT AUDITORS' REPORT. F-17
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
8. OTHER COMMITMENTS
On January 22, 1998, the Company executed a two-year financial consulting
agreement with a consultant to assist with raising debt and equity funding,
developing, studying, and evaluating financing, merger, and acquisition
proposals, as well as to assist in the negotiations and discussions pertaining
thereto. On November 17, 1998, this agreement was terminated under mutual
consent. As compensation for services rendered, the Company will issue 75,000
shares of its common stock. The Company valued these shares at $.50 per share,
which is consistent with the selling price of the shares sold thus far in the
private placement. These shares have not been issued as of March 31, 1999;
hence, the Company recorded this as stock payable.
On February 28, 1999, the Company executed an exclusive agreement with LAMAZE
from AMI, Inc. This agreement allows the Company to use the "LAMAZE" trademark
on the advertising, packaging, and marketing materials related to maternity
support hose, nursing shawls, and other products as submitted to and approved by
LAMAZE. The Company is required to pay a fee of nine percent of the net sales
(sales less returns and allowances) of the authorized products (listed above)
with a minimum yearly fee of $45,000 payable in installments on January 15th and
July 15th of every year.
9. INCOME TAXES
From the date of its inception to February 28, 1998, the Subsidiary, with the
consent of its stockholders, elected to be taxed under the Internal Revenue Code
as an S corporation. In lieu of corporate income taxes, the stockholders of an S
corporation are taxed on their proportionate share of the Company's taxable
income or loss. As of the date of the merger with Vascular International of
Nevada, Inc., the subsidiary became a C corporation and will be taxed as such.
The Company has a loss carryforward of approximately $134,000 as of December 31,
1998 that may be applied against future taxable income. This loss gives rise to
a deferred tax asset at December 31, 1998 of approximately $35,185. Management
has established a valuation allowance equal to the amount of the deferred tax
asset due to the uncertainty of the Company's realization of this benefit.
READ INDEPENDENT AUDITORS' REPORT. F-18
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
9. INCOME TAXES (CONTINUED)
<TABLE>
<S> <C>
Loss carryforward $ 35,185
Less valuation allowance 35,185
----------
Net deferred tax assets $ 0
----------
----------
</TABLE>
The loss carryforward expires on December 31, 2013.
10. STOCK OPTIONS
The Company issues stock options as incentives to lenders. The exercise price of
the options are equal to the price at which the Company last sold shares of its
common stock. The life of the options equal approximately 2.5 years.
The following is a summary of the status of stock options outstanding and
exercisable at March 31, 1999:
<TABLE>
<CAPTION>
Weighted Weighted
Average Remaining Average
Exercise Price Number Contractual Life Exercise Price
-------------- ------ ---------------- --------------
<S> <C> <C> <C>
$.50 100,000 2.25 years $.50
</TABLE>
The weighted average fair value of the options at their grant date during 1999
was $.50. The estimated fair value of each option granted is calculated using
the Black-Scholes option-pricing model. The following summarizes the weighted
average of the assumptions used in the model:
<TABLE>
<S> <C>
Risk-free interest rate 5.11%
Expected years until exercised 2.25
</TABLE>
READ INDEPENDENT AUDITORS' REPORT. F-19
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
11. STOCKHOLDERS' EQUITY
In March 1999, the Board of Directors authorized the Company to issue and sell
300,000 shares of the common stock of the Company at $.50 per share pursuant to
Rule 504, Regulation D. In addition, the Board of Directors also authorized a
right to "put back" all or part of 150,000 shares of the 300,000 shares
purchased to a certain stockholder during a six-month period commencing in March
2000 and ending in September 2000.
In March 1999, the Board of Directors authorized the Company to issue 250,000
shares of common stock to individuals as payment for various services rendered
to the Company. The shares were issued on March 26, 1999 for these services.
12. EARNINGS PER SHARE
The following data shows the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock:
<TABLE>
<CAPTION>
March 13,
Three Months Ended Period Ended 1997 (Date of
March 31, December 31, Inception) to
--------------------------- ------------------------ March 31,
1999 1998 1998 1997 1999
----------- ----------- ----------- ---------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net loss $ (146,118) $ (122,112) $ (278,747) $ (24,468) $ (449,333)
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Weighted average
number of
common shares
used in basic EPS 1,358,165 496,521 4,612,985 330,257 3,043,095
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
</TABLE>
READ INDEPENDENT AUDITORS' REPORT. F-20
<PAGE>
The Rose Group Corporation
of Nevada and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1998,
the Period March 13, 1997 (Date of Inception)
through December 31, 1997, and the
Three Months Ended March 31, 1999 and 1998 (Unaudited)
13. YEAR 2000 (UNAUDITED)
As of March 31, 1999, the Company is still in the process of reviewing its
computer systems to identify the systems that could affected by the "Year 2000
Issue." The "Year 2000 Issue" is the result of computer programs being written
using two digits rather than four to define the applicable year. Programs with
this problem may recognize a date using "00" as the year 1900 rather than the
year 2000, resulting in system failures or miscalculations. Although no
assurance can be given, the Company presently believes that existing software is
"Year 2000" compliant and will not pose significant operational problems for the
Company's computer systems. The Company has also been in contact with its major
vendors and customers and believes that their computer systems are also "Year
2000" compliant, although no assurance can be given regarding this.
READ INDEPENDENT AUDITORS' REPORT. F-21
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
Exhibit No. Name and/or Identification of Exhibit
----------- -------------------------------------
1. Underwriting Agreement
Not Applicable
2. Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession
2.1. Exchange of Stock Agreement and Plan of
Reorganization by and between the Company
(as Vascular International of Nevada, Inc.)
and Rose Group Delaware, dated December 15,
1997
3. Articles of Incorporation and Bylaws
3.1. Articles of Incorporation of Vascular
International of Nevada, Inc., filed
February 13, 1996.
3.2. Certificate of Amendment of Articles of
Incorporation of Vascular International of
Nevada, Inc., changing name of company to
The Rose Group Corporation of Nevada, filed
March 13, 1997.
3.3. Bylaws of The Rose Group Corporation of
Nevada (then named Vascular International of
Nevada, Inc.)
4. Instruments Defining the Rights of Security Holders
Not Applicable
5. Opinion of Legality
Not Applicable
7. Opinion on Liquidation Preference
Not Applicable
8. Opinion on Tax Matters
Not Applicable
-25-
<PAGE>
Exhibit No. Name and/or Identification of Exhibit
----------- -------------------------------------
9. Voting Trust Agreement and Amendments
Not Applicable
10. Material Contracts
10.1 Lease Agreement for 2073 Porter Lake Drive,
Sarasota Florida for period September 1,
1998 to August 31, 1999
10.2 Employment Agreement by and between the
Company and Sheldon R. Rose effective as of
July 14, 1999
10.3 Licensing Agreement for "Privacy Shawl" by
and between the Company and Pretty/Private,
dated January 9, 1998
10.4 Exclusive Sales Agreement by and between the
Company and LAMAZE for AMI, Inc. effective
as of February 24, 1999
10.5 Factoring Agreement and amendments thereto,
by and between the Company and Bay View
Funding dated August 5, 1997 and March 22,
1999, respectively
10.6 Line of Credit Agreement, by and between The
Rose Group Company of Delaware d/b/a in
Florida as Fresh Babies, Inc. and AmSouth
Bank of Florida, dated January 25, 1999.
11. Statement Re Computation of Per Share Earnings
See Notes to Financial Statements
13. Annual or Quarterly Reports
Not Applicable
14. Material Foreign Patents
Not Applicable
15. Letter on Unaudited Interim Financial Information
Not Applicable
-26-
<PAGE>
Exhibit No. Name and/or Identification of Exhibit
----------- -------------------------------------
16. Letter on Change in Certifying Accountants
Not Applicable
17. Letter on Director Resignation
Not Applicable
18. Letter on Change in Accounting Principles
Not Applicable
19. Reports Furnished to Security Holders
Not applicable
20. Other Documents or Statements to Security Holders
Not applicable
21. Subsidiaries of Small Business Issuer
21.1 List of Subsidiaries
22. Published Report Regarding Matters Submitted to Vote of
Security Holders
Not applicable
23. Consent of Experts and Counsel
23.1 Consent of Pender Newkirk & Company,
Certified Public Accountants
24. Power of Attorney
Not applicable
25. Statement of Eligibility of Trustee
Not applicable
-27-
<PAGE>
Exhibit No. Name and/or Identification of Exhibit
----------- -------------------------------------
26. Invitations for Competitive Bids
Not applicable
27. Financial Data Schedule
99. Additional Exhibits
Not Applicable
-28-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
THE ROSE GROUP CORPORATION OF NEVADA
By: /s/ SHELDON R. ROSE
-------------------------------------
SHELDON R. ROSE, President
Date: July 28, 1999
-29-
<PAGE>
Exhibit 2.1
EXCHANGE OF STOCK AGREEMENT AND PLAN OF REORGANIZATION
Exchange of Stock Agreement and Plan of Reorganization dated as of
December 15, 1997, hereinafter sometimes referred to as "the Agreement," by and
between Vascular International of Nevada, Inc. ("Vascular/Nevada" or "the Public
Company") a Nevada corporation, having its principal place for the transaction
of business c/o Julien D. Jensen, Esq., Jensen, Duffin, Carman, Dibb & Jackson,
311 South State Street, Suite 380, Salt Lake City, Utah 84111 and The Rose Group
Corporation, a Delaware corporation ("The Rose Group" or "the Acquired
Corporation"), having its current principal place for the transaction of
business at 2073 Porter Lake Drive, Sarasota, Florida 34240.
W I T N E S S E T H:
WHEREAS, The Rose Group has issued a total of 100 shares (the
"Corporation Shares") to its president, Sheldon Rose, which in fact constitutes
all of the issued and outstanding shares of the common stock of the Acquired
Corporation; and
WHEREAS, prior to giving effect to a reverse stock split on a fifty
share for one share basis ("the Stock Split"), Vascular/ Nevada has a
capitalization of 50,000,000 shares of common stock, $0.001 par value per share,
of which 48,010,923 shares are at present issued and outstanding or otherwise
the subject of stock subscription agreements; and
WHEREAS, Vascular/Nevada desires to acquire from Sheldon Rose all of
the Corporation Shares in exchange solely for 4,500,000 post reverse split
shares of Vascular/Nevada common stock (the "New Issue Exchange Shares"); and
WHEREAS, at the closing of the exchange of stock contemplated by this
Agreement, Vascular/Nevada will not have any assets or liabilities other than
cash in the approximate amount of $15,000 less any expenses required to bring
its books and records up-to-date through December 31, 1997; and
WHEREAS, it is the intention of Vascular/Nevada and The Rose Group that
the exchange of the Corporation Shares for the New Issue Exchange Shares
constitute a "reorganization" as defined in Section 368(a) (1) (B) of the
Internal Revenue Code of 1986, as amended.
NOW THEREFORE, in consideration of the foregoing provisions to be
incorporated in the Agreement and the mutual covenants herein contained, IT IS
AGREED is follows:
ARTICLE I
EXCHANGE OF SHARES
Section 1.1 EXCHANGE OF STOCK. Subject to the terms and conditions of
this Agreement, at the "Closing Date" as such term as defined in Section 7.1
hereof, the Corporation Shares shall be exchanged for the New Issue Exchange
Shares.
Section 1.2 DELIVERY OF CERTIFICATES. At the Closing Date, certificates
representing all of the issued and outstanding shares of The Rose Group duly
<PAGE>
endorsed to Vascular/Nevada with signatures guaranteed and with all requisite
stock transfer tax stamps affixed, shall be delivered to the Public Company. The
cost of any transfer tax stamps required to be affixed to any stock certificates
shall be paid by The Rose Group. Upon delivery by Vascular/Nevada of the
certificates evidencing the New Issue Exchange Shares Sheldon Rose and all other
persons who may then be shareholders of The Rose Group shall be vested with good
and valid title to such New Issue Exchange Shares, free and clear of all liens,
claims and encumbrances. The New Issue Exchange Shares shall constitute more
than eighty (80%) percent of the outstanding common stock of Vascular/Nevada.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF VASCULAR/NEVADA
Vascular/Nevada represents and warrants to Sheldon Rose and any other
shareholders of The Rose Group as follows:
Section 2.1 ORGANIZATION AND QUALIFICATION OF VASCULAR/ NEVADA. The
Public Company is a corporation duly incorporated, duly organized, validly
existing and in good standing under the laws of the State of Nevada. It has
the corporate power and authority to own or lease and operate all of its
properties and assets and to carry on its business as such business is now
being conducted and is duly licensed or qualified to do business and is in
good standing in the State of Nevada. The legal representatives of
Vascular/Nevada (the "Representatives") have previously provided to The Rose
Group copies of its certificate of incorporation and by-laws, certified by
its assistant secretary to be complete and correct, as amended.
Section 2.2 CAPITALIZATION AND OWNERSHIP OF VASCULAR/NEVADA. The
authorized capital stock of Vascular/Nevada consist of (i) 50,000,000 shares of
common stock, $0.001 par value per share, of which 48,010,923 shares were issued
and outstanding (including approximately 9,000,000 shares of treasury stock) as
of December 31, 1997 or otherwise the subject of subscription agreements. All
outstanding shares of Vascular/Nevada common stock are validly issued, fully
paid for and nonassessable with no personal liability attaching to the ownership
thereof and free of pre-emptive rights. There are no shares of Vascular/Nevada
common stock issued or outstanding except as referred to above, and, except as
set forth in the disclosure document annexed hereto (the "Disclosure Document"),
there are no options, calls, subscriptions, warrants, rights, agreements or
commitments of any character obligating the Public Company, contingently or
otherwise, to issue shares of its common stock or to register shares of its
common stock under the Securities Act of 1933, as amended (the "1933 Act"), or
any other applicable federal or state securities laws.
Section 2.3 NO VIOLATIONS. The execution and delivery of this Agreement
by Vascular/Nevada will not violate any provisions of its certificate of
incorporation or by-laws, conflict with any law, rule, statute or regulation to
which is subject or violate or result in a default under any agreement to which
Vascular/Nevada is a party or by which it is bound.
Section 2.4 INVESTMENTS. Vascular/Nevada has not made any investments
and does not own any capital stock of any other corporation or other entity.
Section 2.5 CONSENTS AND APPROVALS. To the best knowledge of the
representatives, no permit, consent, approval or authorization of, or
declaration, filing or registration with any public body or authority or other
-2-
<PAGE>
person, firm or entity is necessary in connection with the execution and
delivery by the Public Company of this Agreement or the consummation by it of
the transactions contemplated hereby.
Section 2.6 COMPLIANCE WITH LAW. Vascular/Nevada holds all licenses,
franchises, permits and authorizations necessary for the lawful conduct of its
business, and has complied and is in compliance with all applicable statutes,
laws, ordinances, rules and regulations of all federal, state, local and foreign
governmental bodies, agencies and subdivisions having, asserting or claiming
jurisdiction over it or over any part of its operations.
Section 2.7 FINANCIAL STATEMENTS. The Representatives have provided to
The Rose Group copies of the financial statements of Vascular/Nevada for the
fiscal years ended December 31, 1996 and December 31, 1995 including balance
sheets, statements of operations, statement of changes in shareholders' equity
for such years and the footnotes thereto. The financial statements of
Vascular/Nevada represent (a) the financial position, results of operations and
changes in financial position of Vascular/Nevada, as of the respective dates and
for the respective periods indicated, and (b) have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied.
Section 2.8 EXISTING CONDITION. Except as disclosed in the Disclosure
Document, since December 31, 1996, the Public Company has not:
(a) incurred any liabilities out of the ordinary course of
business;
(b) sold, encumbered, assigned or transferred any of its
assets;
(c) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease under which the Public Company
is lessee, or cancelled, modified or waived any significant debts or claims held
by it or waived any rights of significant value, whether or not in the ordinary
course of business;
(d) suffered any damage, destruction or loss, whether or not
covered by insurance;
(e) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise);
(f) made commitments or agreements for capital expenditures;
(g) hired any employees or increased the salaries or other
compensation of, or made any advance or loan to, any of its employees or
consultants or made any increase in, or any addition to, other benefits to which
any of its employees may be entitled;
(h) changed any of the accounting principles followed by it or
the methods of applying such principles; or
(i) entered into any transaction other than in the ordinary
course of business consistent with past practice.
Section 2.9 TITLE TO PROPERTIES; LEASEHOLD INTERESTS. Vascular/Nevada
has good and valid title to all properties and assets, real, personal and
-3-
<PAGE>
mixed, free and clear of all mortgages, liens, pledges, security interests,
charges, claims, restrictions and other encumbrances and defects of title of any
nature whatsoever, except for liens for taxes not yet due and payable.
Section 2.10 CONDITION OF TANGIBLE ASSETS. All material items of
tangible personal property are in good condition and repair, subject to normal
wear and tear, and are usable in the regular and ordinary course of business of
Vascular/Nevada.
Section 2.11 BOOKS OF ACCOUNT. The books, records and accounts of
Vascular/Nevada maintained with respect to its business accurately and fairly
reflect, in reasonable detail, all the transactions and all the assets and
liabilities of the Public Company. Vascular/Nevada has not engaged in any
transaction, maintained any bank account or used any of its funds except for
transactions, bank accounts and funds which have been and are reflected in its
normally maintained books and records.
Section 2.12 LITIGATION. No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
best of its knowledge, is threatened against Vascular/Nevada. The Public Company
is not a party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which may materially and adversely affect
the business or assets of Vascular/Nevada.
Section 2.13 CONTRACTS AND COMMITMENTS. Except as listed and annexed to
the Disclosure Document, Vascular/Nevada is not a party to any written or oral:
(a) agreement, contract or commitment with any present or
former employee or consultant or for the employment of any person, other than
contracts terminable at will without future liability to the Public Company;
(b) agreement contract or commitment for the future purchase
of, or payment for, equipment, supplies or products, or for the performance of
services by a third party except for any agreement, contract or commitment
arising in the ordinary course of business;
(c) agreement, contract or commitment to finance any
acquisition of or purchase any asset or to perform any service; or
(d) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or to their contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person.
Each of the agreements, contracts, commitments, leases, plans and other
instruments, documents and undertakings referenced in the Disclosure Document
are valid and enforceable in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting the rights of creditors generally; Vascular/Nevada is not in default
of the performance, observance or fulfillment of any material obligations,
covenant or condition contained therein; and no event has occurred which with or
without the giving of notice or lapse of time, or both, would constitute a
default thereunder; furthermore, except as may be disclosed in the Disclosure
Document, no such agreement, contract, commitment, lease, plan or other
instrument, document or undertaking, in the reasonable opinion of the Public
-4-
<PAGE>
Company, contains any contractual requirement with which there is a likelihood
Vascular/Nevada will be unable to comply.
Section 2.14 NO BROKER OR FINDER. Vascular/Nevada has not dealt with or
retained any finder or broker whose fees or expenses have been paid by the
Public Company or for whose fees or expenses it would be responsible in
connection with this Agreement or the transactions contemplated hereby.
Section 2.15 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Vascular/Nevada
has not sponsored, maintained or supported, or otherwise been a party to, in
default under, or had any liability or accrued obligations under, any plan,
program, fund or arrangement, either qualified or non-qualified for federal
income tax purposes, relating to the employees of the Public Company, whether
for the benefit of a single individual or for more than one individual, and
whether or not funded, including, without limitation, any incentive or other
benefit arrangement for employees, their dependents and/or their beneficiaries
and any "employee pension benefit plan" or "employee welfare benefit plan", as
such terms are defined in Section 3 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Vascular/Nevada has not, at any time,
maintained or contributed or been required to maintain or contribute to any
"Multi-Employer Plan" as such term is defined in Section 3(37) of ERISA.
Section 2.16 COMPLETENESS OF DISCLOSURE. No representation or warranty
in this Agreement or in the annexed Disclosure Document nor in any other
certificate, exhibit, statements, document or instrument furnished or to be
furnished to The Rose Group by Vascular/Nevada pursuant to this Agreement, or in
connection with the negotiation, execution or performance of this Agreement,
contains any untrue statement of a material fact or omits to state a material
fact required to be stated or necessary to make any statement made, not
misleading.
Section 2.17 TAX MATTERS. Vascular/Nevada has filed or will file on a
timely basis (including all extensions) all tax returns which were required to
have been filed, or are hereafter required to be filed up to the Closing Date by
it (including, without limitation, all federal, state, county, local and foreign
tax returns) and such returns are complete and accurate in all material
respects, and the Public Company has paid or provided for all taxes, interest or
penalties which have been incurred or are due and payable pursuant to such
returns or pursuant to any assessments received by it in connection with such
returns. No foreign, federal, state, local or other taxing authority has
provided the Public Company with any notice of any questions relating to, or
claims asserted for, taxes against Vascular/Nevada for which it may be liable.
All taxes which Vascular/Nevada is required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid over
to the proper governmental authorities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ROSE GROUP
The Rose Group represents and warrants to Vascular/Nevada as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION OF THE ROSE GROUP. The Rose
Group is a corporation duly incorporated, duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Corporation has
the corporate power and authority to own or lease and operate all of its
properties and assets and to carry on its business as such business is now being
conducted and is duly licensed or qualified to do business and is in good
-5-
<PAGE>
standing in all jurisdictions in which the nature of its business or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualifications necessary and where the failure to qualify
would not have a material adverse effect on operations, properties, assets,
liabilities, earnings or business.
Section 3.2 CAPITALIZATION AND OWNERSHIP OF THE ROSE GROUP. The
authorized capital stock of The Rose Group consists of 1,000 shares of common
stock, no par value per share, of which 100 shares are issued and
outstanding. All outstanding shares of The Rose Group common stock are validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, free of preemptive rights and are owned free
and clear of all liens, claims and encumbrances. No securities are issued or
outstanding except for the aforementioned 100 shares of common stock and, at
closing, there will be no options, calls, subscriptions, warrants, rights,
agreements or commitments of any character obliging the Corporation on a
contingent basis or otherwise, to issue shares of common stock or to register
shares of its common stock under the 1933 Act or other applicable federal or
state securities laws.
Section 3.3 AUTHORITY. The Rose Group has the full power and authority
to enter into this Agreement and to carry out its obligations hereunder. Other
than approval by its board of directors, no proceedings, on the part of the
Corporation are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement constitutes the legal, valid and bind
obligation of The Rose Group enforceable in accordance with its terms.
Section 3.4 CONSENTS AND APPROVALS. No permit, consent, approval or
authorization of, or declaration, filing or registration with, any public body
or authority or other person, firm or entity is necessary in connection with the
execution and delivery by The Rose Group of this Agreement or the consummation
by the Corporation of the transactions contemplated hereby.
Section 3.5 FINANCIAL STATEMENTS. The Rose Group agrees to provide to
the Representatives prior to closing audited financial statements of the
Acquired Corporation for the period ending December 31, 1997 to be accompanied
by an opinion of Pender, Newkirk & Company, CPAs, with offices located in Tampa,
Florida. When produced, these financial statements (a) will present fairly the
financial position, results of operations and changes in financial position of
the Acquired Corporation, as of the respective dates and for the respective
periods indicated, and (b) will be prepared in accordance with GAAP consistently
applied.
Section 3.6 COMPLETENESS OF DISCLOSURE. No representation or warranty
in this Agreement nor any certificate, exhibit, statements, document or
instrument furnished or to be furnished to Vascular/Nevada by The Rose Group in
connection with the negotiation, execution or performance of this Agreement,
contains any untrue statement of a material fact or omits to state a material
fact required to be stated or necessary to make any statement made, not
misleading.
ARTICLE IV
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 4.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the parties to this Agreement or in any
-6-
<PAGE>
certificate, exhibit, document or instrument furnished hereunder shall survive
for one year from the closing of the transactions contemplated hereby.
ARTICLE V
AGREEMENTS PENDING CLOSING
Section 5.1 AGREEMENT PENDING THE CLOSING. Vascular/Nevada covenants
and agrees that, pending the Closing and except as otherwise agreed to in
writing by The Rose Group, it will:
(a) BUSINESS IN THE ORDINARY COURSE. Conduct its business
solely in the ordinary course.
(b) MAINTENANCE OF PHYSICAL ASSETS. Continue to maintain and
service the physical assets used in the conduct of its business in the same
manner as has been its consistent past practice.
(c) EMPLOYEES AND BUSINESS RELATIONS. Continue to maintain its
business relations and relations with its employees in the same manner as has
been its consistent past practice.
(d) COMPLIANCE WITH LAW. ETC. Comply with all laws,
ordinances, rules, regulations and orders applicable to it or their operations,
assets or properties in respect thereof, the noncompliance with which might
materially affect its business or assets.
(e) COOPERATION. Cooperate with the other parties to this
Agreement and use its best efforts to cause all of the conditions to the
obligations on its part to be performed under this Agreement to be satisfied
before or immediately after the Closing Date.
(f) SALES OF ASSETS; NEGOTIATIONS. Other than in the ordinary
course of business consistent with past practice, the Public Company will not
initiate or participate in any discussions or negotiations or enter into any
agreement to sell or encumber any part of its assets.
(g) PRESS RELEASES. No party to this Agreement shall give
notice to third parties or otherwise make any public statement or release
concerning this Agreement or the transactions contemplated hereby except for
such written information as shall have been approved in writing by the
representatives of The Rose Group as to form and content.
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
AND ADDITIONAL COVENANTS OF VASCULAR/NEVADA
Section 6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ROSE GROUP.
