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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS USERS
UNDER SECTION 12(b) or 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
SILK BOTANICALS.COM, INC.
(formerly Diversified Restaurant Holdings, Inc.)
(Name of Small Business Issuer In Its Charter)
FLORIDA 65-0886132
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
975 S. CONGRESS AVENUE, SUITE 102, DELRAY BEACH, FLORIDA 33445
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(Address of Principal Executive Offices) (Zip Code)
(561) 265-3600
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(Issuer's Telephone Number)
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH EACH
TO BE REGISTERED- - CLASS IS TO BE REGISTERED
N/A N/A
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SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT:
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TITLE OF EACH CLASS TO BE REGISTERED
Common Stock Par Value $.001
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Copies of Communications Sent to:
Robert C. Hackney, Esq.
Hackney & Miller, P.A.
4400 PGA Blvd., Suite 505
Palm Beach Gardens, Florida 33410
Telephone: (561-627-0677) Fax: (561) 625-4685
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PART I
Forward-Looking Statements. This Registration Statement includes
"forward-looking statements" as defined in Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which represent the
Company's objectives, expectations or beliefs, including but not limited to,
statements concerning industry performance, the Company's operations, economic
performance, financial conditions, growth strategies and margins and growth in
sales of the Company's products. 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 foregoing, words
such as "may," "will," "expect," "believe," "anticipate," "intend," "plan,"
"believe," "estimate," "consider," or similar expressions are used.
You should not construe any forward-looking statement as a guarantee of future
performance. These statements inherently involve risks, uncertainties and
assumptions. The Company's future results and stockholder values will differ
from those expressed in these forward-looking statements, and those variations
may be material and adverse. Many of the factors that will affect these results
and values are beyond our ability to control or predict. In addition, we do not
have any intention or obligation to update forward-looking statements after this
registration statement becomes effective, even if new information, future events
or other circumstances have caused statements expressed in this registration
statement to become incorrect or misleading.
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY. Silk Botanicals.Com, Inc. was organized under the name of
Diversified Restaurant Holdings, Inc. ("Diversified") on November 20, 1998 in
the State of Florida. On April 9, 1999, Diversified acquired JRB Marketing of
South Florida, Inc., a Florida corporation incorporated in October 1996. With
this new business acquisition, Diversified amended its Articles of Incorporation
on August 2, 1999 to change its name to "Silk Botanicals.Com, Inc." JRB
Marketing of South Florida, Inc. and Silk Botanicals.Com, Inc. are referred to
herein as the "Company."
BUSINESS OF THE COMPANY. The Company develops, markets and distributes three
lines of high-quality artificial flowers - artificial greenery and floral
arrangements in baskets and containers and artificial floral arrangements in
clear glass vases set in epoxy providing the illusion of fresh flowers in water.
These products are marketed under the Silk Botanicals, "Living Silk/registered
trademark/" and "Forever Fresh/registered trademark/." names. The Company
markets and sells these products to gift retailers, decorative accessory
retailers, and the hospitality industry. The artificial foliage and flowers are
imported primarily from Taiwan, Hong Kong and the Peoples Republic of China. The
Company purchases artificial flowers from U.S. based importers and U.S.
subsidiaries of foreign companies located in the U.S. Glassware is purchased
from domestic manufacturers. The Company's silk botanical products are produced
by JRB Enterprises, Inc. under a Manufacturing Agreement.
Independent research by Jacobs, Jenner & Kent of Baltimore, Maryland, in their
study on the Permanent Floral Products Industry, has revealed three important
opportunities which the Company has and will continue to address: (1) there is
little awareness of artificial floral brands among consumers, (2) merchandise
with retail prices less than $30 is the preferred choice for retailers and their
customers, and (3) gift boxes enhance merchandising. The Company plans to embark
on a program to build brand awareness, develop three product lines targeting
three distinct markets - gift retailers, decorative accessories retailers, and
the hospitality industry - and is developing gift boxes for select products.
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PRODUCTS. The Company has developed over 200 floral and greenery arrangements
and a special gift box for its line of bud vase arrangements. The Company
believes the gift box will be well accepted by national gift and retail store
chains and has plans to develop gift boxes for other vases in its product lines.
Arrangements are sold as get well gifts by hospital gift shops and as gifts for
birthdays, anniversaries, Christmas, Chanukah, Valentines Day, Easter and
Mothers Day. Styles retailing for $20.00 to $50.00 have been strong sellers for
these markets. The Company further believes that the quality of the product will
enable customers to overcome any reluctance to buying artificial flowers. In
addition, styles priced from $58.00 to $198.00 are sold as decorative
accessories and house warming gifts for the consumer and decorative accents for
the hospitality industry. The Company plans to develop new products that would
be less seasonal.