All obligations of The Rose Group under this Agreement are subject to the
fulfillment or satisfaction, and Vascular/Nevada covenants and agrees to fulfill
or satisfy, prior to or at the Closing, each of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING
DATE. The representations and warranties of Vascular/Nevada contained in this
Agreement or in the annexed Disclosure Document delivered by the Public Company
to The Rose Group shall be true on the date of this Agreement without regard to
any updates furnished by Vascular/Nevada after the date of this Agreement and
-7-
<PAGE>
shall be true on the Closing Date with the same effect as though such
representations and warranties were made as of such date.
(b) COMPLIANCE WITH THIS AGREEMENT. Vascular/Nevada shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
(c) NO THREATENED OR PENDING LITIGATION. On the Closing Date,
no suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be pending before any court or government or
regulatory official, body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereby, and no
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.
(d) CONSENTS AND APPROVALS. All of the consents required to
carry out the transactions contemplated hereunder have been obtained or will be
obtained by the closing date including resolutions of the board of directors and
stockholders of Vascular/Nevada approving the entry into this Agreement and the
carrying out of transactions contemplated herein.
(e) MATERIAL ADVERSE CHANGES. There has been no material
adverse change in the business, operations, assets or properties of
Vascular/Nevada.
(f) APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by counsel for The Rose Group in the exercise
of its reasonable judgment.
(g) CERTIFICATES. Vascular/Nevada shall have delivered to the
legal representatives of The Rose Group, one or more certificates for the New
Issue Exchange Shares and the Public Company shall also have delivered to the
representatives of The Rose Group such other documents, instruments,
certifications and further assurances as its counsel may reasonably require.
(h) RESIGNATIONS. Subsequent to the election of three
qualified nominees of The Rose Group to be directors of Vascular/Nevada and
their acceptance of the legal duties and obligations related thereto, all
officers and predecessor directors of the Public Company shall have submitted
written resignations.
(i) NO LIABILITIES. At closing, Vascular/Nevada shall have no
liabilities or obligations, either accrued, absolute, contingent or otherwise.
For purposes of this Agreement, the terms "liabilities" shall
include, without limitation, any direct or indirect indebtedness, guaranty,
endorsement, indemnity, claim, loss, damage, deficiency, cost, expense, or
obligation, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured or a reserve for any of the foregoing.
Section 6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF VASCULAR/NEVADA.
All obligations of Vascular/Nevada under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
-8-
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING
DATE. The representations and warranties of The Rose Group contained in this
Agreement or in any list, certificate or document delivered by The Rose Group to
Vascular/Nevada pursuant to the provisions of this Agreement shall be true on
the Closing Date with the same effect as though such representations and
warranties were made as of such date.
(b) COMPLIANCE WITH THIS AGREEMENT. The Rose Group shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing.
(c) NO THREATENED OR PENDING LITIGATION. On the Closing Date,
no suit, action or other proceeding, or injunction of final judgment relating
thereto, shall be threatened or be pending against The Rose Group before any
court or governmental or regulatory official, body or authority in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might result in any such suit,
action or proceeding shall be pending or threatened.
(d) MATERIAL ADVERSE CHANGES. There shall have been no
material adverse changes in the business, operations, assets or properties of
The Rose Group.
(e) APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by counsel for Vascular/Nevada in the exercise
of its reasonable judgment.
(f) CERTIFICATES. The Rose Group shall have delivered to
Vascular/Nevada one or more certificates for the Corporation Shares and shall
also have delivered to Vascular/Nevada such other documents, instruments,
certifications and further assurances as its counsel may reasonably require.
ARTICLE VII
CLOSING, FURTHER ASSURANCES
AND CONDITIONS SUBSEQUENT
Section 7.1 CLOSING. The Closing Date (the "Closing") for the exchange
of the Corporation Stock and the New Issue Exchange Shares shall take place at
the offices of Julien D. Jensen, Esq. on March 12, 1998 or such other place or
date as may be mutually agreed upon in writing by the parties to this Agreement.
Section 7.2 ACTS TO BE PERFORMED BY THE CORPORATION. Following the
Closing Date, The Rose Group shall cause Vascular/Nevada to:
(a) accept the resignation of its present registered agent in
the States of Nevada and Utah, if appropriate, and appoint a successor thereto;
(b) change the address of its registered office in the State
of Utah and establish a registered office in Florida;
(c) change the address of its principal executive offices and
to take all actions necessary to qualify to transact business in the
jurisdiction of Florida and all other jurisdictions in which the nature of
business
-9-
<PAGE>
conducted by Vascular/Nevada after its merger with The Rose Group or the
character or location of the properties and assets owned or leased by it make
such qualification necessary, except where the failure to so qualify would not
have a material adverse effect on the Public Company;
(d) execute the appropriate certificates and make the
appropriate public filings to effectuate each of the foregoing actions; and
(e) change the name of the Public Company to The Rose Group
and apply to the NASDAQ/OTC Bulletin Board to trade the shares of the Public
Company under the name of The Rose Group with an appropriate NASDAQ symbol, the
first choice of which is BFPD.
Section 7.3 FURTHER ASSURANCES. After the Closing Date, Vascular/Nevada
and The Rose Group agree to execute, acknowledge and deliver to the other such
other instruments of conveyance and transfer and will take such other actions
and execute and deliver such other documents, certifications and further
assurances as the other may reasonably require in order to vest more effectively
the Corporation Shares and the New Issue Exchange Shares, as the case may be, in
the owners thereof. In addition, each of the parties will cooperate by executing
and delivering to the other such additional instruments and documents and take
such other actions as may be reasonably requested from time to time by any other
party necessary to carry out, evidence and confirm the intended purposes of this
Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 TERMINATION.
(a) Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(i) by mutual consent of authorized representatives
of Vascular/Nevada and The Rose Group;
(ii) by The Rose Group at any time if the
representations and warranties of Vascular/Nevada prove to be materially
incorrect when made;
(iii) by Vascular/Nevada if the representations and
warranties of The Rose Group are found to have been materially incorrect when
made; or
(iv) by either Vascular/Nevada or The Rose Group if
the transactions contemplated by this Agreement do not close on or before April
15, 1998 unless extended in writing by the mutual consent of the parties.
(b) In the event of the termination and abandonment of this
Agreement, except as provided in this Section 8.1, this Agreement shall become
void and have no effect, without any liability on the part of any of the parties
or their directors or officers or stockholders. Notwithstanding any such
termination and abandonment, the provisions of Section 5.1 regarding
confidential information shall remain binding upon the parties hereto.
Section 8.2 BROKERS' AND FINDERS' FEES. Each party represents and
warrants to the other that all negotiations relative to this Agreement have
-10-
<PAGE>
been carried on by it directly without the intervention of any person except for
David Mullins. At the Closing Date, it is intended that 200,000 shares of
Vascular/Nevada common stock shall be reserved for issuance to Mr. Mullins for
the exschange for the release of any obligations due to Mr. Mullins by The Rose
Group, including, but not limited to, any services rendered as finder in this
transaciton. It is further understood and agreed that Mr. Mullins will have the
right to assign to third parties who may have cooperated with him in this
transaction all or a part of the shares of Vascular/Nevada (then to be known as
The Rose Group) issued to him as a finder's fee under this Section 8.2.
Section 8.3 INCOME, SALES, TRANSFER AND DOCUMENTARY TAXES; ETC. The
Rose Group shall pay all federal, state and local income taxes, if any, due as a
result of the purchase, sale or transfer of the New Issue Exchange Shares and
the Corporation Shares in accordance with the terms and conditions of this
Agreement.
Section 8.4 EXPENSES. Vascular/Nevada and The Rose Group shall each pay
their own expenses incidental to the preparation and negotiation of this
Agreement.
Section 8.5 CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC. This
Agreement, including the annexed Disclosure Documents, set forth the entire
understanding of the parties with respect to the transactions contemplated by
this Agreement. It shall not be amended or modified except by written instrument
duly executed by representatives of Vascular/Nevada and The Rose Group. Any and
all previous agreements and understandings between or among the parties
regarding the subject matter hereof, whether written or oral, are superseded by
this Agreement.
Section 8.6 ASSIGNMENT AND BINDING EFFECT. This Agreement may not be
assigned prior to the Closing by either party without the prior written consent
of the other.
Section 8.7 WAIVER. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party.
Section 8.8 NOTICES. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given only if delivered personally or sent by
telegram or by registered or certified mail, postage prepaid, as follows:
-11-
<PAGE>
If to Vascular/Nevada, to:
Robert H. Jaffe, Esq.
8 Mountain Avenue
Springfield, New Jersey 07081
Fax No. (973) 467-2246
With a required copy to:
Julien D. Jensen, Esq.
Jensen, Duffin, Carman, Dibb & Jackson
311 South State Street
Suite 380
Salt Lake City, Utah 84111
Fax No. (801) 521-3731
and
If to The Rose Group, to:
Mr. Sheldon Rose
The Rose Group Corporation
2073 Porter Lake Drive
Sarasota, Florida 34240
Fax No. (941) 342-9538
With a copy to:
Scott D. Magliochetti, Esq.
Mason, Taylor & Colicchio
104 Carnegie Center, Suite 201
Princeton, New Jersey 08540
Fax No. (609) 987-0070
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communications will be deemed to have been given as
of the date so delivered, telephoned or mailed.
Section 8.9 GOVERNING LAW. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Delaware.
Section 8.10 NO BENEFIT TO OTHERS. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto.
Section 8.11 SECTION HEADINGS. All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 8.12 SCHEDULES AND EXHIBITS. All Exhibits referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
Section 8.13 SEVERABILITY. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions.
-12-
<PAGE>
Section 8.14 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written .
ATTEST: VASCULAR INTERNATIONAL OF
NEVADA, INC.
/s/ Barbara J. Hyra /s/ Robert H. Jaffe
- --------------------------- -----------------------------
Barbara J. Hyra, Assistant Robert H. Jaffe, President
Secretary
ATTEST: THG ROSE GROUP CORPORATION
/s/ Lola H. Rose /s/ Sheldon Rose
- ------------------------------- ------------------------------
Lola H. Rose, Assistant Sheldon Rose, President
Secretary
-13-
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
VASCULAR INTERNATIONAL OF NEVADA, INC.
The undersigned, for the purpose of forming a corporation, pursuant to
and by virtue of Chapter 78 of Nevada Revised Statutes, hereby adopts and
acknowledges the following Articles of Incorporation.
ARTICLE I
NAME
The name of the corporation is VASCULAR INTERNATIONAL OF NEVADA, INC.
ARTICLE II
RESIDENT AGENT AND REGISTERED OFFICE
The name of the initial resident agent and the street address of the
initial registered office in the State of Nevada where process may be served
upon the corporation is Corporation Trust Company of Nevada, One East First
Street, Reno, Washoe County, Nevada, 89501. The corporation may, from time to
time in the manner provided by law, change the resident agent and the registered
office within the State of Nevada. The corporation may also maintain an office
of offices for the conduct of its business, either within or without the State
of Nevada.
ARTICLE III
CAPITAL STOCK
Section 3.1 AUTHORIZED SHARES. The corporation has two (2) classes of
authorized shares which may be issued by the Board of Directors which are
described as follows:
A. Fifty Million (50,000,000) common shares with a par value of one mil
($0.001) per share. Each common share, as issued, shall be entitled to one (1)
vote per share, is nonassessable, and is not subject to recall.
B. Two Million (2,000,000) Class AA@ preferred shares, with a par value
of one mil ($0.001) per shares. The Class AA@ preferred shares shall be
non-voting, non assessable and are not subject to recall. The Class AA@
preferred shares, as issued, shall be entitled to priority over common shares in
the payment of any dividends, such that no dividend may be paid upon common
shares until any declared dividend is paid upon all preferred shares: and no
dividend shall be paid on common shares without payment of a dividend, at least
one percent (1%) higher for the equivalent period of computation on the issued
preferred shares. The preferred Class AA@ shares, as issued, will also have
priority over common shares in the event of dissolution. Preferred Class AA@
shares, as issued, shall also be entitled to any priority or rights now or
hereafter provided for preferred shares under Nevada law.
Section 3.2 CONSIDERATION FOR SHARES. The shares of the corporation's
stock shall be issued for such consideration as shall be fixed, from time to
time, by the Board of Directors.
Section 3.3 ASSESSMENT OF STOCK. The shares of the corporation's
stock, after the amount of the subscription price has been fully paid, shall
not be assessable for any purpose, and no stock issued as fully paid shall
ever be
<PAGE>
assessable or assessed. No stockholder of the corporation is individually liable
for the debts or liabilities of the corporation.
Section 3.4 NO CUMULATIVE VOTING. No stockholder of the corporation
shall be entitled to cumulative voting of his shares.
Section 3.5 NO PREEMPTIVE RIGHTS. No stockholder of the corporation
shall have an preemptive rights.
ARTICLE IV
DIRECTORS AND OFFICERS
Section 4.1 NUMBER OF DIRECTORS. The members of the governing board
of the corporation are styled as directors. The number of directors may be
changed from time to time in such manner as shall be provided in the bylaws of
the corporation. The initial Board shall consist of three (3) members.
Section 4.2 FIRST BOARD OF DIRECTORS. The name and post office box or
street address of the directors constituting the first Board of Directors, which
shall be:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Mr. L. Kent Mackay 5110 South 800 East
Murray, UT 84107
Mr. Gregory Stringham 23 West 7th North
Bountiful, UT 84010
Mr. Dave Winters 8948 South Cobblecrest Lane
Salt Lake City, UT 84121
</TABLE>
Section 4.3 LIMITED LIABILITY OF DIRECTORS AND OFFICERS. No director
or officer of the corporation shall be personally liable to the corporation
or any of its stockholders for damages for breach of fiduciary duty as a
director or officer of the corporation for (a) acts or omissions which involve
international misconduct, fraud or a knowing violation of law, or (b) the
payment of distributions in violation of Nevada Revised Statutes ?78.300.
Section 4.4 PAYMENT OF EXPENSES. In addition to any other rights of
indemnification permitted by the law of the State of Nevada or as may be
provided for by the corporation in its bylaws or by agreement, the expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding, involving alleged acts or omissions of such officer or director in
his or her capacity as an officer or director of the corporation, must be paid
by the corporation or through insurance purchased and maintained by the
corporation or through other financial arrangements made 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 or she is not entitled to be indemnified by the
corporation.
Section 4.5 REPEAL AND CONFLICTS. Any repeal or modification of
Sections 4.3 or 4.4 approved by the stockholders of the corporation shall be
prospective only. In the event of any conflict between Section 4.3 or 4.4 and
any other provision of the corporation's Articles of Incorporation, the terms
and provisions of Section 4.3 or 4.4 shall control.
<PAGE>
ARTICLE V
PURPOSES
The corporation may engage in any lawful business or enterprise of any
type in the State of Nevada or the world. The intended initial purpose shall be
the potential development and marketing of medical technology, products or
software.
ARTICLE VI
POWERS & PERPETUITY
The corporation shall have all powers conferred or implied under Nevada
law or the laws of any jurisdiction where it may be qualified to conduct
business. The corporation, to achieve its purposes, may issue stock, borrow or
lend money, engage in any joint venture, union of interest, merger, sell or
acquisition of assets; or engage in any other transaction, enterprise or act in
which a corporation may engage. The corporation shall have perpetual existence.
ARTICLE VII
INCORPORATOR
The name and post office box or street address of the incorporator
signing these Articles of Incorporation is:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Julian D. Jensen 311 South State, Suite 380
Salt Lake City, UT 84111
</TABLE>
IN WITNESS WHEREOF, the sole incorporator has executed these Articles
of Incorporation of VASCULAR INTERNATIONAL OF NEVADA, INC., this 9th day of
February, 1996.
/s/ Julian D. Jensen
----------------------------------------------
Julian D. Jensen
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On February 9, 1996, personally appeared before me, a Notary Public,
Julian D. Jensen, personally known (or proved) to me to be the person whose name
is subscribed to the foregoing Articles of Incorporation of VASCULAR
INTERNATIONAL OF NEVADA, INC. who acknowledged that he executed the instrument.
/s/ Jean Campbell
----------------------------------------------
NOTARY PUBLIC
Residing at: 311 South State Street, Suite 380
Salt Lake City, UT 84111
[SEAL]
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
VASCULAR INTERNATIONAL OF NEVADA, INC.
--------------------------------------------------
Name of Corporation
(To be known as: The Rose Group Corporation of Nevada)
We the undersigned SHELDON R. ROSE--PRESIDENT and
---------------------------
President or Vice President
LOLA H. ROSE--SECRETARY of VASCULAR INTERNATIONAL OF NEVADA, INC.
-------------------------------- --------------------------------------
Secretary or assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held on the 15TH day of DECEMBER, 1997, adopted a resolution to amend the
original articles as follows:
Article I is hereby amended to read as follows:
--
The name of the corporation shall be changed to The Rose Group
Corporation of Nevada from (Vascular International of Nevada, Inc.).
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 5,460,219; that the said
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at lease a majority of each class of stock
outstanding and entitled to vote thereon.
(Adopted at Shareholder Meeting 3/10/98)
/s/ Sheldon R. Rose
-----------------------------------
President or Vice President
Sheldon R. Rose
/s/ Lola H. Rose
-----------------------------------
Secretary or Assistant Secretary
Lola H. Rose
State of FLORIDA
----------------------------
ss.
County of SARASOTA
----------------------------
On MARCH __ 1998, _______________________ personally appeared before me, a
Notary Public, SHELDON R. ROSE, PRESIDENT, AND LOLA H. ROSE, SECRETARY, who
acknowledged that they executed the above instrument.
/s/ Doris Raeuftlin
-----------------------------------
Signature of Notary
(NOTARY STAMP OR SEAL)
<PAGE>
THIS FORM SHOULD ACCOMPANY AMENDED AND RESTATED ARTICLES
OF INCORPORATION FOR A NEVADA CORPORATION
1. Name of corporation CURRENT FILING VASCULAR INTERNATIONAL NEVADA, INC.
-------------------------------------------------------
to be known as: The Rose Group Corporation Nevada
-----------------------------------------------------------
2. Date of adoption of Amended and Restated Articles MARCH 10, 1998
--------------
3. If the articles were amended, pleas indicate what changes have been made:
(a) Was there a name change? Yes XX No If yes, what is the new
-- --
name?
THE ROSE GROUP CORPORATION OF NEVADA
------------------------------------------------------------------
(b) Did you change the resident agent? Yes No XX If yes, please
-- --
indicate the new resident agent and address.
------------------------------------------------------------------
------------------------------------------------------------------
Please attach the resident agent acceptance certificate.
(c) Did you change the purposes? Yes No XX Did you add Banking?
-- --
Gaming? Insurance? None of these?
-------------------------------------------------------------------
(d) Did you change capital stock? Yes No XX If yes, what is the
-- --
new capital stock?
-------------------------------------------------------------------
(e) Did you change the directors? Yes XX No If yes, please
-- --
indicate the change.
SEE ATTACHED LIST
-------------------------------------------------------------------
(f) Did you add the directors liability provision? Yes No XX
-- --
(g) Did you change the period of existence? Yes No XX If yes,
-- --
what is the new existence?
-------------------------------------------------------------------
(h) If none of the above apply, and you have amended or modified the
articles, how did you change your articles?
N/A
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
MR. SHELDON R. ROSE--PRESIDENT March 1998
----------------------------------------- ----------------------
Name and Title of Officer Date
State of FLORIDA
------------------------
ss.
County of SARASOTA
------------------------
On MARCH 1998, _____________________________, personally appeared before
me, a Notary Public, MR. SHELDON R. ROSE, PRESIDENT, who acknowledged that
he/she executed the above instrument.
/s/ Doris Raeuftlin
-----------------------------------
Notary Public
(NOTARY STAMP OR SEAL)
<PAGE>
THE NEW BOARD AS ELECTED IS COMPOSED OF
Mr. Sheldon R. Rose
Dr. Francine H. Nichols
Mr. Steven H. Rose
Mrs. Rose C. Smith
Mr. Spencer Halper
For notice purposes the record address for each Director is
The Rose Group Corporation
2073 Porter Lake Driver
Sarasota, FL 34340
<PAGE>
Exhibit 3.3
BY-LAWS
OF
VASCULAR INTERNATIONAL OF NEVADA, INC.
ARTICLE I
Offices
Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the corporation shall be located at 5110 South 800 East, Salt Lake City, Utah
84107. The Board of Directors is hereby granted full power of authority to
change said principal executive office from one location to another. Any such
change shall be noted on the by-laws by the secretary, opposite this Section, or
this Section may be amended to state the new location.
Section 2. OTHER OFFICES. Other business offices may at any time be
established by the Board of Directors at such other places both within and
without the State of Nevada as the Board or Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. PLACE OF MEETINGS. All annual or other meetings of
stockholders hall be held at the principal executive office of the corporation,
or at any other place within or without the State of Nevada which may be
designated by the Board of Directors and stated in the notice of the meeting.
Section 2. ANNUAL MEETINGS. Annual meetings shall be held at such date
and time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered and any
other business may be transacted which is within the powers of the stockholders.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders, for
the purpose of taking any action permitted by the stockholders under the Nevada
Revised Statutes and the Articles of Incorporation, may be called at any time by
the chairman of the board or the president, by the Board of Directors or by one
or more stockholders holding not less than a majority of the shares of capital
stock of the corporation issued and outstanding and entitled to vote at the
meeting. Upon request in writing that a special meeting of stockholders be
called for any proper purpose, directed to the chairman of the board, the
president, any vice president or the secretary by any person (other than the
Board of Directors) entitled to call a special meeting of stockholders, the
officer forthwith shall cause notice to be given to stockholders entitled to
vote that a meeting will be held at a time requested by the person or person
calling the meeting, not less than 20 nor more than 60 days after receipt of
<PAGE>
the request. If the notice is not given within 20 days after receipt of the
request, the person or persons entitled to call the meeting may give the notice.
If a special meeting is called by any person or persons other than the Board of
Directors, the written request to an appropriate officer of the corporation
shall specify the time of such meeting and the nature of the business proposed
to be transacted, and shall be delivered personally or sent by registered mail
or by telegraphic or facsimile transmission.
Section 4. NOTICE OF MEETINGS OF STOCKHOLDERS AND DELIVERY OF REPORTS
TO STOCKHOLDERS. Written notice of any meeting of stockholders shall be given to
each stockholder entitled to vote and a copy of each report to the stockholders
shall be given to each stockholder, in each case either personally or by mail or
other means of written communication, charges prepaid, addressed to such
stockholder at his address appearing on the books of the corporation or given by
him to the corporation for the purpose of notice. If any notice or report
addressed to the stockholder at the address of such stockholder appearing on the
books of the corporation is returned to the corporation by the United States
Postal Service marked to indicate that the United States Postal Service is
unable to deliver the notice or report to the stockholder at such address, all
future notices or reports shall be deemed to have been duly given without
further mailing if such notice or report shall be available for the stockholder
upon written demand of the stockholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice
or report to all other stockholders. If a stockholder gives not address, notice
or a report shall be deemed to have been given to such stockholder if sent by
mail or other means of written communication addressed to the place where the
principal executive office of the corporation is situated, or if published at
least once in a newspaper of general circulation in the county in which the
principal executive office is located.
All such notices of meetings shall be given to each stockholder
entitled thereto not less than 10 days nor more than 60 days before each
meeting, and all such reports shall be given to each stockholder entitled
thereto at the times provided in Section 3 of Article VII of the Bylaws or as
otherwise provided by applicable law. Any such notice or report shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by other means of written communication. An affidavit of mailing of
any such notice or report in accordance with the provisions of this Section,
executed by a responsible employee or any agent of the corporation, shall be
PRIMA FACIE evidence of the giving of the notice or report.
Each such notice shall specify:
(a) the place, the date and the hour of the meeting;
(b) in the case of special meetings, the nature of the
business to be transacted (and no other business may be transacted at such
meeting);
(c) in the case of annual meetings, those matters which the
Board of Directors, at the time of the mailing of the notice, intends to present
for action by the stockholders;
(d) if Directors are to be elected, the names of the
nominees intended at the time of the notice to be presented by the Board of
Directors or management for election; and
<PAGE>
(e) such other matters, if any, as may be expressly required
by applicable law.
Section 5. QUORUM. The presence in person or by proxy of the persons
entitled to vote a majority of the voting shares at any meeting shall constitute
a quorum for the transaction of business, except as otherwise provided by
applicable law or by the Articles of Incorporation. The stockholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action by applicable law or the
Articles of Incorporation. Whenever under the Nevada Revised Statutes any shares
are disqualified from voting on any matter, they shall not be considered
outstanding for purposes of determining the quorum required at a meeting held to
act upon, or the required vote to approve action upon, that matter.
Section 6. ADJOURNED MEETING AND NOTICE THEREOF. Any stockholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the voting shares, the holders of
which are either present in person or represented by proxy thereat, but in the
absence of a quorum no other business may be transacted at such meeting, except
as provided in the preceding Section 5. When any stockholders' meeting, annual
or special, is adjourned for more than 30 days, or if after adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given as in the case of an original meeting to each stockholder of
record entitled to vote at the meeting. Except as provided above, it shall not
be necessary to give notice of the time and place of the adjourned meeting or of
the business to be transacted thereat if the time and place thereof are
announced at the meeting at which such adjournment is taken. At the adjourned
meeting, provided the foregoing notice requirements, if applicable, and the
quorum requirements of the preceding Section 5 are satisfied, the stockholders
may transact any business which might have been transacted at the original
meeting.
Section 7. VOTING. Pursuant to Section 1 of Article VI of these Bylaws,
the Board of Directors may fix a record date for the determination of the
stockholders entitled to vote at any meeting of stockholders.
Unless the Articles of Incorporation provide for more or less than one
vote per share, each outstanding share, regardless of class, shall be entitled
to one vote on each matter on which such share is entitled to be voted. Any
holder of shares entitled to vote on any matter may vote part of his shares in
favor of the proposal and refrain from voting the remaining shares or (except in
voting upon election of Directions) vote them against the proposal, but, if the
stockholder fails to specify the number of shares such stockholder is voting
affirmatively, it will be conclusively presumed that the stockholder's approving
vote is with respect to all shares such stockholder is entitled to vote. Voting
by the stockholders may be a voice vote or by ballot; provided, however, that
all election for Directors must be by ballot upon demand made by a stockholder
at the meting and before the voting begins.
Except as otherwise provided in the last two sentences of Section 5 of
this Article II:
(a) the affirmative vote of a majority of the shares
actually voted for or against a matter at a duly held meeting at which a quorum
is present (without giving effect to abstentions and broker non-votes) shall be
<PAGE>
the act of the stockholders, unless the vote of a greater number or voting by
classes is required for such act by applicable law, the Articles of
Incorporation or the Bylaws; and
(b) in the election of Directors, the candidates receiving
the highest number of affirmative votes of shares entitled to be voted, up to
the number of Directors to be elected by such shares, shall be elected. Votes
against a candidate for Director and votes withheld shall have no legal effect.
If the Articles of Incorporation provide for more or less than one vote
for any shares on any matter, the references in this Section and in Section 5 of
this Article II to a majority or other proportion of shares means, as to such
matter, a majority or other proportion of the votes entitled to be cast by such
shares.
Section 8. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS. The
transactions of any meeting of stockholders, annual or special, however called
and noticed and wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum is present pursuant to Section 5
of this Article II, either in person or by proxy, and if, either before or after
the meting, each of the following persons signs a written waiver of notice, a
consent to the holding of such meeting or an approval of the minutes thereof:
(a) any person entitled to vote at the meting not present at
the meeting in person or by proxy;
(b) any person who, though present, has, at the beginning of
the meeting, properly objected to the transaction of any business because the
meeting was not lawfully called or convened; or
(c) any person who, though present, during the meeting has
property objected to the consideration of particular matters of business
required by the Nevada Revised Statutes or the Bylaws or otherwise to be
included in the notice of the meeting, but not so included.
Except as otherwise provided in the Articles of Incorporation, neither the
business to be transacted at, nor the purpose of, any annual or special meeting
of stockholders need be specified in any written waiver of notice, consent to
the holding of the meeting or approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 9. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Articles of
Incorporation:?
(i) Directors may be elected without a meeting only by a
written consent signed by all the stockholders who would be entitled to vote for
the election of such Directors; provided, that with appropriate notice as
hereinafter set forth, a Director may be elected at any time to fill a vacancy
not filled by the Directors by a written consent signed by the holders of a
majority of the outstanding shares entitled to vote for the election of the
Directorship or Directorships which are vacant; and
(ii) any other action which, under any provision of the
Nevada Revised Statutes, may be taken at a meeting of the stockholders,
<PAGE>
may be taken without a meeting, upon notice as hereinafter set forth, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.
(b) Unless the consents of all stockholders entitled to vote
have been solicited in writing, prompt written notice shall be given of the
taking of any corporate action approved by stockholders without a meeting by
less than unanimous written consent to those stockholders entitled to vote who
have not consented in writing. Such notices shall be given in the manner and
shall be deemed to have been given as provided in Section 4 of Article II of the
Bylaws.
(c) All such written consents shall be filed with the
secretary of the corporation.
(d) Pursuant to Section 1 of Article VI of the Bylaws, the
Board of Directors may fix a record date for the determination of stockholders
entitled to give such written consent.
(e) Any stockholder giving a written consent, or the
stockholder's proxyholders, or a transferee of the shares of a personal
representative of the stockholder or their respective proxyholders, may revoke
the consent by a writing received by the corporation prior to the time that
written consents of the number of shares required to authorize the proposed
action have been filed with the secretary of the corporation, but may not do so
thereafter. Such revocation is effective upon its receipt by the secretary of
the corporation.
Section 10. PROXIES.
(a) At any meeting of stockholders, any stockholder may
designate another person or persons to act as a proxy or proxies. If any
stockholder designates two or more person to act as proxies, a majority of those
persons present at the meeting or, if only one is present, then that one, has
and may exercise all the powers conferred by the stockholder upon all of the
persons so designated unless the stockholder provides otherwise.
(b) Without limiting the manner in which a stockholder may
authorize another person or persons to act for him as proxy pursuant to
subsection (a), the following constitute valid means by which a stockholder may
grant such authority;
(i) a stockholder may execute a writing authorizing
another person or persons to act for him as proxy. Execution may be accomplished
by the signing of the writing by the stockholder or his authorized office,
Director, employee or agent or by causing the signature of the stockholder to be
affixed to the writing by any reasonable means, including, but not limited to, a
facsimile signature; or
(ii) a stockholder may authorize another person or
persons to act for him s proxy by transmitting or authorizing the transmission
of a telegram, cablegram or other means of electronic transmission to the person
who will be the holder of the proxy or to a firm which solicits proxies or like
agent who is authorized by the person who will be the holder of the proxy to
receive the transmission. Any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with information
<PAGE>
from which it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. If it us determined that the
telegram, cablegram or other electronic transmission is valid, the persons
appointed by the corporation to count the votes of stockholders and determine
the validity of proxies and ballots or other persons making those determinations
must specify the information upon which they relied.
(c) Any copy, communication by telecopies or other reliable
reproduction of the writing or transmission created pursuant to subsection (b)
may be substituted for the original writing or transmission for any purpose for
which the original writing or transmission could be used, if the copy,
communication by telecopies or other reproduction is a complete reproduction of
the entire original writing or transmission.
(d) No such proxy is valid after the expiration of six
months from the date of its creation, unless it is coupled with an interest, or
unless the stockholder specifies in it the length of time for which it is to
continue in force, which may not exceed seven years from the date of its
creation. Subject to these restrictions, any proxy property created is not
revoked and continues in full force and effect until another instrument or
transmission revoking it or a properly created proxy bearing a later date is
filed with or transmitted to the secretary of the corporation or another person
or persons appointed by the corporation to count the votes of stockholders and
determine the validity of proxies and ballots.
Section 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment
thereof. If inspectors of election are not so appointed, the chairman of any
such meting may, and on the request of any stockholder or his proxy shall, make
such appointment at the meeting. The number of inspectors shall be either one or
three. If appointed at a meeting on the request of one or more stockholders or
their respective proxies, the majority of shares entitled to vote represented in
person or by proxy shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may, and on the request of any stockholder or a
proxy of any stockholder entitled to vote shall, be filled by appointment by the
Board of Directors in advance of the meeting, or at the meeting by the chairman
of the meeting.
The duties of such inspectors shall include: determining the number of
shares outstanding and the voting power of each; the shares represented at the
meeting; the existence of a quorum; the authenticity, validity and effect of
proxies; receiving votes, ballots or consents; hearing and determining all
challenges and questions in any way arising in connection with the right to
vote; counting and tabulating all votes or consents; determining when the polls
shall close; determining the result; and such acts as may be proper to conduct
the election or vote with fairness to all stockholders. In the determination of
the validity and effect of proxies, the dates contained on the forms of proxy
shall presumptively determine the order of execution of the proxies, regardless
of the postmark dates on the envelopes in which they are mailed.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three inspectors of election, the decision, act or certificate of
a majority is effective in all respects as the decision, act or certificate of
<PAGE>
all. Any report or certificate made by the inspectors of election is PRIMA FACIE
evidence of the facts stated therein.
Section 12. PRESIDING OFFICER; ORDER OF BUSINESS; CONDUCT OF MEETING.
(a) Meetings of the stockholders shall be presided over by
such person as shall be designated by the Board of Directors, if no designation
is made, then by the chairman of the Board of Directors, or if there is no
chairman of the Board of Directors, then the president. The secretary of the
corporation, or in his absence, an assistant secretary, shall act as secretary
of the meeting.
(b) Subject to the following meeting of stockholders shall
generally follow accepted rules of parliamentary procedure.
(i) The chairman of the meeting shall have absolute
authority over matters of procedure and there shall be no appeal from the filing
of the chairman. If the chairman, in his absolute discretion, deems it advisable
to dispense with the rules of parliamentary procedure as to any one meeting of
stockholders or a part thereof, the chairman shall so state and shall clearly
state the rules under which the meeting or appropriate part thereof shall be
conducted.
(ii) If disorder shall arise which prevents continuation
of the legitimate business of the meeting, the chairman may quit the chair and
announce the adjournment of the meeting, and upon his so doing, the meeting is
immediately adjourned.
(iii) The chairman may ask or require that anyone not a
BONA FIDE stockholder or proxyholder leave the meeting.
(iv) A resolution or motion shall be only considered for
a vote if proposed by a stockholder or duly authorized proxyholder, and seconded
by an individual, who is a stockholder or duly authorized proxyholder, other
than the individual who proposed the resolution or motion.
ARTICLE III
Directors
Section 1. POWERS. Subject to the limitations of the Nevada Revised
Statutes and any limitations in the Articles of Incorporation relating to action
required to be authorized or approved by the stockholders, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors. Without prejudice
to such general powers, but subject to the same limitations, it is hereby
expressly declared that the Directors shall have the following powers:
FIRST - To select and remove all the officers, agents and
employees of the corporation; prescribe such powers and duties for them as may
not be inconsistent with applicable law, the Articles of Incorporation or the
Bylaws; fix their compensation and require from them security for faithful
service.
SECOND - To conduct, manage and control the affairs and
business of the corporation, and to make such rules and regulations therefore,
not inconsistent with applicable law, the Articles of Incorporation or the
Bylaws, as they may deem appropriate.
<PAGE>
THIRD - To change the principal executive office of the
corporation from one location to another as provided in Section 1 of Article I
of the Bylaws; to fix and locate from time to time one or more subsidiary
offices of the corporation within or without the State of Nevada, as provided in
Section 2 of Article I of the Bylaws; to designate any place within or without
the State of Nevada for the holding of any stockholders' meeting or meetings;
and to adopt, make and use a corporate seal, and to prescribe the forms of
certificates of stock and to alter the form of such seal and of such
certificates from time to time, as in their judgment they may deem appropriate,
provided such seal and such certificates shall at all times comply with the
provisions of applicable law.
FOURTH - To authorize the issue of shares of stock of the
corporation from time to time, upon such terms as may be lawful and to retain
counsel and other experts to comply with all federal and state securities laws
and regulation incident to the issuance of stock of the company.
FIFTH - To borrow money and incur indebtedness for the
purposes of the corporation, and to cause to be executed and delivered
therefore, in the corporate name, promissory notes, bonds, debentures, deeds of
trust, mortgages, pledges, hypothecation or other evidences of debt and security
therefore.
SIXTH - To review, negotiate, and propose for ratification by
the shareholders, all proposals for merger, acquisition, reorganization, sale of
most or all assets or other acts requiring shareholder vote. Preliminary
negotiations or such transactions may be delegated to one or more officers or
agents of the company.
SEVENTH - To retain, through its officers, various experts,
such as attorneys and accountants, to render securities and tax opinions and
like legal or accounting advice to the Board.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The number of
Directors of the corporation shall not be less than there nor more than twelve
until changed by amendment of the Articles of Incorporation and by a bylaw
amending this Section. The exact number of Directors shall be fixed from to
time, within the limits specified in this Section, by a resolution adopted by
the Board of Directors.
Subject to the foregoing provisions for changing the number of
Directors, the number of Directors of this corporation has been fixed at three.
Section 3. ELECTION AND TERM OF OFFICE. Directors shall be elected to
hold office until the succeeding annual meeting of stockholders, and until their
respective successors have been elected and qualified. Directors shall be
elected at each annual meeting of stockholders, but if any such annual meeting
is not held or Directors are not elected thereat, Directors may be elected at
any special meeting of stockholders held for that purpose. Each Director,
including a Director elected to fill a vacancy, shall hold office until the
expiration of the term for which such Director was elected, and until a
successor has been elected and qualified, subject to the Nevada Revised Statues
and the provisions of the Bylaws with respect to vacancies on the Board of
Directors.
<PAGE>
Section 4. VACANCIES.
(a) A vacancy on the Board of Directors shall be deemed to
exist in case of the death, resignation, incapacity or removal of any Director,
if the authorized number of Directors is increased or if the stockholders fail,
at any annual or special meeting of stockholders at which any Director or
Directors are to be elected, to elect the full authorized number of Directors to
be voted for at that meeting.
(b) Except as otherwise provided in the Articles of
Incorporation, any or all of the Directors may be removed with or without cause
if such removal is approved by the affirmative vote of at least two-thirds of
the outstanding shares entitled to vote on the election of Directors, provided
that when by the provisions of the Articles of Incorporation the holders of the
shares of any class or series, voting as a class or series, are entitled to
elect one or more Directors, any Directors so elected may be removed only by the
applicable vote of the holders of the shares of that class or series.
No reduction in the authorized number of classes of Directors shall
have the effect of removing any Director prior to the expiration of his term of
office.
(c) Any Director may resign effective upon giving written
notice to the chairman of the board, the president, the secretary or the Board
of Directors of the corporation, unless the notice specifies a later time for
the effectiveness of such resignation. If the Board of Directors accepts the
resignation of a Director tendered to take effect at a future time, the Board of
Directors shall have power to elect a successor to take office when the
resignation is to become effective.
(d) Vacancies in the Board of Directors may be filled (i) by
the affirmative vote of a majority of the Directors then in office present at a
duly held meeting at which a quorum is present or the unanimous written consent
of the Directors then in office or (ii) if the number of Directors then office
is less than a quorum, by the unanimous written consent of the Directors then in
office, or the affirmative vote of a majority of the Directors then in office at
a duly held meeting of such Directors or a sole remaining Director; and each
Director so elected shall hold office until his successor is elected and
qualified. The stockholders may elect a Director or Directors at any time to
fill any vacancy or vacancies not filled by the Directors. Any such election by
written consent shall require the consent of holders of a majority of the
outstanding shares entitled to vote for the election of such Directors.
Section 5. ANNUAL MEETING. Immediately following each annual meeting of
stockholders, the Board of Directors shall hold a regular meeting at the place
of said annual meeting, or at such other place as shall be fixed by the Board of
Directors, for the purpose of organization, election of officers and the
transaction of other business. Call and notice of such meetings are hereby
dispensed with.
Section 6. OTHER REGULAR MEETINGS. Other regular meetings of the Board
of Directors shall be held during each year, at such times and places as the
Board of Directors may from time to time provide by resolution, either within or
without the State of Nevada, without other notice than such resolution.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
for the purpose of taking any action permitted by the Directors under the Nevada
Revised Statutes and the Articles of Incorporation may be called at any time by
the chairman of the board, the president, the secretary or any two
<PAGE>
Directors. Notice of the date, hour and place of special meetings shall be given
to each Director (a) personally or by telephone, telegraph or facsimile
transmission, in each case at least 24 hours prior to the holding of the meeting
or (b) by first class mail, charges prepaid, addressed to him at his address as
it is shown upon the records of the corporation or, if it is not so shown on
such records and is not readily ascertainable, at the place at which the
meetings of the Directors are regularly held, at least two days prior to the
holding or the meeting. Notice by mail shall be deemed to have been given at the
time a written notice is deposited in the United States mail, postage prepaid.
Any other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means to the recipient. Oral notice shall be deemed to have been
given at the time it is communicated, in person or by telephone, to the
recipient or to a person at the office of the recipient who the person giving
the notice has reason to believe will promptly communicate it to the recipient.
Any notice shall state the date, place and hour of the meeting and may, but
shall not be required to, state the general nature of the business to be
transacted.
Section 8. WAIVER OF DEFECTIVELY CALLED OR NOTICED MEETINGS. Notice of
a meeting need not be given to a Director who signs a waiver of notice, or a
consent to holding the meting or an approval of the minutes thereof, whether
before or after the meeting, or who attends the meeting without protesting,
prior to or at the commencement of the meeting, the lack of proper notice to
him. Any such waiver or consent shall state the date, place and hour of the
meeting, but need not specify the purpose of the meeting. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 9. PLACE OF MEETING. Regular and special meetings of the Board
of Directors shall be held at any place within or without the State of Nevada
which had been designated from time to time by resolution of the Board of
Directors. In the absence of such designation, regular and special meetings
shall be held at the principal executive office of the corporation.
Section 10. ACTION AT A MEETING; QUORUM AND REQUIRED VOTE. Presence in
person of a majority of the authorized number of Directors at a meeting of the
Board of Directors constitutes a quorum for the transaction of business, except
as hereinafter provided. Members of the board may participate in a meeting
through use of conference telephone or similar communications equipment, so long
as all members participating in such meeting can hear one another. Participation
in a meeting as permitted by the preceding sentence constitutes presence in
person at such meeting. Every act or decision done or made by a majority of the
Directors resent at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Directors, unless a greater number, or the
same number after disqualifying one or more Directors from voting, is required
by the Nevada Revised Statutes, the Articles of Incorporation or the Bylaws. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of a Director, provided that any action taken is
approved by at least a majority of the required quorum for such meeting.
Section 11. ADJOURNMENT. A majority of the Directors present at any
meeting, whether or not a quorum is present, may adjourn any meeting of the
Board of Directors to meet again at a stated date, hour and place. If any
meeting is adjourned for more than 48 hours, notice of any adjournment to
<PAGE>
another date, hour or place shall be given prior to the time of the adjourned
meeting to the directors who were not present at the time of adjournment.
Otherwise, notice of the date, hour and place of holding an adjourned meeting
need not be given to absent Directors if the date, hour and place are fixed at
the meeting adjourned.
Section 12. ACTION WITHOUT MEETING. Any action by the Board of
Directors may be taken without a meeting if all members of the Board of
Directors may be taken without a meeting if all members of the Board of
Directors shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board of Directors and shall have the same force and effect
as a unanimous vote of the Directors.
Section 13. COMMITTEES OF THE BOARD. By resolution adopted by the Board
of Directors, the Board of Directors may designate an executive committee, an
audit committee and such other committees as it shall determine, each consisting
of at least one Director and which may include one or more other persons who
need not be Directors, to serve at the pleasure of the Board of Directors, and
prescribe the manner in which proceedings of such committees shall be conducted.
The appointment of members or alternate members of a committee shall be made by
a majority vote of the Board of Directors. For purposes of the Bylaws, the term
"audit committee" shall mean any committee of the Board of Directors to which is
delegated the function of periodically reviewing the financial condition, and
the results of audit examinations, of the corporation with the corporation's
independent public accountants. The audit committee, if appointed, shall not
include any officer or employee of the corporation or its subsidiaries unless
the Board of Directors shall specifically designate an officer or employee to
serve on such committee. Unless the Board of Directors shall otherwise prescribe
the manner of proceedings of any such committee, meetings of such committee may
be scheduled in advance, in which case call and notice of any such meetings are
hereby dispensed with, and may be called at any time by any member thereof;
otherwise, the provisions of the Bylaws with respect to notice and conduct of
meetings of the Board of Directors shall govern. Any such committee, to the
extent provided in a resolution of the Board of Directors, may have all of the
authority of the Board of Directors, except with respect to:
(a) the approval of any action for which the Nevada Revised
Statutes, the Articles of Incorporation or the Bylaws also requires approval of
the stockholder;
(b) the filling of vacancies on the Board of Directors or on
any committee;
(c) the fixing of compensation of the Directors for serving
on the Board of Directors or on any committee;
(d) the adoption, amendment or repeal of Bylaws;
(e) the amendment or repeal of any resolution of the Board
of Directors which by its express terms is not so amendable or repealable;
(f) any distribution to the stockholders, except at a rate
or in a periodic amount or within a range determined by the Board of Directors;
and
<PAGE>
(g) the appointment of other committees of the Board of
Directors or the members thereof.
Section 14. COMPENSATION. Directors, and members of any committee of
the Board of Directors, shall be entitled to such compensation for their
services as Directors and members of any such committee as shall be fixed from
time to time by resolution of the Board of Directors and shall also be entitled
to reimbursement for any reasonable expenses incurred in attending such
meetings. Any Director receiving compensation under these provisions shall not
be barred from serving the corporation in any other capacity and receiving
compensation for such other services.
Section 15. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint one or more transfer agents and one or more registrars, either domestic
or foreign, at such times and places as the requirements of the corporation may
necessitate.
ARTICLE IV
Officers
Section 1. OFFICERS. The officers of the corporation shall be a
president, a secretary and a treasurer. The corporation may also have, at the
discretion of the Board of Directors, a chairman of the board, a chief financial
officer, one or more vice presidents, one or more assistant secretaries, one or
more assistant treasurers and such other officers as may be appointed in
accordance with the provisions of Section 3 of Article IV. One person may hold
any two or more offices.
Section 2. ELECTION. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article IV, shall be chosen annually by the Board of
Directors; provided, however, that each officer of the corporation shall hold
his office at the pleasure of the Board of Directors, or until he shall resign
or shall become disqualified to serve, or until his successor shall be elected
and qualified, subject, in each case, to the rights, if any, of the corporation
and any such officer under any contract of employment between the corporation
and the officer.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may
appoint, and may empower the chairman of the board, the president or any vice
president to appoint, such other officers as the business of the corporation may
require, each of whom shall hold office for such period, have such authority and
perform such duties as provided in the Bylaws or as the Board of Directors may
from time to time determine.
Section 4. REMOVAL AND RESIGNATION.
(a) Any officer may be removed, either with or without
cause, by the Board of Directors, at any regular or special meeting thereof, or,
except in case of an officer chosen by the Board of Directors, by any officer
upon whom such power of removal may be conferred by the Board of Directors,
subject, in each case, to the rights, if any, of an officer under any contract
of employment with the corporation.
(b) Any officer may resign at any time by giving written
notice to the Board of Directors, the president or the secretary of the
corporation,
<PAGE>
without prejudice,however, to the rights, if any, of the corporation under any
contract to which such officer is a party. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office as a result of any cause
shall be filled in the manner prescribed in the Bylaws for regular appointments
to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if there
shall be such an officer, shall be elected from among the Directors and shall,
if present, preside at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time assigned to him
by the Board of Directors or prescribed by any Bylaws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence of the chairman of the board, or if there be none, at all meetings of
the Board of Directors. He shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the Board of Directors
or the Bylaws.
Section 8. VICE PRESIDENT(S). In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the Board of
Directors or, if not ranked, the vice president designated by the Board of
Directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as are incident to the office of corporate vice president and as
from time to time may be prescribed for them respectively by the Board of
Directors or the Bylaws.
Section 9. SECRETARY. The secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the principal executive office
and such other place or places as the Board of Directors may order, a book of
minutes of actions taken at all meetings of, and by all written consents of,
Directors and stockholders, together with, in the case of meetings, the time and
place of holding, whether regular or special and, if special, how authorized the
notice thereof given, the names of those present at meetings of stockholders and
the proceedings thereof. The secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the corporation's transfer agent
or registrar, a stock ledger, or a duplicate stock ledger, showing the names of
the stockholders, alphabetically arranged, and their address, the number and
classes of shares held by each, the number and date of certificates issued for
such shares and the number and date of cancellation of every certificate
surrendered for cancellation. If the stock ledger or duplicate stock ledger is
kept at the office of the corporation's transfer agent or registrar, a statement
containing the name and address of the custodian of the stock ledger or
duplicate stock ledger shall be kept at the corporation's principal executive
office. The secretary shall give, or cause to be given, notice of all the
meetings of the stockholders and of the Board of
<PAGE>
Directors required by the Bylaws or by law to be given, and shall keep the seal
of the corporation in safe custody, and shall have such other powers and perform
such other duties as are incident to the office of corporate secretary and as
may be prescribed by the Board of Directors or the Bylaws.
Section 10. TREASURER. The treasurer shall keep and maintain, or cause
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. The books of account shall at all reasonable times be open to inspection
by any Director. The treasurer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
president and the Board of Directors, whenever they request it, an account of
all of his transactions as treasurer and of such other duties as are incident to
the office of corporate treasurer and as may be prescribed by the Board of
Directors or the Bylaws.
Section 11. COMPENSATION. The salaries and other compensation for the
principal officers of the corporation shall be fixed, from time to time, by the
Board of Directors. No officer shall be disqualified from receiving a salary or
such other compensation by reason of his also being a Director of the
corporation.
Section 12. MULTIPLE OFFICES. Any person may hold up to two offices
described by this section, except the president may not hold any other office.
It initially intended the Secretary/Treasurer will be a combined office.
Officers need not, but may be shareholders and/or Directors in the company.
ARTICLE V
Indemnification of Corporate Agents;
Purchase of Liability Insurance
Section 1. INDEMNIFICATION OF AGENTS OF THE CORPORATION; PURCHASE OF
LIABILITY INSURANCE.
(a) The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administration or
investigative, except an action by or in the right of the corporation, by reason
of the act 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 believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of NOLO CONTENDERE or its
equivalent does not, or itself, create a presumption that the person did not act
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and that, with respect to any
<PAGE>
criminal action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
(b) The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a Director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as 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
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 believed to
be in or not opposed to the best interests of the corporation. However,
indemnification shall not be made for any claim, issue or matter as to which 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 fair and reasonably entitled to indemnify for such expenses as the
court deems proper.
(c) To the extent that a Director, officer, employee or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsection (a) or (b),
or in defense of any claim, issue or matter therein, he shall be indemnified by
the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
(d) Any indemnification under subsection (a) or (b), unless
ordered by a court or advanced pursuant to subsection (e), shall be made by the
corporation only as authorized in the specified case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances, The determination shall be made: (i) by the stockholders; (ii) by
the Board of Directors by a majority vote of a quorum consisting of Directors
who were not parties to the action, suit or proceeding; (iii) if a majority vote
of a quorum consisting of Directors who were not parties to the action, suit or
proceeding so order, by independent legal counsel in a written opinion; or (iv)
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.