It is estimated that approximately $500,000 will be required to fund this phase
of the Company's development. The funds will be used to expand marketing efforts
to include gift retailers in the western United States and the hospitality
industry, develop additional product and marketing materials enabling the
Company to separately target the gift and decorative accessories markets,
increase inventories and accounts receivables. In addition, management will
undertake an evaluation of alternative channels of distribution including
partnerships with major chains to home base distributors, web sites, and
franchising.
CUSTOMER SERVICE. The Company strives to serve its customers with accurate and
on-time delivery of its products. Retail and chain stores demand a high level of
service to assure full product availability for their customers. The Company
offers a variety of distribution services depending on its customers' needs. The
Company also provides its customers with high quality customer and ordering
services. Its sales force assists customers in identifying products from the
Company's lines and works closely with them to furnish the best products for
their store requirements.
QUALITY ASSURANCE. As part of its quality assurance program, the Company intends
to carefully selects its suppliers and perform periodic product inspections,
both prior to shipment and after receipt. The Company expects to experience
negligible returns of defective or damaged products.
COMPETITION. The artificial floral industry is competitive but highly fragmented
with many small players in the manufacturing end. Therefore, Management believes
that an excellent opportunity exists for the Company and its product lines and
that there are a variety of ways to compete in this industry.
The Company's primary competitors are other assemblers, importers and
distributors. Some of these competitors focus on price and others specialize in
a particular product segment. The Company competes primarily on the basis of
merchandising, high quality product lines, supply dependability, price and
brand name recognition. The Company's competitors are not focused on the gift
industry, have not developed products targeting the gift industry, nor have they
developed packaging to gift industry standards.
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The barriers to entry to the Company's industry are relatively low. The Company
believes, however, that attaining success in the industry is difficult but that
it has competitive advantages, including its ability to fill orders quickly and
completely and provide a high level of customer service, high quality products,
competitive prices and brand names. The Company believes the industry does not
have a single dominant retailer or wholesaler of high quality artificial
greenery and flower arrangements. To date, the only importer, manufacturer or
distributor of artificial flowers whose shares are publicly traded is Celebrity,
Inc. (FLWR).
SALES AND MARKETING. The Company intends to market its products using the
"Forever Fresh/registered trademark/" and "Living Silk/registered trademark/
trademarks which are licensed for thirty-six (36) years. The Company believes it
has found a niche in the gift industry. According to Retail Industry Indicators
in 1997, gift and general merchandise is a $49 billion market annually in the
United States. The overall target market for the Company's products is composed
of almost 200,000 stores, including general merchandise stores, catalog and mail
orders, florists, gift stores and furniture and home furnishing stores. The
Company intends to build a national base of gift stores and develop
relationships that have been recently forged with several regional and national
chains. In addition, the Company's marketing efforts will be through its Web
site, trade shows, direct mail, telemarketing and manufacturer representatives.
EMPLOYEES. Currently the Company employs six part-time and six full-time
employees. It anticipates increasing the staff with six new employees at the end
of March 2000 and with an additional ten new employees by March 2001.
KEY EMPLOYEES: The Company's key employees are Joseph R. Bergmann, President,
Chief Executive Officer and Director; Regina M. Bergmann, Director of Personnel;
Jerry Frenz, Controller, Gail Scheel, Director of Advertising and Marketing; and
Joyce Bernard, Merchandise Manager.
LIMITED OPERATING HISTORY: The Company has a very limited operating history upon
which an evaluation of the Company's prospects can be made. The Company's
prospects must be considered speculative, considering the risks, expenses, and
difficulties frequently encountered in the establishment of a new business.
There can be no assurance that the Company will be able to achieve profitable
operations.
REPORTS TO SECURITY HOLDERS: Once this Registration Statement becomes effective,
the Company will become a reporting company with the Securities and Exchange
Commission ("SEC"), and will thereafter provide an annual report to its security
holders, which will include audited financial statements. The public may read
and copy any materials filed with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may also obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC. The address of that site is WWW.SEC.GOV. The
Company currently maintains its own Internet address at WWW.SILKBOTANICALS.COM.
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ITEM 2. PLAN OF OPERATION
Based on financial projects prepared by management, the Company estimates that
approximately $500,000 will be required to fund its development plans. The funds
will be used to expand marketing efforts to include gift retailers in the
western United States and in the hospitality industry, develop and expand its
Web site, develop additional product and marketing materials to enable the
company to separately target the gift and decorative accessories markets,
increase inventories and accounts receivables, develop new products, and
increase its staff.