(e) The expenses of officers and Directors incurred in
defending a civil or criminal action, suit or proceeding shall 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 subsection (e) do not affect any rights to
advancement or expenses to which corporate personnel other than Directors or
officers may be entitled under any contract or otherwise by law.
(f) The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to this Article V (i) does not
exclude any other
<PAGE>
rights to which a person seeking indemnification or advancement of expenses may
be entitled under the Articles of Incorporation, the Bylaws or any 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
subsection (b) or for the advancement of expenses made pursuant to subsection
(e), shall not be made to or on behalf of any Director or officer if a final
adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or knowing violation of the law and were material to the cause
of action (ii) 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.
(g) The corporation may purchase and maintain insurance or
make other financial arrangements on behalf of any person who is or was a
Director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a Director, officer, employee or agent or
another corporation, partnership, joint venture, trust or other enterprise, for
any liability asserted against him and liability and expenses incurred by him in
his capacity as a Director, officer, employee or agent, or arising out of his
status as such, whether or not the corporation has the authority to indemnify
him against such liability and expenses. The other financial arrangements made
by the corporation may include any now or hereafter permitted by applicable law.
(h) In the event that the Nevada Revised Statutes shall
hereafter permit or authorized indemnification by the corporation of the
Directors, officers, employees or agents of the corporation for any reason or
purpose or in any manner not otherwise provided for in this Article V, then such
Directors, officers, employees and agents shall be entitled to such
indemnification by making written demand therefore upon the corporation, it
being the intention of this Article V at all times to provide the most
comprehensive indemnification coverage to the corporation's Directors, officers,
employees and agents as may now or hereafter be permitted by the Nevada Revised
Statutes.
(i) The foregoing indemnification provisions shall inure to
the benefit of all present and future Directors, officers, employees and agents
of the corporation and all persons now or hereafter serving at the request of
the corporation as Directors, officers, employees or agents of another
corporation, partnership, joint venture, trust or other enterprise and their
heirs, executors and administrators, and shall be applicable to all acts or
omissions to act of any such persons, whether such acts or omissions to act are
alleged to have or actually occurred prior to or subsequent to the adoption of
this Article V.
Section 2. VESTED RIGHTS. Neither the amendment nor repeal of this
Article V, nor the adoption of any provision of the Articles of Incorporation or
the Bylaws or of any statute inconsistent with this Article V, shall adversely
affect any right or protection of a Director, officer, employee or agent of the
corporation existing at the time of such amendment, repeal or adoption of such
inconsistent provision.
<PAGE>
ARTICLE VI
Shares and Share Certificates
Section 1. RECORD DATE.
(a) The Board of Directors may fix a time in the future as a
record date for the determination of the stockholders entitled to notice of and
to vote at any meeting of stockholders or entitled to give consent to corporate
action in writing without a meeting, to receive any report, to receive any
dividend or distribution or any allotment of rights or to exercise any rights in
respect of any other lawful action. The record date so fixed shall be note more
than 60 days nor less than 10 days prior to the date of any meeting, nor more
than 60 days prior to any other event for the purposes of which it is fixed.
(b) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting of stockholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than 30 days from the date set for the original meeting.
(c) When a record date is fixed, only stockholders of record
on the close of business on that date are entitled to notice of and to vote at
any such meeting, to give consent without a meeting, to receive any report, to
receive a dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date, except as otherwise provided in
the Articles of Incorporation, by agreement, by the Nevada Revised Statutes or
in Section 4 of this Article VI.
Section 2. CERTIFICATE FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the chairman of the board or the president or a vice president
and by the treasurer or an assistant treasurer or the secretary or an assistant
secretary. Any of the signatures on the certificate may be by facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issuance.
Any certificate for shares shall contain such legend or other statement
as may be required by the Nevada Revised Statutes, applicable federal or state
securities laws, other applicable law or regulation or any agreement between the
corporation and the issuee thereof.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board of Directors or the Bylaws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state on the face thereof the amount theretofore paid, the amount
remaining unpaid and the terms of payment thereof.
No new certificate for shares shall be issued in lieu of an old
certificate unless the latter is surrendered and cancelled at the same time;
provided, however, that a new certificate shall be issued without the surrender
and cancellation of the old certificate it: (i) the old certificate is lost,
apparently destroyed or wrongfully taken; (ii) the request for the issuance of
the new certificate is made within a reasonable time after the owner of the old
certificate has notice of its loss, destruction or the; (iii) the request for
<PAGE>
the issuance of a new certificate is made priori to the receipt of notice by the
corporation that the old certificate has been acquired by a BONA FIDE purchaser;
(iv) if required by the corporation, the owner of the old certificate furnishes
sufficient indemnity to or provides other adequate security to the corporation;
and (v) the owner of the old certificate satisfies any other reasonable
requirements imposed by the corporation, and of the holders of the old and new
certificates, shall be governed by the provisions of the Nevada Uniform
Commercial Code.
When the Articles of Incorporation are amended in any way affecting the
statements contained in the certificates for outstanding shares, or it becomes
desirable for any reason, in the discretion of the Board of Directors, to cancel
any outstanding certificate for shares and issue a new certificate therefore
conforming to the rights of the holder, the Board of Directors may order any
holders of outstanding certificates for share to surrender and exchange them for
new certificates within a reasonable time to be fixed by the Board of Directors.
The order may provide that a holder of any certificates so ordered to be
surrendered is not entitled to vote or to receive dividends or exercise any of
the other rights of stockholders until the holder has complied with the order,
but such order operates to suspend such rights only after notice and until
compliance. The duty of surrender of any outstanding certifications may also be
enforced by civil action.
Section 3. TRANSFER OF SHARES. Upon surrender to the secretary or
transfer agent or registrar of the corporation of a certificate for shares fully
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books, unless under applicable federal or state
securities laws or otherwise such transfer would be adverse to the best
interests of the corporation or unless the corporation has notice of an adverse
claim, which may be an adverse claim of the corporation, to the certificate.
Section 4. STOCKHOLDERS OF RECORD. Voting by stockholders shall in all
cases be subject to the following provisions:
(a) Subject to subsection (h) of this Section 4, shares held
by an administrator, executor, guardian, conservator or custodian may be voted
by such holder either in person or by proxy, without a transfer of such shares
into the holder's name, and shares standing in the name of a trustee may be
voted by the trustee, either in person or by proxy, but no trustee shall be
entitled to vote shares held by such trustee without a transfer of such shares
into the trustee's name.
(b) Shares standing int he name of a receiver may be voted
by such receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into the receiver's name if
authority to do so is contained in the order of the court by which such receiver
was appointed.
(c) Except where other wise agreed in writing between the
parties, a stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledge shall be entitled to vote the shares so transferred.
(d) Shares standing in the name of a minor, in person or by
proxy, whether or not the corporation has notice, actual or constructive, of
<PAGE>
the nonage, unless a guardian of the minor's property has been appointed and
written notice of such appointment given to the corporation.
(e) If authorized to vote the shares by the power of
attorney by which the attorney-in-fact was appointed, shares held by or under
control of an attorney-in-fact may be voted and the corporation may treat all
rights incident thereto as exercisable by the attorney-in-fact, in person or by
proxy, without transfer of the shares into the name of the attorney-in-fact.
(f) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxyholder as the
Articles of Incorporation or the Bylaws of such other corporation may prescribed
or, in the absence of such provision, as the Board of Directors of such other
corporation amy determine or, in the absence of such determination, by the
chairman of the board, president or any vice president of such other
corporation, or by any other person authorized to do so by the Board of
Directors, president or any vice president of such other corporation. Shares
which are purported to be voted or any proxy purported to be executed in the
name of a corporation (whether or not any title of the person signing is
indicated) shall be presumed to be voted or the proxy executed in accordance
with the provisions of this subsection, unless the contrary is shown.
(g) Subject to subsection (h) below, shares of the
corporation owned by the corporation or any subsidiary shall not be entitled to
vote on any matter and shall not be counted in determining the total number of
outstanding shares. Solely for the purposes of this subsection and subsection
(h) below, a "subsidiary" of the corporation shall mean a corporation, shares of
which possessing a majority of the power to vote for the election of Directors
at the time determination of such voting power is made, are owned directory, or
indirectly through one or more subsidiaries, by the corporation.
(h) Shares held by the corporation in a fiduciary capacity,
and shares of the corporation held in a fiduciary capacity by any subsidiary,
shall not be entitled to vote on any matter, except to the extent that the
settlor or beneficial owner possesses and exercises a right to vote or give the
corporation binding instructions as to how to vote such shares.
(i) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise, or if two or more persons (including proxyholders) have the same
fiduciary relationship respecting the same shares, unless the secretary of the
corporation is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect:
(a) If only one votes, such act binds all;
(b) If more than one vote, the act of the majority so
voting binds all; and
(c) If more than one vote, but the vote is evenly
split on any particular matter, each faction may vote
the securities in question proportionately.
<PAGE>
If the instrument so filed or the registration of the shares shows that
any such tenancy is held in unequal interests, a majority or even split for the
purposes of this Section shall mean a majority or even split in interest.
ARTICLE VII
Records and Reports
Section 1. MAINTENANCE OF BOOKS AND RECORDS. The corporation shall keep
adequate and correct books and records of account and shall keep minutes of the
proceedings of its stockholders, Board of Directors and committees of the Board
of Directors and shall keep at its principal executive office, or at the office
of its transfer agent or registrar, a record of its stockholders, giving the
names and addresses of all stockholders and the number and class of shares held
by each stockholder. Such minutes shall be kept in written form. Such other
books and records may be kept either in written form or in any other form
capable of being converted into written form within a reasonable time. The
corporation shall keep at its principal executive office, or if its principal
executive office is not in Nevada, then at its principal office, if any, in
Nevada, a copy of the Articles of Incorporation, as amended to date, certified
by the Secretary of State, and the original or a copy of the Bylaws, as amended
to date, certified by any officer of the corporation.
Section 2. INSPECTION OF CORPORATE RECORDS. Every Director shall have
the absolute right at any reasonable time to inspect and copy all books, records
and documents of every kind and to inspect the physical properties of the
corporation and its subsidiaries. Such inspection by a Director may be made in
person or by agent or attorney and the right of inspection includes the right to
copy and make extracts.
Section 3. ANNUAL REPORTS.
(a) At such times as the corporation is subject to the
Securities Exchange Act of 1934, as amended, the Board of Directors shall cause
an annual report to be sent to the stockholders not later than 120 days after
the close of the fiscal year; provided that such report shall be sent to the
stockholders at least 10 days prior to the annual meeting of stockholders. Such
report shall contain all matters required by the Securities Exchange Act of
1934, as amended and other applicable laws.
(b) Any report required by this Section shall be given in
the manner and shall be deemed to have been given by the corporation as provided
in Section 4 of Article II of the Bylaws.
Section 4. ANNUAL STATEMENT OF INFORMATION. The corporation shall file
annually with the Secretary of State of the State of Nevada, on the prescribed
for, a statement in compliance with Section 78.150 of the Nevada Revised
Statutes.
ARTICLE VIII
Miscellaneous
Section 1. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
<PAGE>
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 2. CONTRACTS, ETC., HOW EXECUTED. The Board of Directors,
except as otherwise provided in the Bylaws, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of an don behalf of the corporation, and such authority may be
general or confined in specific instances; and, unless so authorized by the
Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, conveyance or other document or instrument in
writing and any assignment or endorsements thereof executed or entered into
between the corporation and any other person, when signed by the chairman of the
board, the president, any vice president, the chief financial officer, the
treasurer or any assistant treasurer of the corporation shall be valid and
binding on the corporation in the absence of actual knowledge on the part of the
other person that the signing officers had not authority to execute the same.
Section 3. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. Any officer
of the corporation is authorized to vote, represent and exercise on behalf of
the corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the corporation. The
authority herein granted to such officers to vote or represent on behalf of the
corporation any and all shares held by the corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
such officers.
Section 4. SEAL. The corporation shall adopt and may, but shall not be
required to, use a corporate seal consisting of a circle setting forth on its
circumference the name of the corporation and showing the state and date of
incorporation.
Section 5. FISCAL YEAR. Unless changed by resolution of the Board of
Directors, the fiscal year of the corporation shall end on the last day of
December.
Section 6. LOANS. No loan shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors, which authority may be
general or confined to specific instances.
Section 7. DEPOSITS. The Board of Directors shall select banks, trust
companies or other depositories in which all funds of the corporation not
otherwise employed shall, from time to time, be deposited to the credit of the
corporation.
Section 8. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules or construction and definitions
contained in the Nevada Revised Statutes shall govern the construction of the
Bylaws. Without limiting the generality of the foregoing, the masculine gender
includes the feminine and neuter, the singular number includes the plural number
and the plural number includes the singular and the term "person" includes a
corporation or other entity as well as a natural person.
<PAGE>
Section 9. PRECLUSION OF ACQUISITION OF CONTROLLING INTEREST--STATUTE.
The Incorporators and initial Directors, being fully advised of the Nevada
Statutory Provisions related to treatment of the acquisition of controlling
sharehold interest pursuant to subsequent share transactions, wish to invoke the
provisions of Nevada Revised Statutes (NRS) ? 78.378, or any subsequent
provision or section, to hereby elect out of any application of the Acquisition
of Controlling Sharehold Interest Provisions under Nevada Statute, NRS ??
78.378-78.3793, or other or subsequent related statutory provisions.
ARTICLE IX
Amendments
Section 1. POWER OF STOCKHOLDERS. New Bylaws may be adopted or the
Bylaws may be amended or repealed by the affirmative vote or written consent of
a majority of the outstanding shares entitled to vote, except as otherwise
expressly provided by applicable law, the Articles of Incorporation or elsewhere
in the Bylaws.
Section 2. POWER OF DIRECTORS. Subject to the right of the stockholders
as provided in Section 1 of this Article IX to adopt, amend or repeal Bylaws,
Bylaws may be adopted, amended or repealed by the Board of Directors.
The undersigned President affirms adoption of these By-Laws by majority
vote of the Board of Directors on February 14th, 1996. The By-Laws, as set-out
herein, having been adopted as part of the organizational Minutes were
inadvertently not executed until the date appearing below, but are and were
deemed of full force and effect from the date of adoption on February 14, 1996.
/s/ ROBERT H. JAFFE
----------------------------------------
Mr. Robert H. Jaffe
Chairman of the Board
Date: December 15, 1997
(Seal)
<PAGE>
Exhibit 10.1
LEASE
THIS LEASE, made and entered into, in duplicate, this 1ST day of SEPT.,
1998 by and between DANNY MARTIN & TIMOTHY SCOT THROWER, (hereinafter called
"Landlord") and THE ROSE GROUP CORP. (hereinafter called the "Tenant").
WITNESSETH
That for and in consideration of the mutual covenants herein contained
and the terms and conditions hereinafter set forth and the rent herein reserved,
the Landlord does by these presents lease and let unto the Tenant that certain
space designated as follows:
Suite E 2,000 sq. ft.
(Hereinafter called the "leased property").
1.) TERM OF LEASE. The term of this Lease shall be for a period of 1
years, beginning SEPTEMBER 1, 1998 and ending AUGUST 31, 1999.
2.) RENT. Tenant agrees to pay Landlord the following rental rates:
a.) The total rent for the first twelve (12) months shall be
payable in monthly installments of $975.00, plus applicable state sales tax.
b.) Upon full execution of this lease Tenant shall be granted
access and use of property.
c.) At the signing of this lease, Landlord acknowledges the
receipt of $2,018.25 representing the first month's rent plus $975.00 as
security deposit.
d.) After the first year of this Lease, the annual rent for each
additional year of the term hereof or any renewals provided for herein shall be
increased by a percentage equal to the total percentage increase in the Consumer
Price Index covering all urban customers, unadjusted, for the United States
using all items 1982-84 100% as a base, and using the percentage gain for the
previous twelve (12) month period ending three (3) months prior to the
commencement date of this Lease and each year thereafter. All as published by
the U.S. Department of Labor, Bureau of Labor Statistics.
e.) In addition to the rent, the following expenses are to be paid
by the Landlord or Tenant, as designated, as follows and Tenant agrees to insure
for the amount stated and includes Landlord as one of the named insured (if
applicable).
TAXES: TENANT LANDLORD
Real Estate ( ) (X)
Personal Property ( ) (X)
Sales, Florida (X) ( )
<PAGE>
INSURANCE:
Personal Property (X) ( )
Public Liability (X) (X)
Fire & Ext. Cov. ( ) (X)
Furnishings (X) ( )
Plate Glass (X) (X)
MAINTENANCE:
A/C & Heat Equipment Exterior ( ) (X)
A/C & Heat Equipment Interior ( ) (X)
Building Exterior ( ) (X)
Building Interior ( ) (X)
Grounds & Planting ( ) (X)
Monthly Replacement of A/C Filter (X) ( )
UTILITIES:
Telephone (X) ( )
Electric (X) ( )
Gas/Fuel ( ) (X)
Sewer ( ) (X)
Water ( ) (X)
Refuse Collection (X) ( )
3.) MAINTENANCE, CARE, REPAIR, AND ALTERATION OF PREMISES. All
plumbing, heating and air conditioning shall be in good operating condition upon
surrender of the leased property to tenant. Subsequent to moving into the leased
premises, Tenant shall take good care thereof and shall, as its own cost and
expense, make all interior repairs to the leased premises (other than repairs
due to a common use by all occupants of the building rather than by Tenant),
including repairs to plumbing and air conditioning, and at the expiration of
said term the Tenant shall quit and surrender said premises in as good condition
as the use thereof will permit, reasonable wear and tear excepted. During the
term hereof, Tenant shall not make any alterations, additions or improvements in
said premises without the prior written consent of the Landlord, and all
alterations, additions or improvements which may be made by either of the
parties hereto, except movable furniture and equipment put in at the expense of
Tenant, but including any and all locks, plumbing fixtures or any other
improvements that Tenant may place or cause to be placed in the premises, shall
become a part of said premises and the property of Landlord and shall remain
upon and be surrendered with the premises as a part thereof at the termination
of this Lease. Any injury caused, by moving said movable furniture and equipment
in and out shall be repaired by said Tenant. In the event of any additions,
alterations or improvements by Tenant, Tenant agrees to keep said premises free
of liens and encumbrances and specifically agrees to indemnify Landlord from
loss suffered therefrom.
4.) COMPLIANCE WITH THE LAWS, ETC. Tenant, at its sole expense, shall
comply with all laws, orders and regulations of federal, state and municipal
authorities and with any direction of any public officer pursuant to law, which
shall impose any duty upon Landlord or Tenant with respect to the leased
property. Tenant shall, at its own expense, obtain all licenses or permits which
may be required for the conduct of its business within the terms of this Lease,
or for the making of repairs, alterations, improvements or additions not the
responsibility of Landlord; and Landlord, where necessary, will join with Tenant
in applying for all such permits or licenses.
5.) QUIET ENJOYMENT. Tenant, upon the payment of the rent herein
reserved and upon the performance of all the terms of this Lease, shall at all
times during the lease term and during any extension or renewal term, peaceably
and quietly enjoy the leased property, without any disturbance from Landlord or
from any other person or corporation claiming through Landlord.
6.) SIGNS. Tenant shall place no signs in the exterior windows, upon
the walls or roof of the property without the consent of Landlord in writing.
<PAGE>
7.) RIGHT OF ACCESS. The Landlord and his agents and other
representatives shall have the right to enter into and upon the leased premises
or any part thereof at al reasonable hours, for the purpose of examining the
leased property or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. Landlord shall have full and
unrestricted access to all air conditioning and heating equipment and to all
utility installations servicing the leased premises. Landlord reserves the right
temporarily to interrupt, curtain or suspend air conditioning and heating
services and all other utility or other services because of accident or
emergency or for repairs or alterations, additions or improvements, or because
of Landlord's inability to obtain, or difficulty or delay in obtaining, labor or
materials necessary therefor, or because of any other cause beyond Landlord's
reasonable control; provided that Landlord will use his best efforts to limit
such stoppage to after office hours, will notify Tenant in advance, if possible,
of any such stoppage and, if ascertainable, its estimated duration, and will
proceed diligently with the work necessary to perform such services as promptly
as possible. No diminution or abatement of fixed rent or other compensation
shall be claimed by Tenant by reason of such interruption, stoppage or
curtailment, nor shall the same give rise to a claim in Tenant's favor that such
failure constitutes total or partial eviction; provided that if the leased
premises shall be completely untenantable for a continuous period of more than
seven (7) business days by reason of such stoppage, the fixed rent payable shall
abate until the lease property becomes acceptable. During the six (6) months
next preceding the expiration of this Lease, Tenant shall permit inspection of
the leased property during business hours by or on behalf of prospective
tenants.
8.) INSURANCE. Tenant agrees to save Landlord harmless from any
liability by reason of personal injury to any person or persons inside the
boundaries of the space occupied by Tenant excluding any common area on or about
the premises, or property damage thereon, and to carry indemnity insurance
against said liability in an amount not less than $300,000 dollars for personal
injury and $500,000 dollars for property damage, and will furnish Landlord proof
thereof with Landlord as named insured. Landlord shall keep the building
containing the leased premises insured against loss or damage by fire and
extended coverage. Tenant shall maintain its own insurance to cover its own
personal property kept in the premises. Any changes of mode of business that
shall affect the present cost of fire and extended coverage shall be paid by
Tenant.
9.) SUB-LEASING. It is agreed that the said premises shall not be
assigned, under-let or sub-let, in whole or in part, without Landlord's written
consent to the assignment or transfer of this Lease or such under-letting or
sub-letting, which consent shall not be unreasonably withheld; and should such
written consent be granted by Landlord, then it is expressly understood that
such transfer, assignment, or subleasing shall not affect the primary obligation
of Tenant hereunder.
10.) DESTRUCTION OR DAMAGE. In the event of the total destruction of
the premises by fire or otherwise, this Lease shall cease, and the Tenant shall
be liable for the rent only up to the time of such destruction. If the said
premises or any part thereof shall be promptly repaired by Landlord, and an
abatement will be made for the rent corresponding with the time during which,
and to the extent to which, said premises may have been made untenantable, but
if the premises are not repaired and restored within 180 days from the date of
partial destruction, then at the option of the Tenant shall aggregate rent up
<PAGE>
to the time of partial destruction and also a reasonable rent for such part of
the premises as may have ben occupied by Tenant thereafter.
11.) CONDEMNATION. If the leased property or any part thereof is taken
by eminent domain, this Lease shall expire on the date when said leased property
shall be so taken and the rent shall be apportioned as of that date. No part of
any award shall belong to Tenant, except the costs of improvements to the
property paid by Tenant.
12.) DEFAULT. If the leased property shall be deserted or vacated, or
if proceedings are commenced against Tenant in any court under a bankruptcy act,
or for the appointment of a trustee or receiver of Tenant's property, either
before or after commencement of the lease term, or if there shall be default in
the performance of any other covenants, agreement, condition, rule or regulation
or expenses to be paid by Tenant herein contained or hereafter established on
the part of Tenant for more than ten (10) days after written notice of such
default by Landlord, or if there shall be a default in the payment of rent or
any part thereof for more than three (3) days after written notice of such
default by Landlord, then Landlord shall have the right to re-enter or repossess
the leased property, either by force, summary proceedings, surrender or
otherwise, and dispossess and remove therefrom Tenant or other occupants thereof
and their effects, without being liable to any prosecution therefor. In such
case, Landlord, at his option, may relet the leased property or any part thereof
without being liable to any prosecution therefor. In such case, Landlord, at his
option, may relet the leased property or any part thereof as agent of Tenant,
and Tenant shall pay to Landlord the difference between the rent hereby reserved
and agreed to be paid Tenant for the portion of the term remaining at the time
of re-entry or repossession and the amount, if any, received or to be received
under such re-letting for such portion of the term.
13.) TERMINATION. The covenants and conditions herein contained shall
apply to and bind the heirs, successors, executors, administrators and assigns
of all the parties hereto.
14.) NOTICES. All notices called for herein shall be given to Lessor
at: 2073 Porter Lake Drive, Sarasota, Fl. 34240
15.) SUBORDINATION. Tenant agrees to subordinate its interest under
this Lease to the lien of any mortgage Landlord might procure from a recognized
lending institution or source provided, however, Tenant shall be entitled to
remain in quiet possession of the premises hereby demised so long as it is in
full and complete compliance with the terms and conditions of this Lease.
16.) TIME OF ESSENCE. It is understood and agreed that time is of the
essence herein.
17.) NOTIFICATION UNDER FLORIDA RADIATION PROTECTION ACT- Florida
Statute 404.056 mandates that a prospective Tenant be notified that:
Radon Gas - Radon is naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed Federal and
State guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your County health unit.
<PAGE>
The undersigned hereby acknowledge that they have received notification.
18.) ADDITIONAL CLAUSES:
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of the
day and year first above written.
In the presence of:
/s/ Mark C. Nicholas /s/ Danny D. Martin
- -------------------------- --------------------
Witness LANDLORD
/s/ Mark C. Nicholas /s/ Sheldon R. Rose
- -------------------------- --------------------
Witness TENANT
\<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made and entered into as
of July 1, 1999 (the "Effective Date"), by and between THE ROSE GROUP
CORPORATION OF NEVADA, a Nevada corporation (the "Company") and SHELDON R.
ROSE, an individual ("Employee").
WHEREAS, the Employee has expertise in the field of sales and
distribution of prenatal and postpartum products and services;
WHEREAS, the Company and the Employee acknowledge that the Employee's
expertise, abilities and services are unique and essential to the success of the
Company;
WHEREAS, in light of the foregoing, the Company desires to employ the
Employee as its President and Chief Executive Officer and the Employee desires
to accept such employment upon the terms and conditions contained in this
Agreement; and
WHEREAS, the Company, The Rose Group Corporation, a Delaware
corporation, Rosebaby.com of Utah, Inc., a Utah corporation, and all other
current and future subsidiaries and affiliates of the Company are hereinafter
collectively referred to as the "Rose Group Companies" and individually as a
"Rose Group Company".
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
SECTION 1. EMPLOYMENT AND DUTIES. (a) The Company hereby employs
Employee as its President and Chief Executive Officer. In such position,
Employee shall have the responsibilities, duties and authority reasonably
accorded to, expected of and consistent with such position and will report
directly to the Board of Directors of the Company (the "Board") or such person
as the Board may direct. Additional or different duties, titles or positions,
however, may be assigned to Employee from time to time; provided, that any such
changes are consistent and compatible with Employee's experience, background and
managerial skills. Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to paragraph (c) of this Section 1,
agrees to devote substantially all of his business time, attention and efforts
to promote and further the business and interests of the Company and its
affiliates.
(b) Employee shall faithfully adhere to, execute and fulfill all lawful
policies established, promulgated and communicated by the Company.
(c) Employee shall not, during the term of his employment hereunder,
engage in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. If Employee intends to engage in any other business
activity, he shall give written notice of such intent to the Board, and the
Board shall in good faith determine whether such activity will interfere with
Employee's duties and responsibilities hereunder, and Employee agrees to accept
such a determination by the Board. The foregoing limitations shall not be
construed as prohibiting Employee from making personal
<PAGE>
investments in such form or manner as will neither require his services in the
operation or affairs of the companies or enterprises in which such investments
are made nor violate the terms of Section 3 hereof.
SECTION 2. COMPENSATION. For all services rendered by Employee, the
Company shall compensate Employee as follows:
(a) BASE SALARY. The base salary payable to Employee shall be $120,000
per year; provided, however, that (i) when Sales (as defined below) in any
fiscal year of the Company reach or exceed $50,000,000, the base salary payable
to Employee shall be automatically increased to $180,000 per year, (ii) when
Sales in any fiscal year of the Company reach or exceed $100,000,000, the base
salary payable to Employee shall be automatically increased to $240,000 per
year, and (iii) each time when Sales in any fiscal year of the Company reach or
exceed any integral multiple of $50,000,000 in excess of $100,000,000, the base
salary payable to Employee shall be automatically increased by an additional
$30,000 per year. "Sales" as used in the preceding sentence shall mean the Sales
of the Company in any fiscal year as set forth on the Company's Consolidated
Statement of Operations for such fiscal year as audited by the Company's
independent auditor in accordance with generally accepted auditing standards.
The base salary shall be payable to Employee on a regular basis in accordance
with the Company's standard payroll procedures. In addition to the automatic
adjustments to the base salary described above, the base salary may be increased
by the Board at any time, in its discretion, in light of Employee's position,
responsibilities, performance and other relevant factors.
(b) AUTOMOBILE. The Company will furnish to Employee, without cost to
Employee, a Company-owned or leased current model automobile commensurate with
his position as President. The monthly payment to be made by the Company for
such automobile shall not be in excess of $1,000.00. The Company shall reimburse
Employee for all expenses incurred in the business and personal use of such
automobile including, but not limited to, fuel, insurance and maintenance and
repair expenses. All reimbursable expenses for such automobile shall be
appropriately documented in reasonable detail by Employee upon submission of any
request for reimbursement and in a format and manner consistent with the
Company's expense reporting policy.
(c) INSURANCE. Employee shall be eligible to participate in the health,
hospitalization, disability, dental, life and other insurance plans that the
Company may have in effect from time to time to the extent that such benefits
are provided to other executives of the Company similarly situated.
(d) VACATION. Employee shall be entitled to three (3) weeks paid
vacation per year.
(e) REIMBURSEMENT. Employee shall be entitled to reimbursement for all
business travel and other out-of-pocket expenses reasonably incurred by Employee
in the performance of his duties pursuant to this Agreement and in accordance
with the Company's policies. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement and in a format and manner consistent with the Company's expense
reporting policy.
-2-
<PAGE>
(f) OTHER BENEFITS. The Company shall provide to Employee all other
benefits as may be available to all employees of the Company from time to time.
SECTION 3. NON-COMPETITION AGREEMENT. (a) Employee recognizes that the
Company's willingness to enter into this Agreement, including the compensation
arrangements set forth in Section 2 above, is based in material part on
Employee's agreement to the provisions of this Section 3 and that Employee's
breach of the provisions of this Section 3 could materially damage the Company.
Employee will not, during the period of employment by or with the Company, and
for a period of one (1) year immediately following the termination of his
employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any business in direct
competition with the Company or any current or future Rose Group
Company;
(ii) call upon any person who is, at that time, an employee of
the Company or any of the other Rose Group Companies for the purpose or
with the intent of enticing such employee away from or out of the
employ of the Company or any such Rose Group Company;
(iii) call upon any person or business entity which is, at
that time, or which has been, within two (2) years prior to that time,
a customer of the Company or any of the other Rose Group Companies for
the purpose of soliciting or selling products or services in
competition with the Company or any of the other Rose Group Companies;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was, to Employee's knowledge after due inquiry of the company
approached, either called upon by the Company or any of the other Rose
Group Companies or for which the Company or any of the other Rose Group
Companies has made an acquisition analysis, for the purpose of
acquiring such entity; or
(v) voluntarily testify as an expert witness for an adverse
party to the Company or any of the other Rose Group Companies in
litigation or arbitration.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of any competing business whose stock is traded on a
national securities exchange or on an over-the-counter or similar market.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the covenants of paragraph (a) of this
Section 3, and because of the immediate and irreparable damage that could be
caused to the Company for which they would have no other adequate remedy,
Employee agrees that the covenants of paragraph (a) of this Section 3 may be
enforced by the Company in the event of breach by Employee by injunctions,
restraining orders
-3-
<PAGE>
and orders of specific performance issued by a court. Employee further agrees to
waive any requirement for the Company's securing or posting of any bond in
connection with such remedies.
(c) It is agreed by the parties that the foregoing covenants in this
Section 3 impose a reasonable restraint on Employee in light of the activities
and business of the Rose Group Companies on the Effective Date and the current
plans of the Rose Group Companies; but it is also the intent of the Company and
Employee that such covenants be construed and enforced in accordance with the
changing activities, business and locations of the Rose Group Companies,
throughout the term of the employment of Employee under this Agreement. For
example, if, during the term of this Agreement, a Rose Group Company engages in
new and different activities or enters a new business in addition to or other
than the activities or business it currently engages in, then Employee will be
precluded from soliciting the customers or employees of such new activities and
business or from directly competing with such new activities or business during
the term of the covenants of this Section 3.
It is further agreed by the parties hereto that, if Employee shall
cease to be employed by the Company and shall enter into a business or pursue
other activities not in competition with a Rose Group Company, or shall engage
in potentially competitive activities or businesses which do not violate
paragraph (a) of this Section 3, Employee shall not be chargeable with a
violation of this Section 3 if a Rose Group Company shall thereafter enter the
same, similar or a competitive business or course of activities.
(d) The covenants contained in this Section 3 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or other restrictions set
forth herein are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
(e) All of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against a Rose Group
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of such covenants. It is
specifically agreed that the period of one (1) year following termination of
employment stated at the beginning of this Section 3, during which the
agreements and covenants of Employee made in this Section 3 shall be effective,
shall be computed by excluding from such computation any time during which
Employee is in violation of any provision of this Section 3.
SECTION 4. TERM; TERMINATION; RIGHTS ON TERMINATION. The initial term
of this Agreement shall begin on the Effective Date and continue for five (5)
years (the "Initial Term") unless terminated sooner as herein provided. After
the Initial Term, this Agreement shall continue thereafter on a year-to-year
basis (each such year is referred to herein as a "Renewal Term") on the same
terms and conditions contained herein in effect as of the time of renewal unless
the Company gives written notice of non-renewal at least sixty (60) days prior
to the end of the Initial Term or the then current Renewal Term, as the case may
be. If this Agreement is not renewed prior to the end of the Initial Term or any
subsequent Renewal Term, then Employee shall become an employee at-will at the
expiration of the term of the Agreement. If the Agreement is not renewed,
-4-
<PAGE>
this Agreement shall expire; provided, however, Employee's obligations under
Sections 3, 6, 7, 8 and 9 and all rights and liabilities which have accrued
hereunder to either party prior to such expiration shall survive. Non-renewal of
this Agreement shall not be "Good Reason" for Employee to terminate employment
under paragraph (d) of this Section 4 nor shall it be considered a termination
without "Good Cause" by the Company.
During the Initial Term or subsequent Renewal Terms, this Agreement and
Employee's employment may be terminated in any one of the following ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due Employee's estate.
(b) DISABILITY. If, as a result of a long-term incapacity or disability
from which Employee is not reasonably likely to continue to full employment, as
such concept is defined in the insurance programs, from time to time, maintained
by the Company ("Long-Term Disability") due to physical or mental illness or
injury, and Employee shall have been absent from his full-time duties hereunder
for three (3) consecutive months, then, the Company may terminate Employee's
employment hereunder. The Company shall give Employee thirty (30) days advance
written notice of such termination. Such notice may be given before or after the
end of such three (3) month period; provided, however, that if such notice is
given before the expiration of such three (3) month period, the termination of
this Agreement shall not be effective until the last day of such three (3) month
period; and provided, further, however, such termination shall not be effective
if Employee is able to resume his full-time duties at the conclusion of such
thirty (30) day notice period.
If Employee shall have been absent from his full-time duties hereunder
for six (6) consecutive months as a result of a short-term incapacity or
disability from which Employee is reasonably likely to continue to full
employment, as such concept is defined in the insurance programs, from time to
time, maintained by the Company ("Short-Term Disability") due to physical or
mental illness or injury, then the Company may terminate Employee's employment
hereunder. The Company shall give Employee thirty (30) days advance written
notice of such termination. Such notice may be given before or after the end of
such six (6) month period; provided, however, that if such notice is given
before the expiration of such three (3) month period, the termination of this
Agreement shall not be effective until the last day of such six (6) month
period; and provided, further, however, such termination shall not be effective
if Employee is able to resume his full-time duties at the conclusion of such
thirty (30) day notice period.
For purposes of the foregoing paragraphs, if the Company does not have
an insurance program which includes a definition of long-term disability or
short-term disability, such terms shall have the meanings generally ascribed to
them by the insurance industry.
During such three (3) month or six (6) month period, the Company shall
pay to Employee his base salary amount hereunder net of any disability insurance
payments under policies maintained by the Company which are received by
Employee; provided, however, that such payments shall be netted only to the
extent that the premiums for such insurance are borne by the Company and are not
paid or reimbursed by the Employee.
-5-
<PAGE>
(c) GOOD CAUSE. The Company may terminate this Agreement ten (10) days
after written notice to Employee for "Good Cause," which shall be limited to:
(i) Employee's breach of any material provision of this Agreement (continuing
for ten (10) days after receipt of written notice of need to cure); (ii)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities; (iii) Employee's
dishonesty, fraud or willful misconduct with respect to the business or affairs
of the Company or any other Rose Group Company which materially and adversely
affects the operations or reputation of the Company or any other Rose Group
Company; (iv) Employee's conviction of a felony crime; or (v) Employee's
violation of the Company's substance abuse policy that would result in discharge
under such policy as applied to the Company's employees generally. In the event
of a termination for Good Cause, as enumerated above, Employee shall have no
right to any severance compensation but shall receive all compensation due and
payable through the effective date of termination.
(d) WITH OR WITHOUT GOOD REASON OR WITHOUT GOOD CAUSE. At any time,
either Employee, with or without Good Reason (as defined below), or the Company,
without Good Cause, may terminate this Agreement and Employee's employment. Any
such termination by Employee or the Company shall be effective thirty (30) days
after written notice of such termination is provided to the other party.
Should this Agreement be terminated by the Company without Good Cause
or by Employee with Good Reason, Employee shall receive from the Company an
amount equal to two hundred percent (200%) of the base salary then in effect for
the greater of (i) the time period remaining under the Initial Term or the
current Renewal Term of this Agreement, or (ii) one (1) year. Such amount, in
all cases, shall be paid in equal monthly payments on the last regular payday of
each month for all Company employees. If Employee resigns or otherwise
terminates his employment without Good Reason, Employee shall receive no
severance compensation, but shall be entitled to reimbursement for all
reasonable business expenses incurred prior to the date of resignation or
termination as provided in Section 2 hereof. Employee shall be deemed to have
"Good Reason" to terminate this Agreement and employment hereunder upon the
occurrence of any of the following events:
(i) (A) Employee is requested to take on duties materially
inconsistent with Employee's experience and abilities, or (B) Employee
is requested to move his work location to an area outside a 100-mile
radius of Employee's present work location, and any such request by the
Company, is not withdrawn within five (5) business days after written
notice from Employee that he is unwilling to accept such proposed
changes in duties or to accept such move. Employee's failure to respond
within five (5) business days after receiving notification of any such
proposed change in Employee's duties or work location shall be deemed
an acceptance of such change by Employee; or
(ii) the Company breaches any material provision of this
Agreement (continuing for ten (10) business days after receipt of
written notice from Employee of the need to cure); or
(iii) any merger in which the Company is not the surviving
corporation and in which the stockholders of the Company will own less
than 50% of the voting securities of
-6-
<PAGE>
the merged entity upon the effectiveness of the merger, or any
consolidation, sale of substantially all of the assets of the Company,
or Change of Control (as defined below) of the Company, provided that
Employee has not approved the transaction by voting for it either as a
director or stockholder. For purposes of the preceding sentence, a
"Change of Control" shall be presumed to have occurred if within any
twelve (12) month period a single person or entity, or related group of
persons or entities, acquires 50% or more of the outstanding voting
stock of the Company.
Upon termination of this Agreement for any reason provided in (a)
through (d) above, Employee shall be entitled to receive all compensation earned
and/or accrued and all benefits and reimbursements due and/or accrued through
the effective date of termination. Additional compensation subsequent to
termination, if any, will be due and payable to Employee only to the extent and
in the manner expressly provided above. All other rights and obligations of the
Company and Employee under this Agreement shall cease as of the effective date
of termination, except that Employee's obligations under Sections 3, 5, 6, 7 and
8 hereof, and the Company's obligations with respect to severance payments, if
any, and indemnification under Section 13 below, shall survive such termination
in accordance with their terms if the Agreement is terminated pursuant to (a)
through (d) above.
SECTION 5. RETURN OF COMPANY PROPERTY. All records, designs, patents,
business plans, financial statements, manuals, memoranda, lists and other
property delivered to or compiled by Employee by or on behalf of any Rose Group
Company, their representatives, vendors or customers which pertain to the
business of any Rose Group Company shall be and remain the property of the Rose
Group Companies, and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
the Rose Group Companies which is collected by Employee shall be delivered
promptly to the Company without request by it upon termination of Employee's
employment.
SECTION 6. INVENTIONS. Employee shall disclose promptly to the Company
any and all conceptions, designs, inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment and which are
directly related to the then current business or activities of the Company and
which Employee conceives as a result of his employment by the Company. Employee
hereby assigns and agrees to assign all his interests therein to the Company or
its nominee. Whenever requested to do so by the Company, Employee shall execute
any and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect the Company's interest therein.
SECTION 7. TRADE SECRETS. Employee agrees that he will not, during or
after the term of this Agreement with the Company, disclose the specific terms
of any Rose Group Company's relationships or agreements with their significant
vendors or customers or any other significant and material trade secret of a
Rose Group Company, whether in existence or proposed, to any person, firm,
partnership, corporation or business for any reason or purpose whatsoever,
except in pursuit of the Company's business (e.g. interaction with outside
auditors and consultants
-7-
<PAGE>
engaged by the Company) or with lenders or potential lenders consistent with
policies of the Company.
SECTION 8. CONFIDENTIALITY. (a) Employee acknowledges and agrees that
all Confidential Information (as defined below) of the Company is confidential
and a valuable, special and unique asset of the Company that gives the Company
an advantage over its actual and potential, current and future competitors.
Employee further acknowledges and agrees that Employee owes the Company a
fiduciary duty to preserve and protect all Confidential Information from
unauthorized disclosure or unauthorized use, that certain Confidential
Information constitutes "trade secrets" under applicable laws, and that
unauthorized disclosure or unauthorized use of the Confidential Information
could irreparably injure the Company.
(b) Both during the term of Employee's employment and after the
termination of Employee's employment for any reason (including wrongful
termination), Employee shall hold all Confidential Information in strict
confidence, and shall not use any Confidential Information except for the
benefit of the Company, in accordance with the duties assigned to Employee.
Employee shall not, at any time (either during or after the term of Employee's
employment), disclose any Confidential Information to any person or entity
(except other employees of the Company who have a need to know the information
in connection with the performance of their employment duties), or copy,
reproduce, modify, decompile or reverse engineer any Confidential Information,
or remove any Confidential Information from the Company's premises, without the
prior written consent of the Board, or permit any other person to do so except
for the benefit of the Company. In the event Employee is requested or required
by law to disclose any Confidential Information, Employee will provide the
Company with immediate written notice of any such request or requirement so that
the Company may seek an appropriate protective order or seek with Employee's
cooperation to narrow the request or demand or waive Employee's compliance with
the provisions of this Agreement. If, failing the entry of a protective order or
the receipt of a waiver hereunder, Employee is, in the opinion of his counsel,
compelled to disclose Confidential Information, Employee may disclose only that
portion of the Confidential Information which Employee's counsel advises
Employee in writing that Employee is compelled to disclose and Employee will
exercise his or her best efforts to obtain assurance that confidential treatment
will be accorded such Confidential Information. In any event, Employee will not
oppose action by the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Confidential
Information. Employee shall take reasonable precautions to protect the physical
security of all documents and other material containing Confidential Information
(regardless of the medium on which the Confidential Information is stored). This
Agreement applies to all Confidential Information, whether now known or later to
become known to Employee.
(c) Upon the termination of Employee's employment with the Company for
any reason, and upon written request of the Company at any other time, Employee
shall promptly surrender and deliver to the Company all documents and other
written material of any nature containing or pertaining to any Confidential
Information and shall not retain any such document or other material. Within
five days of any such request, Employee shall certify to the Company in writing
that all such materials have been returned.
-8-
<PAGE>
(d) As used in this Agreement, the term "Confidential Information"
shall mean any information or material known to or used by or for the Company
(whether or not owned or developed by the Company and whether or not developed
by Employee) that is not generally known to the public and has been generally
treated by the Company as confidential information. Confidential Information
includes, but is not limited to, the following: all trade secrets of the
Company; all information that the Company has marked as confidential or has
otherwise described to Employee (either in writing or orally) as confidential;
all nonpublic information concerning the Company's products, services,
prospective products or services, research, product designs, prices, discounts,
costs, marketing plans, marketing techniques, market studies, test data,
customers, customer lists and records, suppliers and contracts; all Company
business records and plans; all Company personnel files; all financial
information of or concerning the Company; all information relating to operating
system software, application software, software and system methodology, hardware
platforms, technical information, inventions, computer programs and listings,
source codes, object codes, copyrights and other intellectual property; all
technical specifications; any proprietary information belonging to the Company;
and all data and all computer system passwords and user codes.
"Confidential Information" shall not include information which (i) is
in the public domain to such an extent as to be readily available to competitors
of the Rose Group Companies, (ii) becomes generally known to the public other
than by disclosure by Employee, or (iii) is received by Employee, outside his
capacity as an employee of the Company, from a third party which was under no
legal obligation of confidentiality with a Rose Group Company with respect to
such information.
SECTION 9. NO PRIOR AGREEMENTS. Employee hereby represents and warrants
to the Company that the execution of this Agreement by Employee and his
employment by the Company and the performance of his duties hereunder will not
violate or be a breach of any agreement with a former employer, client or any
other person or entity. Further, Employee agrees to indemnify the Company for
any loss or damage, including, but not limited to, attorneys' fees and expenses
of investigation, the Company may incur based upon or arising out of any breach
of this Section 9.
SECTION 10. ASSIGNMENT; BINDING EFFECT. Employee understands that he
has been selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two sentences, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
SECTION 11. RELEASE. Notwithstanding anything in this Agreement to the
contrary, Employee shall not be entitled to receive any severance payments
pursuant to Section 4 of this Agreement unless Employee has executed (and not
revoked) a general release of all claims Employee may have against the Company
and its affiliates relating to Employee's employment hereunder, other than
claims for unpaid compensation amounts required to be paid by the Company
pursuant to Section 2 hereof, in a form of such release reasonably acceptable to
the Company.
SECTION 12. INDEMNIFICATION. In the event Employee is made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative
-9-
<PAGE>
or investigative (other than an action by the Company against Employee), by
reason of the fact that he is or was performing services in good faith under
this Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company agrees to engage
competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee, he
may engage separate counsel and the Company shall pay all reasonable attorneys'
fees and reasonable expenses of such separate counsel. Further, while Employee
is expected at all times to use his best efforts to faithfully discharge his
duties under this Agreement, Employee cannot be held liable to the Company for
errors or omissions made in good faith where Employee has not exhibited gross,
willful and wanton negligence and misconduct nor performed criminal and
fraudulent acts which materially damage the business of the Company.
SECTION 13. COMPLETE AGREEMENT. Except as expressly set forth herein,
this Agreement is not a promise of future employment. Employee has no oral
representations, understandings or agreements with the Company or any of its
officers, directors or representatives covering the same subject matter as this
Agreement. This Agreement hereby supersedes any other employment agreements or
understandings, written or oral, by and between the Company and Employee. This
written Agreement is the final, complete and exclusive statement and expression
of the agreement between the Company and Employee, and it cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous oral or
written agreements. This written Agreement may not be later modified except by a
further writing signed by Employee and a duly authorized officer of the Company,
and no term of this Agreement may be waived except by a writing signed by the
party waiving the benefit of such term.
SECTION 14. NOTICE. Whenever any notice is required hereunder, it shall
be given in writing addressed as follows:
TO THE COMPANY:
The Rose Group Corporation of Nevada
2073 Porter Lake Drive
Suite E
Sarasota, Florida 34240
WITH A COPY TO:
Robert H. Jaffe, Esq.
c/o Robert H. Jaffe & Associates, P.A.
8 Mountain Avenue
Springfield, New Jersey 07081
TO EMPLOYEE:
Sheldon R. Rose
8990 Wembley Court
Sarasota, Florida 34238
-10-
<PAGE>
Notice shall be deemed given and effective on the earlier of three (3) days
after the deposit in the U.S. mail of a writing addressed as above and sent by
first class mail, certified, return receipt requested, or when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this Section 14.
SECTION 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is
held invalid or inoperative, the other portions of this Agreement shall be
deemed valid and operative and, so far as is reasonable and possible, effect
shall be given to the intent manifested by the portion held invalid or
inoperative. The Section headings herein are for reference purposes only and are
not intended in any way to describe, interpret, define or limit the extent or
intent of the Agreement or of any part hereof.
SECTION 16. ARBITRATION. Any unresolved dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration; provided, however, the Company shall be entitled to bring an action
to enforce its rights under Sections 3, 5, 6, 7 and 8 hereof. The arbitration
shall be held at a location mutually agreed upon by the Company and Employee and
shall be conducted before a panel of three (3) arbitrators in accordance with
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association ("AAA") then in effect. Unless both parties agree
otherwise, the arbitrators will be those provided by the AAA. The arbitrators
shall not have the authority to add to, detract from or modify any provision
hereof nor to award punitive damages to any injured party. The arbitrators shall
have the authority to order back pay, severance compensation, reimbursement of
legal fees and costs, including those incurred to enforce this Agreement, and
interest thereon. A decision by a majority of the arbitration panel shall be
final and binding. Judgment may be entered on the arbitrators' award in any
court having jurisdiction. The AAA fees and all direct expenses (e.g., room
rental for a location to conduct the proceedings, reimbursement of arbitrators'
per diems and out-of-pocket expenses) of any arbitration proceeding shall be
borne evenly by the parties pending a final determination by the arbitrators as
to how the costs shall be borne between the parties.
SECTION 17. GOVERNING LAW. This Agreement shall in all respects be
construed according to the laws of the State of Nevada, without regard to its
conflicts of laws provisions.
SECTION 18. COUNTERPARTS. This Agreement may be executed simultaneously
in two (2) or more counterparts, each of which shall be deemed an original and
all of which together shall constitute but one and the same instrument.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE ROSE GROUP CORPORATION OF NEVADA
By: /s/ Mark C. Nicholas
-------------------------
Name: Mark C. Nicholas
Title: Vice President-Operations
/s/ Sheldon R. Rose
--------------------------
SHELDON R. ROSE
-12-
<PAGE>
Exhibit 10.3
LICENSING AGREEMENT
THIS AGREEMENT is effective beginning January 9, 1998.
The parties to this agreement are Valda K. Hemming dba PRETTY/PRIVATE,
residing at 943 North Orlando, Mesa, AZ 85205, hereinafter referred to as
LICENSOR and The Rose Group Corporation located at 2073 Porter Lake Drive,
Sarasota, FL, 34240, hereinafter referred to as "LICENSEE".