PRODUCT DEVELOPMENT: Much of the efforts since its inception have been on
product design and development. The design staff studies competitive fresh cut
and artificial arrangements, researches new sources of stems and vases, surveys
retailers and end users for preferences, and tests prototypes in focus groups
and by sampling. The Company is focused not only on meeting production
requirements, but also in developing new product. The Company design staff have
developed and refined over 200 arrangements by communicating with customers and
by attending silk and fresh flower trade shows.
As the product line has been refined, the focus has shifted to packaging and
merchandising. Although competitors offer similar products, the Company is not
aware of any that have focused its energies on developing a brand, marketing to
the gift market, and responding to the packaging requirements of this market.
The Company will continue to diversify to meet retailers' demands for quality
and value. The products will create revenue streams as follows:
BASIC LINE: The basic line is drawn from the existing unboxed designs, sold and
shipped in bulk. These are inexpensive and serve as the opening price point for
gift stores. The Company believes that this product sells especially well for
tabletop displays, for parties, and to the hospitality market.
FOREVER FRESH/registered trademark/ GIFT-BOXED LINE: This line is the Forever
Fresh arrangements packaged in a branded window gift box. Benefits to the
retailer include Uniform Product Code ("UPC") labels for inventory and Point of
Sale ("P.O.S."), reduction of breakage, and enhanced on-shelf merchandising.
Wholesale prices range from $8.00 to $14.00 and retail from $16.00 to $30.00 per
unit. This product line includes some of the following:
o Special Occasion merchandise (Easter, Valentine's Day, Birthdays,
Get Well) and for special people (Wives, Mothers, Teachers).
o Twin-pack boxed gifts will also be tested, i.e. small floral
vase with candle.
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o Special seasonal arrangements, country arrangements, exotic
florals, and greenery.
o Desktop accessories such as bud vases and mini floral arrangements.
CATALOG PROGRAM SALES: Catalog program sales are basic line and custom products
that are suitable for "drop shipping." The Company's products will appear in
upcoming Smithsonian Institute and Touch of Class catalogs. The Company
continually seeks new and diversified catalogs to carry their products.
GENERIC/PRIVATE LABEL GIFT-BOXED PRODUCT: The Company will develop and package a
line of 10-12 permanent floral gifts in private label windowed gift boxes with
seasonal designs.
SIGNATURE SERIES: The Company's design staff is developing the Company's
signature line of large floral arrangements. These will wholesale for $100.00 to
$300.00. Upon completion this line will be released and marketed to home
accessories retailers and hospitality providers through manufacturers'
representatives. Other designer containers will be introduced that will enhance
the silk flowers and fit into custom interiors.
MARKET DEVELOPMENT: The Company will continue to cater to the needs of gift
retailers and expand its marketing efforts to include the western half of the
United States. The Company plans to target five segments of the market:
INDEPENDENT GIFT SHOPS. Businesses that own/operate one or two retail locations;
STRAND GIFT BUSINESSES: Companies that own/operate from three to twenty- five
retail locations;
CHAIN STORES: Companies that own a nationally or regionally recognized retail
gift business;
CATALOGS: Companies that sell products directly to consumers via direct mail
catalogs; and,
DEPARTMENT STORES: The Company has begun to work closely with department stores,
rather than discounters, to develop products to meet their specifications.
By identifying and categorizing the prospect list, current sales presentations
will be modified and new presentations developed, to meet specific needs of
current and future customers. Secondary target markets will continue to include
home furnishings retailers, hotels and restaurants, corporate gifts and
furnishings, the military (exchanges, commissaries, and officers clubs).
SALES AND MARKETING. The Company will use the following marketing tactics to
achieve its financial objectives:
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TRADE SHOWS: The Company believes most sales are generated through trade shows
where the products can be properly displayed to their fullest effect. The
Company currently participates in wholesale trade shows and anticipates
increasing the number of shows they attend:
GIFT INDUSTRY TRADE SHOWS. The gift and general merchandise industries purchase
approximately $1 billion of products at gift trade shows each year. Buyers
prefer to view the merchandise in person before buying for their businesses and
trade shows provide this opportunity. The Company believes that participating in
these shows will enhance sales due to the visual nature of the product.
HIGH POINT, NC FURNITURE SHOW. This trade show is the only resource dedicated by
the Company to general sales within the furniture industry. Furniture stores
represent a projected 13% of the Company's sales, making attendance at this show
cost effective. The Company anticipates participation in other furniture shows
as well.