WHEREAS, LICENSOR has invented a nursing garment (hereinafter referred
to as the "Invention") and is owner of all right, title and interest in and to
trade secrets, proprietary know how, United States Letters Patent No. 5,008960
issued on April 3, 1991, for a Nursing Garment, and
WHEREAS, LICENSEE desires a license to make, have made, use and sell
the Invention, which license LICENSOR is willing to grant:
NOW, THEREFORE, in consideration of the premises and mutual covenants
of this Agreement, the parties hereto have agreed as follows:
LICENSEE shall mean not only The Rose Group Corporation, but shall
include any firm which is related to The Rose Group Corporation in the sense
that it is owned or controlled by, or which controls The Rose Group Corporation,
or is an exclusive affiliate, division, or parent of a company substantially
owned or controlled by The Rose Group Corporation.
1. PRODUCT DESCRIPTION
"Licensed Product", shall mean the invention, related trade secrets and
proprietary know how, any article covered by any of the claims of United States
Patent No. 5,008960 or any of its foreign counterparts, or of any pending patent
applications of LICENSOR, and any improvement upon said article.
2. LICENSE GRANT
LICENSOR hereby grants LICENSEE a personal, license(without the right to grant
sublicenses) to make, have made, use and sell the Licensed Product throughout
the world.
3. PERFORMANCE BY LICENSEE
LICENSEE shall use its best efforts to produce and sell the Licensed Product in
the greatest quantity and of the greatest quality possible, and shall deal in
good faith with LICENSOR at all times, and shall not engage in any activity
which is against the interests of LICENSOR.
4. ROYALTY PAYMENTS
As monetary consideration for the license herein granted, LICENSEE shall pay to
LICENSOR,
a. A 7.5% (Seven and one-half per cent) royalty, based on net selling
price, on all sales (or other commercial disposition) of LICENSED PRODUCTS by
LICENSEE, its subsidiaries, and/or associate companies. The term "Net Selling
<PAGE>
Price" shall mean the invoice price, f.o.b. factory, less any discounts for
volume, promotion, defects, or freight.
b. Royalty payments are to be made monthly, within sixty (60) days
following the last day of the month for LICENSED PRODUCTS shipped during the
month. Payments not received by LICENSOR within sixty (60) days after the last
day of each month shall bear interest at the rate of twelve percent (12%) per
annum from sixty (60) days after the last day of the month until paid. Further,
LICENSEE agrees to reimburse LICENSOR for any legal costs it may incur in
collecting overdue royalty payments.
d. All payment to LICENSOR hereunder shall be made payable to Valda K.
Hemming dba PRETTY/PRIVATE, and sent or delivered to 943 North Orlando, Mesa, AZ
85205 or at such other address as LICENSOR may, from time to time, designate to
LICENSEE in writing.
5. REPORTS
LICENSEE shall submit a written report to LICENSOR together with each royalty
payment hereunder with respect to shipments in a given month, setting forth the
following:
a. The total quantify of LICENSED PRODUCTS sold for the given month,
b. The NET SALES PRICE at which each shipped LICENSED PRODUCT was sold.
c. the calculated royalty due; and
d. A running total of royalties paid hereunder for the calendar year.
6. RECORDS
LICENSEE shall maintain books and records in sufficient detail to confirm the
accuracy of royalty payments due hereunder and shall make such books and records
available for inspection by LICENSOR or its representative upon a reasonable
advance request in writing. In the event such inspection reveals that past
royalty payments have been deficient, the reasonable cost of such inspection
shall be borne by the LICENSEE.
7. PATENT MARKING
LICENSEE agrees that on the product, its packaging and collateral material there
will be printed notice, in compliance with the applicable statutory
requirements, of any patents issued or pending, such notice showing the LICENSOR
as the owner of said patents under exclusive license to LICENSEE.
8. IMPROVEMENTS
Should LICENSEE or any member of its organization develop, either solely or
jointly with others or with LICENSOR, any improvements in the LICENSED PRODUCT
or any intellectual property related thereto (collectively "Developments"),
which Developments are based on, derived from, or otherwise result from access
to the LICENSED PRODUCT, LICENSEE agrees to assign and does hereby assign to
LICENSOR, for consideration herein acknowledged, all of LICENSEE'S right, title,
and interest in and to said Developments. LICENSEE hereby appoints LICENSOR as
its attorney-in-fact for the limited purpose of executing all documents and
performing all other acts necessary to give effect and legality to the
provisions of this paragraph.
<PAGE>
9. TERMS AND WARRANTS
a. Unless sooner terminated as provided herein, this License Agreement
shall remain in full force and effect for four years commencing on the effective
date of this License Agreement, and ending at midnight on the fourth anniversary
of said effective date, provided the term automatically be extended for another
four (4) years unless either party gives the other written notice on the third
(3rd) anniversary of the effective date of their intent to terminate.
b. This Agreement shall be considered to be in force during the terms
of paragraph 9.a, so long as LICENSEE continues to sell the LICENSED PRODUCT,
including the original product line or subsequent extensions and/or variations
thereof. However, it is herein acknowledged that, with the exception of the
requirement of paragraph 12.a, LICENSEE has made no warrants to LICENSOR in
regard to minimum sales and/or royalty payment guarantees. Further, LICENSOR
agrees that, for the life of the Agreement, it will not create and/or provide
directly competitive products to another manufacturer or distributor without
giving the right of first refusal to LICENSEE.
10. PRODUCT DESIGNS
LICENSOR agrees to furnish product designs, if requested, for the initial
product line and all subsequent variations and extensions at no charge to
LICENSEE. In addition, if requested, LICENSOR will assist in the design of
packaging, point-of-purchase material, displays, etc. at no charge to LICENSEE.
However, all direct costs for such activities will be borne by LICENSEE.
LICENSEE shall submit product samples of the initial product line and all
subsequent variations and extensions to LICENSOR for design approval. The
approval will not be unreasonably withheld. If approval is not received within
30 days, then approval is automatic.
11. HOLD HARMLESS
In the event any claim for damages (including, but not limited to, consequential
damages) by way of product liability, negligence of otherwise is asserted
against the LICENSOR, alleging that any Licensed Product manufactured by or for
LICENSEE is faulty and provided that LICENSEE is given notice in writing of any
such claims promptly after receipt by the LICENSOR, and provided that the
LICENSOR affords LICENSEE information relative to the defense of such claim,
LICENSEE agrees to defend or settle, at its own cost and expense, any such claim
or subsequent action, suit or proceeding brought against the LICENSOR and shall
indemnify and hold the LICENSOR harmless against any such claim or action, suit
or proceeding, including reasonable legal fees and cost incurred and any
judgment or award of damages arising out of such claim or action.
12. TERMINATION
a. In the event LICENSEE does not commence to manufacture, distribute
and sell Licensed Products within six months after the execution of this
agreement, LICENSOR, in addition to all other remedies available to him, shall
have the option of terminating this Agreement immediately upon written notice to
LICENSEE.
b. In the event LICENSEE files a petition in bankruptcy, of if the
LICENSEE becomes insolvent or makes an assignment for the benefit of creditors,
<PAGE>
the license granted hereunder shall terminate automatically without the
requirement of written notice.
c. If LICENSEE shall breach any other obligations under the terms of
the Agreement, LICENSOR, without waiving any other remedies it may have, may
terminate this License Agreement upon thirty (30) days advance written notice.
If the LICENSEE shall cure the breach within the 30-day notice period, the
notice of termination shall be rendered null and void, and this License
Agreement shall remain in full force and effect. No right to cure a breach or
default shall be provided for non-payment of royalties hereunder by LICENSEE
after two (2) notices of termination for non-payment of royalties have been
served upon LICENSEE with two (2) corresponding opportunities to cure.
d. The waiver by LICENSOR of any breach of any provisions of License
Agreement shall not be construed to be a waiver of any succeeding breach of the
provisions or a waiver of the provision itself.
13. LICENSEE'S RIGHT TO TERMINATE
Notwithstanding anything contained in this Agreement, LICENSEE shall have the
absolute right to cancel this Agreement at any time by notifying LICENSOR of its
decision in writing to discontinue the sale of the product(s) covered by this
Agreement. This cancellation shall be without recourse from the LICENSOR except
as provided by Paragraph 14 herein.
14. DUTIES UPON TERMINATION
a. Upon any termination of this Agreement, Licensee shall (1)
immediately cease manufacturing the Licensed Products, and (2) make no further
use of any and all of LICENSOR'S rights conferred by this Agreement.
b. LICENSOR shall retain any and all payments made in accordance with
any payment provisions of this Agreement. It is further understood that after
termination, LICENSEE shall have sixty (60) days, give LICENSOR a final report
setting forth the number of Licensed Products manufactured by or on behalf of
LICENSEE pursuant to the provisions of section 4), and LICENSEE shall, with such
final report, pay all royalties due to LICENSOR for such Licensed Products
manufactured but not yet shipped, and the location of such products. A royalty
shall be paid on all products in inventory as if sold at cost, in the event of
termination, within thirty (30) days of termination.
In the event of termination, for whatever reason under this
Agreement, IT IS EXPRESSLY UNDERSTOOD by the parties that LICENSEE may dispose
of any and all Licensed Products remaining within its possession or control
provided that royalties are paid therefore to LICENSOR.
<PAGE>
15. OBLIGATIONS OF CONFIDENCE
During the term of this Agreement, LICENSOR and LICENSEE shall keep in trust and
confidence all trade secrets and proprietary know how relating to the Licensed
Product, provided however, that such obligation shall not preclude or impair
LICENSEE's right to develop, manufacture, have manufactured, service, maintain
or market the Licensed Product, LICENSEE's obligation being that it will
maintain the trade secrets and proprietary know-how confidential to the same
degree it exercises in protecting its own confidential or proprietary
information.
16. INDEMNIFICATION
LICENSEE agrees to obtain, at its own expense, product liability insurance for
at least $1,000,000 combined single unit for LICENSEE and LICENSOR against
claims, suits, loss or damage arising out of any alleged defect in the Licensed
Product(s). As proof of such insurance, LICENSEE will submit to LICENSOR a full
paid certification of insurance naming LICENSOR as an insured party. This
submission is to be made before any Licensed Product is distributed or sold.
17. NO PARTNERSHIP, ETC.
This Agreement shall be binding upon the successors and assigns of the parties
hereto. Nothing contained in this Agreement shall be construed to place the
parties in the relationship of legal representatives, partners, or joint
venturers. Neither LICENSOR nor LICENSEE shall have the power to bind or
obligate in any manner whatsoever, other than as per this Agreement.
18. DISPUTES
Disputes are to be settled through The American Arbitration Association,
location to be determined by the LICENSOR.
<PAGE>
19. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State of
Arizona.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day
and year written below.
LICENSOR
DATE: January 9, 1998 By /s/ VALDA K. HEMMING
-------------------------
Valda K. Hemming
President
Pretty/Private
LICENSEE
DATE: January 9, 1998 By /s/ SHELDON R. ROSE
---------------------
Sheldon R. Rose
Chief Executive Officer
The Rose Group Corporation
<PAGE>
Exhibit 10.4
EXCLUSIVE SALES AGREEMENT
This agreement, effective as of the 24th day of February, 1999, is by
and between LAMAZE from AMI, Inc., a Corporation organized and existing under
the laws of the State of New York, having a place of business at 275 Central
Park West (14th floor), New York, N.Y. 10024 ("LAMI") and THE ROSE GROUP
CORPORATION of Nevada, a Corporation organized and existing under the laws of
the State of Nevada, and having a place of business at 2073 Porter Lake Drive,
Sarasota, Florida, 34240 ("ROSE").
WITNESSETH:
WHEREAS, LAMI represents that it has the exclusive right and license to
use the federally registered trademark LAMAZE in conjunction with the
advertising and distribution of various maternity and nursingwear products by
virtue of an existing Contribution Agreement between LAMAZE International and
LAMI, and
WHEREAS, ROSE desires to obtain the exclusive right to sell certain
products as approved by LAMI,
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and the sum of one dollar, receipt of which is hereby acknowledged,
and other good and valuable consideration, the parties mutually agree as
follows:
1. LAMI warrants and represents that it has the exclusive right and license to
use the federally registered trademark LAMAZE in conjunction with the
manufacture, offering for sale, advertising and sale and distribution of various
maternity and nursingwear products pursuant to a Contribution Agreement between
LAMI and LAMAZE International. LAMI further warrants that Peter Incorvaia is
fully authorized to enter into this Agreement for and on behalf of LAMI.
2. ROSE warrants and represents that Sheldon Rose is fully authorized to enter
into this Agreement for and on behalf of ROSE. ROSE further warrants and
represents that it has the necessary expertise, knowledge and capability to
manufacture, supply and distribute, bill, and collect for LAMI various products
under private label including the trademark LAMAZE, and remit and account to
LAMI for the sale of said products.
3. LAMI hereby grants to ROSE and ROSE hereby accepts from LAMI, upon the terms
and conditions hereinafter specified, the exclusive sales rights to manufacture,
supply, advertise, offer for sale, promote and sell for LAMI the products
enumerated on EXHIBIT "A" annexed hereon ("Authorized Products") within the
United States of America, its territories and possessions, for the term set
forth herein. Except as indicated herein, for the term of this Agreements, LAMI
will not grant any sales rights to any third party for the manufacture or sale
of any of the Authorized Products. LAMI retains the right to sell any Approved
Product through its own network with the Agreement of ROSE.
<PAGE>
4. ROSE shall control and have full responsibility for the manufacture,
packaging, inventory, pricing, shipment, invoicing and collection of accounts
receivable with respect to the Authorized Products.
5. ROSE will pay to LAMI a fee equal to nine Percent (9%) of the net sales of
Authorized Products. As used throughout this Agreement, the term "net sales"
shall mean the gross sales proceeds from the sale of all Authorized Products
less any returns by customers of ROSE or damaged or defective Authorized
Products. As used throughout this Agreement, the term "annual net sales" shall
mean the net sales as defined above for the time period from january 1 through
December 31 of each year of the term of this Agreement. The fee will be due and
payable on the 15th of the month for the previous month's sales. Rose will be
considered in default and this Agreement will become null and void if payments
become more than 45 days in arrears. ROSE shall keep such records as are
necessary for LAMI to ascertain the accuracy of the statements.
6. In consideration for the exclusive sales rights granted to ROSE by LAMI in
this Agreements, ROSE shall pay to LAMI a minimum of $45,000.00 in 1999 against
sales as follows: $14,000.00 upon the execution of this Agreement, $16,000.00 by
May 15th, 1999, $10,000.00 by August 15th, 1999, and $5,000.00 by September
15th, 1999. Beginning in the year 2000 and annually thereafter, ROSE shall pay a
minimum of $45,000.00 against sales in the sum of Twenty Two Thousand Five
Hundred Dollars ($22,500.00) on January 15th of every year, and the sum of
Twenty Two Thousand Five Hundred Dollars ($22,500.00) on July 15th of every
year. All of the aforementioned payments shall be non-refundable advances on the
fee due to LAMI upon same year net annual sales of Authorized Products (the
"Advances"). The Advances shall be credited against the fees payable on sales of
Authorized Products. ROSE agrees to sell a minimum of $500,000.00 Authorized
Products annually. The failure by ROSE to realize the minimum net annual sales
levels shall constitute a material breach of the Agreement. ROSE shall provide
LAMI with annual audited financial statements.
7. LAMI acknowledges that it has examined ROSE's Maternity support hose and the
nursing shawl products and that the quality standards of the samples thereof
shown to LAMI are acceptable to LAMI. ROSE agrees that the Authorized Products
shall meet or exceed such quality standards and LAMI agrees that Authorized
Products that meet or exceed such quality standards shall be acceptable to LAMI
for purposes of this paragraph. ROSE agrees to furnish complete product
specifications to LAMI to establish a minimum quality standard for all
Authorized Products.
8. Use of "LAMAZE" Mark: For any use of the "LAMAZE" mark as allowed under this
Agreement in connection with advertising, packaging or marketing materials, it
must at lease once place the "R" letter in a circle by the "LAMAZE" mark, and
then in a prominent location place the following statements: "LAMAZE" is a
registered trademark of Lamaze International, Inc."
9. ROSE agrees to defend, indemnify and hold harmless LAMI, LAMAZE
International, their respective officers, Directors and shareholders from and
against any and all claims of any third party alleging that the Authorized
Products are defective or have caused injury.
10. ROSE agrees that, during the term of this agreement, it will maintain
product liability insurance having liability limits customary in the trade, but
in no event less than the amounts required by LAMAZE International to be carried
by LAMI. As of the date of this agreement, LAMAZE International is requiring
liability limits of One Million Dollars ($1,000,000.00). LAMI and
<PAGE>
LAMAZE International shall be named as "additional insureds" on the product
liability policies held by ROSE and shall provide LAMI with a copy of the
declaration page to such policy as soon as practical after the execution of this
Agreement.
11. The term of this Agreement is until December 31, 2001 and may be renewed by
mutual agreement of the parties upon the terms agreed upon at the time of
renewal.
12. This Agreement may be terminated by either party for a material breach of
the provisions herein, upon written notice to the breaching party, if the breach
is not cured within thirty (30) days of receipt of such notice.
13. All notices herein shall be sent by certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to ROSE Mr. Sheldon R. Rose, Chairman, CEO
The Rose Group Corporation
2073 Porter Lake Drive
Sarasota, Florida 34240
If to LAMI: Mr. Peter Incorvaia, President
LAMAZE from LAMI, Inc.
275 Central Park West, 14th Floor
New York, NY 10024
14. ROSE expressly acknowledges the ownership by Lamaze International of the
LAMAZE mark, and the right of Lamaze International to pre-approve all
advertising, packaging and promotional materials with the Authorized Products
containing the LAMAZE mark.
15. LAMI acknowledges the proprietary rights to the tradename THE ROSE GROUP
CORPORATION in Design, and Agrees that ROSE's tradename may appear on the
authorized Products, labels attached to Authorized Products, and the packages in
which the Authorized Products are sold so long as the LAMAZE tradename remains
the dominate name appearing on the Authorized Products, its labels and
packaging. ROSE may not advertise or promote any other products which it
manufactures, now or in the future, along with an Authorized Product in such a
way as to give the appearance that the unauthorized product is in any way
connected with or endorsed by LAMAZE International or LAMI, or that the
unauthorized product is comparable to the Authorized Product.
16. The parties hereto agree to the jurisdiction of the United States District
Courts for the adjudication of disputes relating to the interpretation of or
performance under this Agreement or the improper use of the parties trademarks
or tradenames. The parties further agree that the laws of the State of New York
shall apply to the interpretation of this Agreement regardless of any prior
conflicts of law determinations.
<PAGE>
17. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in their respective corporate names by their respective officers
thereunto duly authorized as of the day and year hereinabove first written.
LAMAZE from AMI, INC.
By: /s/ PETER INCORVAIA
-----------------------------------
Peter Incorvaia, President
THE ROSE GROUP CORPORATION
OF NEVADA
By: /s/ SHELDON R. ROSE
------------------------------------
Sheldon R. Rose President
<PAGE>
EXHIBIT "A"
To Exclusive Agreement between
LAMAZE from AMI, INC.
and
THE ROSE GROUP CORPORATION OF NEVADA
ITEM STYLE NUMBER
Maternity Support Hose 70, 80, 82, 84, 86, 88, 90,
92, 94, 96, 98
Nursing Shawl 60620
<PAGE>
Exhibit 10.5
AMENDMENT TO
FACTORING AGREEMENT
Amendment # 2
Dated March 22, 1999
The FACTORING AGREEMENT dated AUGUST 5, 1997 (the "Agreement"), between Bay View
Funding, a California corporation, and THE ROSE GROUP CORPORATION, a
corporation, is hereby amended in the specific section(s) as follows:
First paragraph, Page 1: Buyer's additional name shall be BAY VIEW BANK.
FURTHER, any and all references to Buyer shall mean: BAY VIEW FUNDING and BAY
VIEW BANK. FURTHER, Buyer's additional name affects all other related documents.
1.4 "ADVANCE PERCENTAGE" shall be EIGHTY FIVE percent (85%).
2.2 ACCEPTANCE OF RECEIVABLES. Buyer shall have no obligation to purchase
any Receivable listed on a Schedule of Accounts. Upon acceptance, Buyer
shall pay to Seller the Advance Percentage of the face amount of each
Receivable Buyer desires to purchase. Such payment shall be the "Advance"
with respect to such Receivable. The purchase price of any Receivables
purchased hereunder shall be the sum of the Advance, plus any Reserve
payable by Buyer to Seller relating to such Receivable. The aggregate amount
of all outstanding Advances shall not at any time exceed the lesser of
$200,000 (the Maximum Credit) or an amount equal to the sum of all
undisputed Purchased Receivables multiplied by the Advance Percentage.
Seller shall not request and Buyer shall not make an Advance that would
cause the resulting total of all Advances to exceed the foregoing
limitation. In the event the aggregate outstanding Obligations shall at any
time exceed the foregoing limitation, Seller shall immediately repay the
Advances in the amount of such excess.
3.8 MONTHLY MINIMUM FEE. Buyer would not have entered into this Agreement
and agreed to provide Seller with the factoring arrangements hereunder
unless Seller guaranteed Buyer that the sum of the Finance Fees and
Factoring Fees paid to Buyer in each month would be at least ONE HALF OF ONE
percent (.5%) of the Maximum Credit (the "Monthly Minimum Fee"). In the
event the aggregate Finance Fees, and Factoring Fees paid during any month
is less than the Monthly Minimum Fee, then Seller shall pay to Buyer the
amount of any deficiency (the "Supplemental Fee"). The Supplemental Fee, if
any, for any month shall be calculated and due and payable on the first
business day of the succeeding month.
Section 13. EFFECTIVENESS: TERM. This Agreement shall only become effective upon
execution and delivery by Seller and acceptance by Buyer and, unless earlier
terminated as provided in this Agreement, shall continue in full force and
effect for an initial term of 12 MONTHS periods. Unless earlier terminated as
provided in this Agreement, all Obligations shall be due and payable in full at
the expiration of the last renewal term. This Agreement may be terminated prior
to the end of the initial term (a "Term") as follows: (a) Seller may
<PAGE>
terminate this Agreement at any time after giving Buyer at least thirty (30)
days prior written notice and paying Buyer an Early Termination Fee equal to TWO
percent (2%) of the Maximum Credit (the "Early Termination Fee"). Any such
termination shall be effective upon payment to Buyer in full of all Obligations,
including the Early Termination Fee; and (b) This Agreement shall automatically
terminate following the occurrence of an Event of Default under Section 9. Upon
any such termination following an Event of Default, all Obligations, including
the Early Termination Fee, shall be due and payable in full.
Notwithstanding the foregoing, any termination of this Agreement shall not
affect Buyer's security interest in the Collateral and Buyer's ownership of the
Purchased Receivables, and this Agreement shall continue to be effective, and
Buyer's rights and remedies hereunder shall survive such termination, until all
transactions entered into and Obligations incurred hereunder or in connection
herewith have been completed and satisfied in full.
The Amendment affects only the above listed Section(s) of the Agreement and all
other provisions of the Agreement shall remain unchanged and in force as written
or thereafter amended in writing.
This Amendment shall become effective when it is accepted and executed by an
authorized officer of Buyer.
AGREED:
SELLER:
THE ROSE GROUP CORPORATION
BY: /s/ Sheldon R. Rose
-----------------------------
(PRINT NAME AND TITLE)
DATE: 3/22/99
BUYER:
BAY VIEW FUNDING
BY: /s/
-----------------------------
(AUTHORIZED SIGNER)
DATE: 3/22/99
BUYER:
BAY VIEW BANK
BY: /s/
-----------------------------
(AUTHORIZED SIGNER)
DATE: 3/22/99
<PAGE>
FACTORING AGREEMENT
This Factoring Agreement (the "Agreement") is made as of AUGUST 5, 1997, by and
between Concord Growth Corporation ("Buyer") having a place of business at 3590
North First Street, Suite 200, San Jose, CA 95134, and THE ROSE GROUP
CORPORATION, a CORPORATION ("Seller") having its principal place of business and
chief executive office at 13130 56TH COURT #608, CLEARWATER, FL 34620.
Additional location where collateral is domiciled: 70 TRANQUILITY ROAD, WESLEY
HILLS, NY 10901.
Section 1. DEFINITIONS. When used herein, the following terms shall have the
following meanings:
1.1 "ACCOUNT BALANCE" shall mean, on any given day, the gross amount of all
Purchased Receivables unpaid on that day.
1.2 "ACCOUNT DEBTOR" shall have the meaning set forth in the Uniform
Commercial Code and shall include any person liable on any Purchased Receivable,
including without limitation, any guarantor of the Purchased Receivable and any
issuer of a letter of credit or banker's acceptance.
1.3 "ADJUSTMENTS" shall mean all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor with respect to any Purchased Receivable.
1.4 "ADVANCE PERCENTAGE" shall be SEVENTY FIVE percent (75%).
1.5 "COLLECTIONS" shall mean all good funds received by Buyer from or on
behalf of an Account Debtor with respect to Purchased Receivables.
1.6 "INSOLVENT" shall mean with respect to an Account Debtor that such
Account Debtor has filed, or has had filed against it, any bankruptcy case, or
has made an assignment for the benefit of creditors.
1.7. "SCHEDULE OF ACCOUNTS" shall mean a Bill of Sale signed by a
representative of Seller which accurately identifies the Receivables which
Buyer, at its election, may purchase, and includes for each such Receivable the
correct amount owed by the Account Debtor, the name and address of the Account
Debtor, the invoice number, and the invoice date.
1.8 "PAYMENT PERIOD" shall be 90 calendar days from an invoice date.
1.9 "PURCHASED RECEIVABLES" shall mean all Receivables arising out of the
invoices and other agreements identified on or delivered with any Schedule of
Accounts delivered by Seller to Buyer which Buyer elects to purchase and for
which Buyer makes an Advance.
1.10 "RECEIVABLE" shall mean all Receivable arising out of the invoices and
other agreements identified on or delivered with any Schedule of Accounts
delivered by Seller to Buyer which Buyer elects to purchase and for which Buyer
makes an Advance.
1.11 "RECONCILIATION PERIOD" shall, unless otherwise notified by Buyer to
Seller, mean a WEEKLY calendar period.
1.12 "REPURCHASED RECEIVABLE" shall refer to a Purchased Receivable which
the Seller has become obligated to Repurchase under Section 4.1 hereof.
1.13 "WRITE OFF PERIOD" shall mean twelve (12) calendar months from the date
Buyer purchases a Receivable.
1.14 "DISPUTE" shall mean a dispute, claim, or defense of any kind
whatsoever, whether valid of invalid, asserted by an Account Debtor, that may
reduce the amount collectible by Buyer from Account Debtor.
Section 2. PURCHASE AND SALE OF RECEIVABLES
2.1 OFFER TO SELL RECEIVABLES. Seller may, on the terms provided herein, from
time to time factor, sell and assign to Buyer, Receivables acceptable to Buyer
in its sole discretion, at a discount below face
<PAGE>
value. Seller will notify each Account Debtor of a Receivable purchased by Buyer
that all payments thereon must be made only to Buyer. Seller shall deliver to
Buyer a signed Schedule of Accounts along with copies of invoices and purchase
orders, contracts, and proof of delivery or service, with respect to any
Receivable for which a request for purchase is made. Buyer shall be entitled to
rely on all of the information provided by Seller to Buyer on the Schedule of
Accounts and rely on the signature on any Schedule of Accounts as an authorized
signature of Seller. Each invoice shall bear a notice, in form satisfactory to
Buyer, that it has been sold and assigned to and is payable only to Buyer.
2.2 ACCEPTANCE OF RECEIVABLES. Buyer shall have no obligation to purchase any
Receivable listed on a Schedule of Accounts. Upon acceptance, Buyer shall pay to
Seller the Advance Percentage of the face amount of each Receivable Buyer
desires to purchase. Such payment shall be the "Advance" with respect to such
Receivable. The purchase price of any Receivables purchased hereunder shall be
the sum of the Advance, plus any Reserve payable by Buyer to Seller relating to
such Receivable. The aggregate amount of all outstanding Advances shall not at
any time exceed the lesser of $350,000 (the Maximum Credit) or an amount equal
to the sum of all undisputed Purchased Receivables multiplied by the Advance
Percentage. Seller shall not request and Buyer shall not make an Advance that
would cause the resulting total of all Advances to exceed the foregoing
limitation. In the event the aggregate outstanding Obligations shall at any time
exceed the foregoing limitation, Seller shall immediately repay the Advances in
the amount of such excess.
2.3 EFFECTIVENESS OF SALE TO BUYER. Effective upon Buyer's payment of an
Advance, and for and in consideration therefore and in consideration of the
covenants of this Agreement, Seller will have absolutely sold, transferred and
assigned to Buyer, all of Seller's right, title and interest in and to each
Purchased Receivable and all monies due or which may become due on or with
respect to such Purchased Receivable.
2.4 ESTABLISHMENT OF A RESERVE. Upon the purchase by Buyer of each Purchased
Receivable, Buyer shall, unless waived by Buyer in its sole discretion,
establish a Reserve. The Reserve shall be the amount by which the face amount of
the Purchased Receivable exceeds the Advance, less all accrued fees and
Adjustments on the Purchased Receivable (the "Reserve"). The Reserve shall be a
book balance maintained on the records of Buyer and shall not be a segregated
fund.
Section 3. COLLECTIONS, CHARGES AND REMITTANCES
3.1 COLLECTIONS. All Collections will go directly to Buyer and Buyer shall apply
all Collections to Seller's Obligations hereunder in such order and manner as
Buyer may determine. Seller will hold in trust and safekeeping, as the sole
property of Buyer, and immediately turn over to Buyer, in identical form
received, any payment on a Purchased Receivable that comes into Seller's
possession. In the event Seller comes into possession of a remittance comprising
payments of both a Purchased Receivable and Receivable which has not been
purchased by Buyer, Seller shall hold same in accordance with the provisions set
forth above and immediately turn same over to Buyer, in identical form received.
Upon collection of such item, Buyer shall remit to Seller its portion thereof.
Seller agrees to indemnify and save Buyer to harmless from and against any and
all claims, loss, costs and expenses caused by or arising out of the Receivables
or any attempt by Buyer to collect same or resolve any Dispute.
3.2 FACTORING FEE. Seller shall pay to Buyer upon purchase of Receivables by
Buyer, a Factoring Fee ("Factoring Fee"), calculated by taking the
<PAGE>
gross face value of a Purchased Receivable and multiplying it by ONE TENTH OF
ONE percent (.01%).
3.3 FINANCE FEE. Seller shall pay to Buyer as earned for each Fee Period for
Purchased Receivables, a fee calculated by taking 0.9% of the gross face value
of a Purchased Receivable for every 10 day period or fraction thereof ("Fee
Period") from the date said Purchased Receivable is first purchased by Buyer
until the date said Purchased Receivable is paid in full or otherwise
repurchased by Seller or otherwise written off by Buyer within the Write Off
Period.
3.4 ACCOUNTING. Seller shall immediately upon sale of Receivables to Buyer, make
proper entries on its books and records disclosing the sale thereof to Buyer.
Seller will immediately furnish Buyer financial statements, tax records and
other information as reasonably requested by Buyer. Buyer shall prepare and send
to Seller after the close of business for each calendar month, an accounting of
the transactions for that calendar month, including the amount of all Purchased
Receivables, all Collections, Adjustments, Factoring Fees, and Finance Fees. The
accounting shall be deemed correct and conclusive unless Seller makes written
objection to Buyer within thirty (30) days after the date Buyer mails the
accounting to Seller.
3.5 REFUND TO SELLER. Provided that there does not then exist an Event of
Default, as defined in Section 9, or any event or condition that with notice,
lapse of time or otherwise would constitute an Event of Default, Buyer shall
refund to Seller, the amount, if any, which Buyer owes to Seller at the end of
the Reconciliation Period according to the accounting prepared by Buyer for that
Reconciliation Period (the "Refund"). The Refund shall be an amount equal to:
3.5.1 The Reserve as of the beginning of that Reconciliation Period,
plus
3.5.2 The Reserve created for each Purchased Receivable purchased
during that Reconciliation Period, minus
3.5.3 The total for that Reconciliation Period of:
3.5.3.1 Finance Fee;
3.5.3.2 Factoring Fee;
3.5.3.3 Adjustments;
3.5.3.4 Repurchase Receivables, to the extent Buyer has agreed to
accept payment thereof by deduction from the Refund; and
3.5.3.5 The Reserve for the Account Balance as of the first day of the
following Reconciliation Period. In the event the formula set forth in
this Section 3.5 results in an amount due to Buyer from Seller, Seller
shall immediately make such payment to Buyer.
3.6 FACILITY FEE. Seller shall pay Buyer on the date hereof, a facility fee (the
"Faculty Fee") in the amount of NA percent (0.00%) of the Maximum Credit, which
fee is fully earned and non-refundable as of the date of this Agreement.
3.7 AUDIT FEES. Buyer or its designee may conduct NA examinations of the
Collateral and Seller's operations, unless an Event of Default has occurred and
is continuing, in which event the number of audits conducted will be in Buyer's
reasonable discretion. Seller shall pay Buyer audit fees not to exceed $575.00
per day plus expenses per audit. Audit fees shall be payable upon demand by
Buyer.
3.8 MONTHLY MINIMUM FEE. Buyer would not have entered into this Agreement and
agreed to provide Seller with the factoring arrangements hereunder unless Seller
guaranteed Buyer that the sum of the Finance Fees and Factoring Fees paid to
Buyer in each month would be at least NA percent (0%) of the Maximum Credit (the
"Monthly Minimum Fee"). In the event the
<PAGE>
aggregate Finance Fees, and Factoring Fees paid during any month is less than
the Monthly Minimum Fee, then Seller shall pay to Buyer the amount of any
deficiency (the "Supplemental Fee"). The Supplemental Fee, if any, for any month
shall be calculated and due and payable on the first business day of the
succeeding month.
3.9 COSTS AND EXPENSES. Seller shall pay to Buyer immediately upon Buyer's
demand, all fees and expenses, including reasonable fees and expenses of
attorneys and other professionals, incurred by Buyer in connection with any and
all of the following: (a) preparing, amending, supplementing, restating,
negotiating or enforcing the Factoring Agreement, or any of the other Document
or any waivers or consents in connection with the foregoing, (b) perfecting,
protecting or enforcing Buyer's interest in the Collateral, (c) collecting the
Obligations, or (d) defending or in any way addressing any claims made or
litigation initiated by or against Buyer as a result of Buyer's relationship
with Seller or any guarantor, or (e) the costs incurred by Buyer in establishing
and maintaining the Lockbox. All such fees and expenses shall be payable to
Buyer whether incurred before, during or after any bankruptcy case or insolvency
proceeding involving Seller, any guarantor or any Account Debtor. At Buyer's
option, all fees, costs, expenses and other charges provided for in this
Agreement, or in any other Document may be charged to Seller's account of Seller
maintained by Buyer either by (a) deducting such amounts from any Remittance
otherwise payable to Seller pursuant to this Agreement, (b) deducting such
amounts from any Advance requested by Seller and made by Buyer, or (c) treating
such amounts as additional Advances.
Section 4. RECOURSE AND REPURCHASE OBLIGATIONS
4.1 SELLER'S AGREEMENT TO REPURCHASE. Seller agrees to pay to Buyer on demand,
the full face amount, or any unpaid portion of, any Purchased Receivable:
4.1.1 Which remains unpaid for the Payment Period, unless prior to the
expiration of the Payment Period, the subject Account Debtor has become
Insolvent; or
4.1.2 With respect to which there has been any breach of warranty or
representation set forth in Section 6 hereof or any breach of any
covenant contained in this Agreement; or
4.1.3 With respect to which the Account Debtor asserts any Dispute.
Section 5. POWER OF ATTORNEY. In order to carry out the sale of Purchased
Receivables to Buyer hereunder, Seller does hereby irrevocably appoint Buyer and
its successors and assigns as Seller's true and lawful attorney in fact, with
respect to Purchased Receivables and hereby authorizes Buyer, regardless of
whether there has been an Event of Default, (a) to sell, assign, transfer or
pledge the whole or any part of the Purchased Receivables; (b) to demand,
collect, receive, sue, and give releases to any Account Debtor for the monies
due or which may become due upon or with respect to the Purchased Receivables
and to compromise, prosecute, or defend any action, claim, case or proceeding
relating to the Purchased Receivables, including the filing of a claim or the
voting of such claims in any bankruptcy case, all in Buyer's name or Seller's
name as Buyer may choose; (c) to prepare, file and sign Seller's name on any
notice, claim, assignment, demand, draft or notice of or satisfaction of lien or
mechanic's lien or similar document; (d) to receive, open, and dispose of all
mail addressed to Seller for the purpose of collecting the Purchased
Receivables; (e) to endorse Seller's name on any checks or other forms of
payment on the Purchased Receivable; and (f) to do all acts and things necessary
or expedient, in furtherance of any such purposes.
<PAGE>
Section 6. REPRESENTATIONS, WARRANTIES, AND COVENANTS.
6.1 RECEIVABLES' WARRANTIES, REPRESENTATIONS AND COVENANTS. To induce Buyer to
buy Receivables and to render its services to Seller, and with full knowledge
that the truth and accuracy of the following are being relied upon by the Buyer
in determining whether to accept Receivables as Purchased Receivables, Seller
represents, warrants, covenants and agrees, with respect to each Schedule of
Accounts delivered to Buyer and each Receivable described therein, that:
6.1.1 Seller is the absolute owner of each Receivable set forth in the
Schedule of Accounts and has full legal right to sell, transfer and
assign such Receivables;
6.1.2 The correct face amount of each Receivable is as set forth in the
Schedule of Accounts and is not in Dispute;
6.1.3 The payment of each Receivable is not contingent upon the
fulfillment of any obligation or contract, past or future, and any and
all obligations required of the Seller have been fulfilled as of the
date of the Schedule of Accounts;
6.1.4 Each Receivable set forth on the Schedule of Accounts is based on
the actual sale and delivery of goods and/or services actually rendered
on terms not to exceed 30 days, does not represent a sale to a parent,
subsidiary or affiliate of Seller, is presently due and owing to
Seller, is not past due or in default, has not been previously sold,
assigned, transferred, or pledged, is not a consignment sale or bill
and hold transaction, and is free of any and all liens, security
interests or encumbrances in favor of Buyer or any other division of or
affiliate of Buyer;
6.1.5 There are no defenses, offsets, or counterclaims against any of
the Purchased Receivables, and no agreement has been made under which
the Account Debtor may claim any deduction or discount, except as
otherwise stated in the Schedule of Accounts;
6.1.6 At the time that Buyer makes an Advance relating to a Receivable,
the Account Debtors set forth in the Schedule of Accounts, are then not
insolvent and Seller has no knowledge that the Account Debtors are
insolvent or may become insolvent within the Payment Period;
6.1.7 Seller shall not take or permit any action to countermand
notification to Account Debtors of Buyer's ownership of Purchased
Receivables.
6.2 ADDITIONAL WARRANTIES, REPRESENTATIONS, AND COVENANTS. In addition to the
foregoing warranties, representations and covenants, to induce Buyer to buy
Receivables and to render its services to Seller, Seller hereby represents,
warrants, covenants and agrees that:
6.2.1 Seller will not assign, transfer, sell or grant any security
interest in any Collateral to any other party, without Buyer's prior
written consent;
6.2.2 The Seller's name, form of organization, place of business and
the place where the records concerning all receivables herein referred
to are kept is set forth at the beginning of this Agreement, and Seller
will give Buyer 30 days advance notice in writing if such name,
organization, place of business or record keeping is to be changed or a
new place of business or record keeping is to be added and shall
execute any documents necessary to perfect Buyer's interest in
Purchased Receivables and the Collateral;
<PAGE>
6.2.3 Seller shall pay all of its normal gross payroll for employees,
and all federal and state taxes, as and when due, including without
limitation all payroll and withholding taxes and state sales taxes;
6.2.4 Seller has not, as of the time Seller delivers to Buyer a
Schedule of Accounts, or as of the time Seller accepts any Advance from
Buyer, filed a voluntary petition for relief under the United States
Bankruptcy code or had filed against it an involuntary petition for
relief;
6.2.5 Seller, if a corporation, is duly incorporated and, at all times,
in good standing under the laws of the State of DELAWARE and is duly
qualified in all States where such qualification is required. Seller
has all required licenses to operate its business and transacts
business under no trade names or trade styles other than NA.
Section 7. NOTICE OF ADJUSTMENTS. In the event of a breach of any of the
representations, warranties, or covenants set forth in Section 6, or in the
event any Dispute is asserted by any Account Debtor, Seller shall promptly
advise Buyer and shall, subject to the Buyer's approval, resolve such disputes
and advise Buyer of an Adjustment. Until the disputed Purchased Receivable is
repurchased by Seller and the full amount of the Purchased Receivable is paid,
Buyer shall remain the absolute owner of any Purchased Receivable which is
subject to Adjustment or repurchase under Section 4.1 hereof, and any rejected,
returned, or recovered personal property, with the right to take possession
thereof at any time.
Section 8. SECURITY INTEREST. In order to secure all of Seller's now existing or
hereafter arising obligations and indebtedness to Buyer, howsoever arising,
whether under this Agreement or otherwise (collectively the "Obligations"),
Seller hereby grants to Buyer a continuing lien upon and security interest in
all Seller's now existing or hereafter arising: Accounts Receivable and proceeds
thereof; Inventory; Contract Rights; Chattel Paper; books and records relating
to any of the above; and accessions, substitutions for and all replacements,
products, and cash and non-cash proceeds of the foregoing, in whatever form,
including, without limitation, all insurance proceeds and all claims against
third parties for loss or destruction of or damages to any of the foregoing
(collectively, the "Collateral").
Seller is not authorized to sell, assign, transfer or otherwise convey any
Collateral without Buyer's prior written consent, except for the sale of
finished inventory in the Seller's usual course of business. Seller agrees to
sign and to allow Buyer to file UCC financing statements, in a form acceptable
to Buyer. Seller agrees to deliver to Buyer the originals of all instruments,
chattel paper and documents evidencing or related to Receivables.
Section 9. DEFAULT. The occurrence of any one of more of the following shall
constitute an Event of Default hereunder: (i) Seller fails to pay or perform any
Obligation as and when due; (ii) there shall be commenced by or against Seller
any voluntary or involuntary case under the United States Bankruptcy Code, or
any assignment for the benefit of creditors, or appointment of a receiver or
custodian for any of its assets, or Seller makes or sends notice of a bulk
transfer; (iii) Seller or any guarantor of the Obligations shall become
insolvent in that its debts are greater than the fair value of its asserts, or
Seller is generally not paying its debts as they become due or is left with
unreasonably small capital; (iv) any lien, garnishment, attachment, execution or
the like is issued against or attaches to the Seller, the Purchased
<PAGE>
Receivables, or the Collateral, not subject to subsection 9viii; (v) Seller
shall breach any covenant, agreement, warranty, or representation set forth
herein; (vi) Seller delivers any documents, financial statements, schedule or
report to Buyer which is false or incorrect in any material respect; (vii) any
present or future guarantor of the Obligations revokes, terminates or fails to
perform any of the terms of any guaranty, endorsement or other agreement of such
party in favor of Buyer or any affiliate of Buyer; or (viii) any judgment
involving an amount in excess of $25,000 (twenty-five thousand dollars) is
issued against the Seller, the Purchased Receivables, or the Collateral and
remains undischarged for fifteen (15) days thereafter.
Section 10. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default,
the Obligations shall bear interest at a rate per annum equal to the per annum
rate of the Finance Fee and Factoring Fee, and Buyer may, without implying any
obligation to buy Receivables, cease buying Receivables or extending any
financial accommodations to Seller, and (i) declare all Obligations immediately
due and payable; (ii) withhold any further payments to Seller until all
Obligations have been paid in full; (iii) notify all Account Debtors to pay
Buyer directly, whether such Receivable is a Purchased Receivable or not; (iv)
direct the U.S. Post Office or other party to forward mail to an address
specified by Buyer; (v) exercise all rights under the power of attorney set
forth in Section 5 above with respect to all Collateral and all remedies set
forth herein; (vi) settle, compromise, adjust or litigate Receivables on such
terms as Buyer deems necessary to protect its rights in said Receivables; (vii)
proceed against Seller or any guarantor directly without any obligations to
proceed against the Collateral; (viii) remove from Seller's premises and take
possession of the Collateral and dispose of same at public or private sale; (ix)
exercise any right or remedy with respect to Seller or the Collateral granted
under applicable law or this Agreement.
The Seller will pay to Buyer immediately upon demand all reasonable fees and
expenses of attorneys and other professionals that Buyer incurs in enforcing
this Agreement or any other agreement executed in connection herewith,
protecting or enforcing its interest in the Purchased Receivables or the
Collateral, or collection of the Purchased Receivables and the Obligations.
Section 11. SEVERABILITY, WAIVER OF RIGHTS. This Agreement constitutes the
entire Agreement between the parties and may not be notified or amended or any
right or remedy of Buyer waived, except by agreement of the parties in writing.
In the event that any provision of this Agreement is deemed invalid by reason of
law, this Agreement will be construed as not containing such provision and the
remainder of the Agreement shall remain in full force and effect. This Agreement
shall be binding upon the Seller and Buyer and their successors and assigns, but
may not be assigned by Seller without Buyer's written consent. Any delay or
failure by Buyer to exercise any right or remedy hereunder shall not operate as
a waiver thereof. A waiver by Buyer of a right or a remedy on one occasion shall
not be deemed a waiver of the right or remedy on any subsequent occasion.
Section 12. CHOICE OF LAW, JURISDICTION, WAIVER OF JURY TRIAL. This Agreement
has been transmitted by Seller to Buyer at Buyer's office in the State of
California and has been executed and accepted by Buyer in the State of
California. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California. Seller hereby irrevocably submits to
the jurisdiction of any California State or Federal court sitting in San
Francisco County in any action or proceeding arising out of or relating to this
Agreement, or any other agreements, and Seller hereby irrevocably agrees that
<PAGE>
all claims with respect to such action or proceeding may be heard and determined
in such California State court or, to the extent permitted by law, in such
Federal court. Seller consents to the service of any and all process in any such
action or proceeding by the mailing of copies of such process to Seller's
address specified in the Agreement. SELLER HEREBY WAIVES ITS RIGHT TO TRIAL BY
JURY IN ANY SUIT OR PROCEEDING ARISING UNDER OR RELATING TO THIS AGREEMENT.
Section 13. EFFECTIVENESS: TERM. This Agreement shall only become effective upon
execution and delivery by Seller and acceptance by Buyer and, unless earlier
terminated as provided in this Agreement, shall continue in full force and
effect for an initial term of 12 MONTHS from the date hereof and shall be deemed
automatically renewed for successive 12 MONTHS periods. Unless earlier
terminated as provided in this Agreement, all Obligations shall be due and
payable in full at the expiration of the last renewal term. This Agreement may
be terminated prior to the end of the initial term (a "Term") as follows: (a)
Seller may terminate this Agreement at any time after giving Buyer at least
thirty (30) days prior written notice and paying Buyer an Early Termination Fee
equal to TWO percent (2%) of the Maximum Credit (the "Early Termination Fee").
Any such termination shall be effective upon payment to Buyer in full of all
Obligations, including the Early Termination Fee; and (b) This Agreement shall
automatically terminate following the occurrence of an Event of Default under
Section 9. Upon any such termination following an Event of Default, all
Obligations, including the Early Termination Fee, shall be due and payable in
full.
Notwithstanding the foregoing, any termination of this Agreement shall not
affect Buyer's security interest in the Collateral and Buyer's ownership of the
Purchased Receivables, and this Agreement shall continue to be effective, and
Buyer's rights and remedies hereunder shall survive such termination, until all
transactions entered into and Obligations incurred hereunder or in connection
herewith have been completed and satisfied in full.
Section 14. PARTICIPATIONS: ASSIGNMENTS. Seller understands that Buyer may from
time to time transfer and assign its rights under this Agreement to one or more
assignees. Seller hereby consents to these transfers and assignments by Buyer to
one or more assignees. Seller hereby consents that any such assignee may
exercise the rights of the Buyer hereunder. Seller further hereby consents and
acknowledges that any and all defenses, claims or counterclaims that it may have
against the Buyer shall be limited to, and may only be brought against, Buyer
and may not extend to any assignee, including, but not limited to the funding
obligations.
Seller and Buyer intend that any and all direct assignees of the Buyer of the
type set forth above shall be the third party beneficiaries of this Agreement.
<PAGE>
IN WITNESS WHEREOF, Seller has executed and delivered this Agreement for
acceptance by Buyer as of the day and year above written. If this Agreement is
not witnessed by any authorized employee of Buyer, Seller must have their
signature acknowledged by a Notary Public.
SELLER CONCORD GROWTH CORPORATION WITNESS:
The Rose Group Corporation
By: /s/ SHELDON R. ROSE By:
----------------------------------- --------------------------------
Title: CHM-CEO Print Name:
-------------------------------- -------------------------
Signer's Driver's License No.
BUYER
CONCORD GROWTH CORPORATION
By: /s/ Donald J. Carvel
----------------------------------
Title: Assistant Vice President
-------------------------------
Date: 8-28-99
--------------------------------
INSTRUCTIONS TO NOTARY PUBLIC: Use an ACKNOWLEDGMENT FORM as the Buyer requires
identity verification.
State of New York
County of Rockland
Before me this 25th day of August 1997 came Sheldon R. Rose
Lucinda J. Persaud
Notary Public, State of New York
<PAGE>
Exhibit 10.6
AmSouth Bank FRESH BABIES, INC. AN
105.00 AFFILIATE OF THE ROSE GROUP
CORPORATION, A DELAWARE CORPORATION
Name of Bank AMSOUTH BANK CORPORATION
Account# 0000 2120 0003 8472 FlexLine
Amount $30,000.00
State FLORIDA Date of Agreement 1/25/99
BUSINESS FLEXLINE OF CREDIT AGREEMENT
This Agreement (the "Agreement") covers your Business FlexLine of
Credit Account ("Account") with us and the use of our Business FlexLine of
Credit Access Checks ("Access Checks") issued in connection with your Account.
The use of our telephone banking service ("Telephone Banking Service") in
connection with your Account is governed by this Agreement and the disclosure
statement relating to our Telephone Banking Service. As used in this Agreement,
the words "we", "our" and "us" mean the bank named above. The words "you",
"your" and "yours" mean any person or organization whose name appears on the
Access Checks or at whose request or authorization the Access Checks were
issued, including any person or entity who signs this Agreement, other than
someone who signs solely as an Authorized Signer in Section 32 below.
SECTION 1: DEMAND LOAN; INDIVIDUAL AND JOINT RESPONSIBILITY. You
promise to pay to us, on demand, the full amount of all loans made under your
Account, together with all finance charges and all other amounts, charges and
fees that may be assessed against your Account under this Agreement. Each of you
will be individually and jointly (jointly and severally) responsible for any
debt created by the use of your Access Checks or Telephone Banking Service,
including any debt created by anyone you allow to use your Access Checks or
Telephone Banking Service.
SECTION 2: HOW ACCESS CHECKS WORK. We will give you a supply of Access
Checks. You may use an Access Check from time to time to obtain a loan through
your Account. An Access Check drawn on your Account is a loan from us to you
from the time it is posted to your Account, and you will owe us for the amount
of the Access Check plus the applicable finance charge.