ALA MILITARY TRADE SHOW. The ALA Military Trade Show is the annual, exclusive
buying show for military bases and exchanges. It represents the only opportunity
to show and sell products to this lucrative business category. Forever
Fresh/registered trademark/ and the Department of the Air Force expect to
finalize a Non-Appropriated Funds Contract in the Fall of 1999 enabling the
Company to provide artificial floral arrangements to all military installations.
RESTAURANT SUPPLY TRADE SHOWS: The Company has initiated a search to retain a
sales organization that targets restaurants and hotels. Trade shows will be an
important component of the sales efforts.
MANUFACTURERS' REPS: Independent sales organizations sell products through road
sales and trade shows. The Company has signed contracts with representative
companies that maintain permanent showrooms in Atlanta, Columbus and Chicago for
the east coast of the United States. The Company plans to increase
representation on the west coast with representatives who can provide quality
temporary or permanent show space.
COLOR CATALOGS: Full color catalogs have been produced for both Forever
Fresh/registered trademark/ and Living Silk/registered trademark/. These are
being used to sell the most important and popular designs in both lines.
DIRECT MAIL: Holiday and seasonal product designs will be presented to existing
customers and prospects through direct mail. Trade show schedules and special
events are also announced through direct mail.
TELEMARKETING: The Company plans to contact its complete customer base at least
four times a year. Two of the calls will be used for pre-show marketing and the
other two calls will sell specific holiday packages (the Valentine's Day and
Mother's Day collections). Additionally, all direct mail recipients will receive
a follow-up call.
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WEB SITE: The Company has plans to fully develop its Web site,
WWW.SILKBOTANICALS.COM. The site is expected to be operational in the fall of
1999. The Company will display its product lines and accept orders through its
site, as well as provide information on the company for potential investors.
SELL SHEETS: Sell Sheets will be used to show the individual products at trade
shows and in direct mail presentations. The Company will use sell sheets to
expand the use of packages, to introduce and sell new products, and increase
Basic Line sales. The package themes include: Valentine and Mother's Day,
Summer, Christmas, and the Table Top Collection.
The sales and marketing plans take into account the Company's desire to expand
operations both financially and geographically. While the Company continues to
build on the solid base of 2,000+ customers, with additions to the sales force,
enhanced trade shows schedules, print advertising and direct mail programs, and
product development, it will be able to achieve its revenue and market share
objectives.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's administrative, warehousing and distribution facilities are
located at 955 and 975 South Congress Avenue in Delray Beach, Florida. The
Company currently subleases this property, which consists of approximately
20,000 square feet of prime, high end commercial space. The existing sublease
expires in May 2003, and the terms include additional ten year options. Various
leasehold improvements have been made to this facility to support the
anticipated growth which will come from the Company's new projects. The Company
carries sufficient insurance coverage on the property, equipment and inventory.
In addition, the Company leases a variety of point of sale computer equipment
and software at its headquarters, as well as office and warehouse equipment. The
Company believes that these facilities are adequate for the foreseeable future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the beneficial
ownership of the Company's common stock as of August 2, 1999, by (i) each person
or entity known by the Company to be beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each of the Company's directors and
named executive officers, and (iii) all directors and executive offices of the
Company as a group.
<TABLE>
<CAPTION>
TITLE OF CLASS NAME & ADDRESS AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER CLASS
<S> <C> <C>
Common Joseph R. Bergmann 4,042,687 Shares* 64.7%
Par Value $.001 975 S. Congress Ave President & Director
Delray Beach, FL
Common Directors & Officers 4,042,687 Shares* 64.7%
Par Value $.001 As a Group
</TABLE>
*Of this number, 1,042,688 shares are issued to Joseph R. Bergmann IRA.
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CHANGES IN CONTROL. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF THE COMPANY. Said persons are
listed on the following table:
<TABLE>
<CAPTION>
NAME POSITION AGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph R. Bergmann President, Secretary & Director 51
Regina M. Bergmann Director of Personnel 50
Joyce Bernard Merchandise Manager 57
Jerry Frenz Controller 51
Gail Scheel Director of Advertising & Marketing 57
</TABLE>
BIOGRAPHICAL INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS:
JOSEPH R. BERGMANN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr.
Bergmann oversees the entire operation of the Company. He is responsible for
merchandising of products, as well as the formation and implementation of the
Company's marketing plans. Prior to his tenure with the Company, he was
President of Jewelmasters, Inc., a public multimillion dollar fine jewelry
company. He also served as Senior Vice President of Federated Department Stores.
Mr. Bergmann currently serves as President of JRB Enterprises, Inc. He is a
graduate of Queens College in New York.