SECTION 3: HOW TELEPHONE BANKING SERVICE WORKS. If we establish
Telephone Banking Service for use in connection with your Account, you will be
able to obtain a loan through your Account by using the Telephone Banking
Service to request that the amount of the loan be deposited directly to a
checking account maintained with us. Any funds so deposited will be loans under
this Agreement and will be treated as such. You acknowledge that anyone who can
use or access your Telephone Banking Service can obtain loans from your Account
through the Telephone Banking Service. You hereby release us from any and all
liability for loans obtained from your Account through your Telephone Banking
Service. You can also make a payment on your Account by using the Telephone
Banking Service to request that the amount of the payment be transferred from a
checking account maintained with us to your Account. Please see the Telephone
Banking Customer Agreement and Disclosure Statement for more information about
services available through our Telephone Banking Service.
<PAGE>
SECTION 4: CONFLICTING REQUESTS. If your Account is in the name of two
or more persons or entities, you agree that we are authorized to honor any
Access Check or other request for a loan made by any of you, but in the event of
conflicting requests, we may, at our option, refuse to honor any requests not
made by all of you. If more than one person is listed as an Authorized Signer
under Section 34 below, you agree that we are authorized to honor any Access
Check or other request for a loan made by any Authorized Signer, but in the
event of conflicting requests, we may, at our option, refuse to honor any
request not made by all Authorized Signers. In any event, you will be
responsible for any requests of an Authorized Signer that we honor.
SECTION 5: CREDIT LIMIT. Your credit limit is shown on the Periodic
Statement we mail to you. We may change your credit limit from time to time
without prior notice to you. The total amount you owe us must never exceed your
credit limit without our permission. We have no duty to see that your credit
limit is not exceeded, and under some circumstances we may allow you to obtain
credit in excess of your credit limit. An overlimit charge of $25 will be
imposed on your Account if your credit limit is exceeded at any time during a
billing cycle.
SECTION 6: RESTRICTIONS ON LOANS. Each loan can be as large as you
like, so long as it does not exceed your available credit (the difference
between your credit limit and the sum of your outstanding Account balance plus
any loans or other debits that have not been posted to your Account). The
smallest amount you can borrow at one time, either by using your Access Checks
or through your Telephone Banking Service, is $250. This means that whenever you
use one of your Access Checks to obtain a loan, you must make it out for at
least $250, and whenever you use your Telephone Banking Service to obtain a
loan, you must request a loan of at least $250. You may get as many loans as you
wants, provided that the total you owe us does not exceed your credit limit.
SECTION 7: PERIODIC STATEMENT. We will send you a billing statement
("Periodic Statement") for each billing cycle at the end of which your Account
has a debit or credit balance or on which a finance charge has been imposed.
Each "billing cycle" is a period of from 26 to 36 calendar days whose beginning
and ending dates are determined from time to time by us in our discretion. Your
Periodic Statement will show all loans and other debits posted to your Account,
any finance charge, and other charges, payments and credits to your Account. You
Periodic Statement will also show the minimum payment due and other important
information. We will not send the Access Checks to you after they are paid, but
we will let you see copies of them if you need to. You agree to pay any charge
that we may reasonably impose when providing you with copies of Access Checks to
you after they are paid, but we will let you see copies of them if you need to.
You agree to pay any charge that we may reasonably impose when providing you
with copies of Access Checks. You should review each Periodic Statement
carefully and must advise us in writing of any errors within 60 days after we
mail it to your last address shown on our records.
SECTION 8: PAYMENTS. Unless sooner demanded, when you receive your
Periodic Statement, you may pay as much of the new balance (total amount owing)
as you like. the least amount you may pay, however, is the "minimum payment due"
shown on your Periodic Statement. The minimum payment due will be equal to
[check the appropriate box]:
XX any amount past due plus the largest of (i) 3% of the new balance,
(ii) $250, or (iii) the applicable finance charge; or
<PAGE>
any amount past due plus the applicable finance charge.
Of course, the minimum payment due will never exceed the new balance shown on
your Periodic Statement. Whatever you choose to pay, your payment must reach us
no later than the "payment due date" shown on your Periodic Statement.
SECTION 9: APPLYING PAYMENTS. We will apply payments and credits to
your Account in this order:
(a) to any finance charge included in your previous balance;
(b) to any miscellaneous fees (such as late fees, annual maintenance
charge, and overlimit charges) included in your previous balance;
(c) to any remaining portion of your previous balance;
(d) to any loans and other debits posted during the billing cycle; and
(e) to any finance charge imposed during the billing cycle.
SECTION 10: FINANCE CHARGE. A finance charge will be imposed on each
loan posted to your Account during a billing cycle from the day we post it.
Also, a finance charge will be imposed, from the closing date of the billing
cycle, on the new balance (less any finance charge and late charge included in
that balance). There is no "free-ride period" within which payments may be made
in order to avoid finance charges completely.
To determine your finance charge, we multiply your average daily
balance during each billing cycle by the monthly periodic rate. The monthly
periodic rate is figured by dividing the annual percentage rate then in effect
for your Account (determined each billing cycle as set forth in Section 11) by
12.
We figure your average daily balance by adding your closing daily
balances during the billing cycle and dividing the result by the number of days
in that cycle. We compute your closing daily balances by starting with the
previous balance (which is the same as the new balance shown on your last
Periodic Statement), less any finance charge, late charge and other fees
included on that statement. We add loans to that balance as of the day we post
them. We subtract any payments and credits as of the day we post them. You may
verify the total amount of finance charges appearing on your Periodic Statement
by multiplying the average daily balance by the monthly periodic rate.
SECTION 11: VARIABLE RATE. The annual percentage rate (and monthly
periodic rate) on your Account may vary from billing cycle to billing cycle
based upon increases and decreases in the "Prime Rate." The "Prime Rate" is the
highest rate of interest published from time to time as the "prime rate" in the
Wall Street Journal Money Rates table.
The ANNUAL PERCENTAGE RATE on your Account for each billing cycle will
be 2.00% above the Prime Rate in effect on the first day of that billing cycle.
Adjustments in the annual percentage rate (and the monthly periodic rate) will
take effect on the first day of each billing cycle. Your Periodic Statement will
reflect the annual percentage rate (and the monthly periodic rate) in effect
over the billing cycle.
The annual percentage rate on your Account may increase if the Prime
Rate in effect on the first day of the billing cycle increases. The annual
percentage rate will not increase more than once each billing cycle. Any
increase will take the form of increased periodic finance charges and may result
in increased minimum payment amounts.
SECTION 12: ANNUAL MAINTENANCE CHARGE AND LATE CHARGE. We will impose
an annual non-refundable charge in the amount of $100 for establishing and
<PAGE>
maintaining the Account. We will assess this charge on the date of the first
Periodic Statement (shown as the "Cycle Closing Date") sent to you after the
opening of the Account and every twelfth month thereafter. You agree to pay a
late charge equal to the greater of $15 or 5% of any past due amount when any
minimum payment is not paid within 12 days after the payment due date shown on
your Periodic Statement.
SECTION 13: RETURNED CHECK FEE. A returned check fee may be imposed if
you make a payment on your Account with a check, draft, negotiable order of
withdrawal, or similar instrument drawn on a depository institution and such
instrument is not paid or is dishonored by that depository institution. This fee
will not be more than the greater of $15 or the actual amount charged by the
depository institution for the return on the instrument.
SECTION 14: SECURITY INTEREST. Your obligations under this Agreement
may be secured by any mortgage, deed of trust, security deed, deed to secure
debt, security agreement, pledge, hypothecation, or other similar document or
agreement whether executed in connection with this Agreement and whether or not
such document, instrument or agreement makes specific reference to this
Agreement. Collateral security other loans with us may also secure your
obligations under this Agreement.
SECTION 15: UPDATED CREDIT INFORMATION. You agree to notify us
immediately if any adverse change in your credit or financial condition occurs.
You further agree to provide us with such updated credit or financial
information as we may request from time to time.
SECTION 16: AUTOMATIC ACCELERATION. In the event of or on the happening
of any one or more of the following events, your obligations under this
Agreement shall, without notice or demand, immediately become due and payable
with interest to date, we may exercise the rights and remedies available to us
pursuant to any instrument securing your obligations under this Agreement, and
we shall not have any obligations to make further loans or advances on your
Account:
a. The death of you or any of your obligations to us ("Guarantor");
b. The insolvency of you or any Guarantor;
c. A general assignment for the benefit of creditors by you or any
Guarantor;
d. A judgment against you or any Guarantor;
e. The filing of a petition seeking relief under Title 11 of the United
States Code or any other applicable federal or state bankruptcy law by or
against you or any Guarantor;
f. The filing of application in any court for the appointment of a
receiver for you or any Guarantor;
g. The issuance of a writ of garnishment or attachment in a suit or
action against you or any Guarantor or against any of the assets of you or any
Guarantor; or
h. We determine that a change in circumstances has occurred that would
adversely affect your ability to meet your obligations under this Agreement.
SECTION 17: COLLECTION COSTS. If we have to take steps to collect
anything you owe us on your Account, you agree to pay all our costs and expenses
of collection, including reasonable attorneys' fees and court costs.
SECTION 18: STOPPING PAYMENT ON ACCESS CHECKS. If you want to stop
payment on an Access Check, you may do so by calling us at (205) 326-5700. You
must tell us your Account number, the party to whom you wrote the Access Check
and the date, number and amount of the Access Check. If you do not contact us at
least 2 hours before we receive an Access Check, we may not be able to stop
payment on it. If you choose to stop payment on any Access check, you agree to
pay our standard fee then in effect for stopping payment on a check.
SECTION 19: LOSS, THEFT OR UNAUTHORIZED USE OF SPECIAL CHECKS. You may
be liable for the unauthorized use of your Access Checks. Under the federal
Truth-in-Lending Act (the "Act"), you will not be liable for unauthorized use of
a credit card (as defined in the Act) that occurs after you notify us, orally or
in writing of the loss, theft or possible unauthorized use. You may notify us by
calling us at 1-800-231-7493 or by writing to us at P.O. Box 216, Birmingham, AL
35201. In any case, your liability for the unauthorized use of a credit card (as
defined in the Act) will not exceed $50.
You must notify us in writing within 24 hours if your Access Checks are
lost, stolen or used without your permission.
When we receive your notice, to protect you, we may choose to treat
your Account as if it has been terminated by assigning you a new Account number.
If this happens and if you are making payments to your Account through our
Telephone Banking Service, be sure to notify us at 1-800-888-2455 (or, in
Birmingham, 326-5300) to make sure that your payments are properly credited.
As used in this agreement, "unauthorized use" means the use of your
Access Checks by a person, other than you, who does not have actual, implied or
apparent authority for such use, and from which you receive no benefit.
<PAGE>
SECTION 20: LIMITS ON OUR RESPONSIBILITY. If we refuse to honor one of
your Access Checks for any reason whatsoever, including, without limitation,
electronic, telephonic or computer malfunction, we will not be legally
responsible to you in any way. We will not be legally responsible if anyone
refuses to accept an Access Check for any reason whatsoever, including, without
limitation, electronic, telephonic or computer malfunction. Under the Act, if
you have a problem with property or services purchased with a credit card (as
defined in the Act), you may have the right to withhold payment from us or to
use against us certain claims and defenses you have against a merchant honoring
a credit card (as defined in the Act). Your rights under the Act are explained
in the last paragraph of the billing error rights notice that follows this
Agreement. This Agreement does not affect your rights under the Act. However, if
the Act does not give you the right to withholder payment from us or to use a
particular claim or defense against us in connection with property or services
purchased with an Access Check, you agree not to withhold payment or to use the
claim or defense and that we are not responsible for the property or services.
You also agree that we may make any adjustments or refunds by crediting your
Account.
SECTION 21: CLOSING YOUR ACCOUNT. Either you or we may close your
Account at any time. If your Account is closed, we will not have any obligation
to make any further advances on your Account and any outstanding balance on your
Account shall, without notice, at our option, become immediately due and payable
twenty years from the date of this Agreement.
SECTION 22: CANCELING AN AUTHORIZED SIGNER'S AUTHORITY. If you want to
cancel an Authorized Signer's authority to sign Access Checks, you should notify
us in writing. If you are a corporation, you must provide us with a corporate
resolution revoking the Authorized Signer's authority.
SECTION 23: CHANGING THIS AGREEMENT. We can change any of the terms of
this Agreement (including the finance charge, annual percentage rate, terms of
payment and any fees) at any time. We will mail a notice of any changes to the
last address we have for you. The changes will become effective 30 days after we
mail them unless we state otherwise in the notice. All Changes will apply both
to outstanding and new loans and to the outstanding balance then in your Account
unless we tell you otherwise. Except as provided in this paragraph, any
amendment, modification or waiver of the terms and provisions of this Agreement
must be in writing and signed by our officer.
SECTION 24: ENFORCING OUR RIGHTS. We can delay enforcing any of our
rights under this Agreement without losing them. The fact that we waive our
rights in one instance does not mean we will waive them in other instances. All
our rights can be enforced against your heirs, legal representatives, successors
or assigns.
SECTION 25: NO ASSIGNMENT. You may not assign your Account, or your
Access Checks.
SECTION 26: NOTICES. You agree to keep us informed of any changes in
your address. If we mail you a letter, notice or statement at the last address
appearing in our records, we can assume that you have received it. If you send a
notice of letter to us, it must be sent to us at the address shown on your
Periodic Statement as the address to which questions about your statement should
be sent.
<PAGE>
SECTION 27: USE OF ACCOUNT. You agree that each loan made with the
Access checks or through your Telephone Banking Service will have a business or
commercial purpose and will not be for personal, family or household use.
SECTION 28: WAIVERS. You (a) waive demand as a result of any of the
events listed in Section 16; (b) waive presentment, protest, notice of protest,
notice of dishonor, suit against any party and all other requirements necessary
to hold you liable; (c) waive as to this debt or any renewal or extension
thereof all rights of exemption under the Constitution or laws of any state as
to personal property; (d) agree that time of payment may be extended one or more
times for any period of time or other indulgence may be granted without notice
of or consent to such action and without release of your liability; (e) as to
all or any part of your obligations under this Agreement, consent to our
releasing, agreeing not to sue, suspending the right to enforce this Agreement
against or otherwise discharging or compromising any obligation of any person
against whom you have a right of recourse, all without notice to or further
reservations of right against you, and all without in any way affecting or
releasing your liability; and (f) consent to our releasing, exchanging or
otherwise dealing in any manner with all or any portion of any collateral, lien,
or right of set-off which may now or hereafter secure your obligations under
this Agreement, all without notice to or further reservations of rights against
you, and all without in any way affecting or releasing your liability, even
though such release, exchange or other dealing may in any manner and to any
extent impair any such collateral, lien or right of set-off.
SECTION 29: SET-OFF. In addition to all liens upon, and rights of
set-off against, any monies, securities, or other property of yours given to us
by law, we shall have a lien upon and a right of set-off against all monies,
securities and other property of yours now or hereafter in our possession or on
deposit with us, whether held in a general or special account or deposit, for
safekeeping, or otherwise; and every such lien and right of set-off may be
exercised without demand or notice, and we shall have no liability with respect
to any checks or other items which may be returned or other funds transfers
which may not be made due to insufficient funds thereafter.
SECTION 30: ARBITRATION. Subject to the provisions of the next
paragraph below, any controversy, claim, dispute or disagreement arising out of,
in connection with or relating to (1) the negotiation, execution,
collateralization, administration, repayment, modification, extension or
collection of this Agreement, the Account or any agreement or instrument
relating to this Agreement or the account, or (2) an alleged tort relating in
any way to this Agreement, the Account or any agreement or instrument relating
to this Agreement or the Account, shall be settled by arbitration in accordance
with the Commercial Arbitration rules of the American Arbitration Association.
The Expedited Procedures of said rules shall apply in any dispute where the
aggregate of all claims and the aggregate of all counterclaims each is an amount
less than $1,000,000. Judgment upon any award rendered by the arbitrator(s) in
any such arbitration may be entered in any Court having jurisdiction thereof.
Any demand for arbitration under this agreement shall be made no later than the
date when any judicial action upon the same matter would be barred by any
applicable statute of limitations. The locale of any arbitration proceedings
under this agreement shall be in Birmingham, Alabama, unless you and we mutually
agree otherwise. You and we specifically acknowledge and agree that this
Agreement evidences, and the Advances under the Account are, "transactions
involving commerce" under the Federal Arbitration Act, and you and we hereby
waive and relinquish any right to claim otherwise.
<PAGE>
Neither anything contained in the preceding paragraph nor the exercise
of any right to arbitrate shall limit the right of you or use to (1) foreclose
against any real or personal property collateral by the exercise of the power of
sale under a deed of trust, mortgage, security deed, deed to secure debt, or
other security agreement or instrument or under applicable law; (2) exercise any
self-help remedies such as setoff or repossession; or (3) obtain provisional or
ancillary remedies such as replevin, injunctive relief, attachment, or
appointment of a receiver from a court having jurisdiction, before, during or
after the pendency of any arbitration proceeding. This arbitration provision
shall not be interpreted to require that any such remedies be stayed, abated or
otherwise suspended pending any arbitration or request for arbitration. The
exercise of a remedy shall not waive the right of either party to resort to
arbitration.
SECTION 31: GOVERNING LAW, ETC. This Agreement will be governed by the
law of the state named at the top of this Agreement. If any provision of this
Agreement is held to be invalid or unenforceable, the remaining provisions of
this Agreement will remain in full force and effect.
SECTION 32: INTEREST. All agreements made in this Agreement are
expressly limited so that in no event whatsoever shall the interest and loan
charges agreed to be paid to us for the use of the money advanced or to be
advanced hereunder exceed the maximum amounts collectible under applicable laws
in effect from time to time. If for any reason whatsoever the interest or loan
charges paid or contracted to be paid in respect of the indebtedness evidenced
hereby shall exceed the maximum amounts collectible under applicable laws in
effect from time to time, then IPSO FACTO, the obligations to pay such interest
and/or loan charges shall be reduced to the maximum amounts remaining unpaid
hereunder and/or refunded to you so that at no time shall the interest or loan
charges paid or payable in respect of the indebtedness evidenced hereby exceed
the maximum amounts permitted from time to time by applicable laws. This
provision shall control every other provision in any and all other agreements
and instruments now existing of hereafter arising between you and us with
respect to the indebtedness evidenced hereby.
SECTION 33: ARTICLE HEADINGS. All titles and paragraph headings
contained in this Agreement are for references only and shall not in any way
affect the meaning or interpretation of this Agreement.
SECTION 34: AUTHORIZED SIGNERS. The following persons ("Authorized
Signer(s)") are authorized to sign Access Checks until we receive written notice
from you (or, if you are a corporation, a corporate that such authority has been
revoked:
Name SHELDON R. ROSE Signature /s/ Sheldon R. Rose
-------------------- -------------------
Name Signature
-------------------- -------------------
Name Signature
-------------------- -------------------
SECTION 35: SIGNATURES. By signing this Agreement, you acknowledge
receipt of a copy of this Agreement and agree to be bound by its terms and
conditions.
CAUTION--IT IS IMPORTANT THAT YOU THOROUGHLY READ THE AGREEMENT
BEFORE YOU SIGN IT
<PAGE>
FRESH BABIES, INC.
AN AFFILIATE OF THE ROSE GROUP CORPORATION, A DELAWARE CORPORATION
BY: /s/ Sheldon R. Rose [SEAL] [SEAL]
------------------------- ---------------------------------
SHELDON R. ROSE
ITS PRESIDENT
[SEAL] [SEAL]
-------------------------- ---------------------------------
If you have any questions about your Account, please write us at Revolving
Credit Center, P.O. Box 216, Birmingham, Alabama 35201 or telephone (205)
326-5700.
YOUR BILLING RIGHTS-KEEP THIS NOTICE FOR FUTURE USE
If the Fair Credit Billing Act applies to any transactions under your
Account, this notice contains important information about your rights and our
responsibilities under the Fair Credit Billing Act.
NOTIFY US IN CASE OF ERRORS OR QUESTIONS
ABOUT YOUR STATEMENT
If you think your statement is wrong, or if you need more information about a
transaction on your statement, write us on a separate sheet at the address
listed on your statement. Write to us as soon as possible. We must hear from you
no later than 60 days after we sent you the first statement on which the error
or problem appeared. You can telephone us, but doing so will not preserve your
rights.
In your letter give us the following information:
(a) Your name and account number;
(b) The dollar amount of the suspected error;
(c) Describe the error and explain, if you can, why you believe there
is an error. If you need more information, describe the item you are not sure
about.
YOUR RIGHTS AND OUR RESPONSIBILITIES AFTER WE RECEIVE YOUR WRITTEN NOTICE
We must acknowledge your letter within 30 days, unless we have corrected the
error by then. Within 90 days, we must either correct the error or explain why
we believe the statement was correct.
After we receive your letter, we cannot try to collect any amount you
question or report you as delinquent. We can continue to bill you for the amount
you question, including finance charges, and we can apply any unpaid amount
against your credit limit. You do not have t pay any questioned amount while we
are investigating, but you are still obligated to pay the parts of your
statement that are not in question.
If we find that we made a mistake on your statement, you will not have to pay
any finance charges related to any questioned amount. If we didn't make a
mistake, you may have to pay finance charges, and you will have to make up any
missed payments on the questioned amount. In either case, we will send you a
statement of the amount you owe and the date that it is due.
If you fail to pay the amount that we think you owe, we may report you as
delinquent. However, if our explanation does not satisfy you and you write to us
within ten days telling us that you still refuse to pay, we must tell anyone we
report you to that you have a question about your statement. And, we must tell
you the name of anyone we reported you to. We must ell anyone we report you to
that the matter has been settled between us when it finally is.
If we don't follow these rules, we can't collect the first $50 of the
questioned amount, even if your statement was correct.
<PAGE>
SPECIAL RULE FOR CREDIT CARD PURCHASES
If you have a problem with the quality of property or services that you
purchased with a credit card, and you have tried in god faith to correct the
problem with the merchant, you may have the right not to pay the remaining
amount due on the property or services. There are two limitations on this right:
(a) you must have made the purchase in your home state or, if not
within your home state, within 100 miles of your current mailing address; and
(b) the purchase price must have been more than $50.
These limitations do not apply if we own or operate the merchant, or if we
mailed you the advertisement for the property or services.
<PAGE>
Addendum and Supplement
to
Business FlexLine of Credit Agreement
This Addendum is made and entered into on the 25th day of Jan. 99 between you
and AmSouth Bank and is incorporated into and made part of the Business FlexLine
of Credit Agreement (the "Agreement") signed by you on this date as fully and
completely as if the terms contained in the Addendum were set out completely in
the Agreement.
1. DEFINITIONS-All terms used in this Addendum that are defined in
the Agreement shall have the meaning given to them in the
Agreement.
2. DISCOUNTED ANNUAL PERCENTAGE RATE-No matter what Section 11 of the
Agreement says, until the first day of your seventh full billing
cycle, the ANNUAL PERCENTAGE RATE on your Account for each billing
cycle will be 6.75%. Beginning on the first day of your seventh
full billing cycle, the ANNUAL PERCENTAGE RATE on your account
will be determined in accordance with Section 11 of the Agreement.
The Annual Percentage Rate on your Account may increase on the first day of your
seventh billing cycle even if the Prime Rate in effect on that day remains the
same or decreases. The Agreement contains information on other circumstances
under which the Annual Percentage Rate may increase, any limitations on
increases in the Annual Percentage Rate, and the effects of the increases in the
Annual Percentage Rate.
3. NO OTHER CHANGES-Except as specifically changed in this Addendum,
all the terms, conditions and provisions contained in the
Agreement remain unchanged and in full force and effect.
FRESH BABIES, INC.
AN AFFILIATION OF THE ROSE GROUP CORPORATION
A DELAWARE CORPORATION
By: /s/ Sheldon R. Rose
----------------------
SHELDON R. ROSE
Its: PRESIDENT
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES
1. The Rose Group Corporation, a Delaware corporation d/b/a in the State of
Florida under the assumed name Fresh Babies, Inc.
2. Rosebaby.com of Utah, Inc., a Utah corporation.
<PAGE>
Exhibit 23.1
PENDER NEWKIRK & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
100 SOUTH ASHLEY DRIVE
SUITE 1650
TAMPA, FL 33602
Consent of Independent Auditors
We hereby consent to the use of our Auditors' opinion, dated April 8, 1999, in
the March 31, 1999 Form 10-SB to be filed by The Rose Group Corporation of
Nevada, Inc. accompanying the financial statements of The Rose Group Corporation
of Nevada, Inc. as of December 31, 1998 and 1997 and the results of operations
and its cash flows for the years ended December 31, 1998 and 1997.
Pender Newkirk & Company
Certified Public Accountants
Tampa Florida
July 21, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001091810
<NAME> THE ROSE GROUP CORPORATION OF NEVADA
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 148,699
<SECURITIES> 0
<RECEIVABLES> 29,336
<ALLOWANCES> 0
<INVENTORY> 69,863
<CURRENT-ASSETS> 274,798
<PP&E> 37,350
<DEPRECIATION> 10,013
<TOTAL-ASSETS> 549,215
<CURRENT-LIABILITIES> 330,219
<BONDS> 0
0
0
<COMMON> 6,014
<OTHER-SE> 286,100
<TOTAL-LIABILITY-AND-EQUITY> 549,215
<SALES> 151,182
<TOTAL-REVENUES> 151,182
<CGS> 86,302
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 205,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,594
<INCOME-PRETAX> (146,118)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (146,118)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