BIOGRAPHICAL INFORMATION ON SIGNIFICANT EMPLOYEES:
REGINA M. BERGMANN, DIRECTOR OF PERSONNEL. Ms. Bergmann serves as the Company's
Director of Personnel and participates in the daily operations of the business.
JOYCE BERNARD, MERCHANDISE MANAGER. Ms. Bernard has direct responsibility for
purchasing, manufacturing, inventory control and shipping and receiving. She has
over 15 years experience in the floral industry. Prior to joining the Company,
Ms. Bernard held various merchandising positions with Ben Franklin Stores, Inc.
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JERRY FRENZ, CONTROLLER. Mr. Frenz is responsible for the financial reporting as
well as budgeting cash management and special product analysis. Mr. Frenz has
over 25 years of experience in key financial management positions including
Controller, and Director of Accounting. Mr. Frenz began his career in public
accounting as a CPA with Arthur Andersen & Co. He held various financial
management positions at two multi-billion dollar companies, Case and FPL Group,
Inc. and received his Accounting degree at the University of Wisconsin -
Whitewater.
GAIL SCHEEL, DIRECTOR OF ADVERTISING AND MARKETING. Ms. Scheel is responsible
for the Company's advertising programs including media analysis and selection,
advertising scheduling and advertising promotion. Ms. Scheel majored in
Marketing at DePaul University.
FAMILY RELATIONSHIPS. Joseph R. Bergmann, President, Chief Executive Officer and
Director and Regina M. Bergmann, Director of Personnel, are husband and wife.
ITEM 6. EXECUTIVE COMPENSATION
The Table below summarizes the annual compensation for services in all
capacities to the company for the (i) person(s) serving as the Company's Chief
Executive Officer; and (ii) the Company's four most highly compensated executive
officers other than the CEO for the last fiscal year:
<TABLE>
<CAPTION>
(i)
NAME TITLE SALARY/FISCAL YEAR BONUS AWARDS
RESTRICTED STOCK
<S> <C> <C>
Joseph R. Bergmann President $35,000.00 N/A N/A
(ii)
Not Applicable.
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 9, 1999, Diversified Restaurant Holdings, Inc. acquired JRB Marketing
of South Florida, Inc. from Joseph R. Bergmann in a stock for stock exchange.
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The Company will purchase its silk botanical products from JRB Enterprises,
Inc., which is owned by the Company's President and majority stockholder. On
April 1, 1999, the Company entered into a Manufacturing and Distribution
Agreement with JRB Enterprises, Inc. for a term of six years with the right to
extend the term for six additional terms. JRB Enterprises, Inc. will invoice the
Company for products and distribution of the products at rates to be negotiated
periodically between the Company and JRB Enterprises, Inc.
Additionally, the Company shares office facilities, certain office equipment and
certain employees with JRB Enterprises, Inc. At May 31, 1999, the Company had
issued 1,900 shares of preferred stock to JRB Enterprises, Inc. for the license
rights to the trademarks Living Silk and certain manufacturing processes. The
Company owed JRB Enterprises, Inc. $138,338 at May 31, 1999, for the purchase of
inventory, a computer and software, and monies JRB Enterprises, Inc. had
advanced the Company in acquiring the trademark and manufacturing process rights
to the Forever Fresh/registered trademark/ line of floral arrangements.
JRB Enterprises, Inc., one of the Company's primary suppliers of artificial
plants and foliage, is owned by Joseph R. Bergmann, President and Majority
Shareholder of the Company.
On April 10, 1999, the Company entered into an exclusive license agreement to
market and distribute artificial greenery and floral arrangements with the
Living Silk and Silk Botanicals trademarks owned by JRB Enterprises, Inc.
Additionally, the license agreement granted the Company the exclusive right to
use the manufacturing process of the Living Silk(TM) and Silk Botanicals(TM)
products. As consideration for the license agreement the Company issued
preferred stock to JRB Enterprises, Inc. valued at $190,000. The Company further
agreed to pay JRB Enterprises, Inc. royalty payments of 5% of the net amount
invoiced by the Company, or any affiliate, for Living Silk(TM) or Silk
Botanicals(TM) products invoiced to any third party during the initial six year
term. For additional periods of up to six, six year terms, the Company agreed to
pay one quarter of one percent (.25%) of its net sales per annum for all Living
Silk(TM) and Silk Botanicals(TM) products sold to any third party.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 25,000,000 shares of common stock, $.001 par
value, each share of common stock having equal rights and preferences, including
voting privileges. As of August 2, 1999, 6,250,000 shares of common stock were
issued and outstanding.
The Company is authorized to issue 5,000,000 shares of preferred stock at $.001
par value. As of August 2, 1999, 1,900 shares of preferred stock were issued and
outstanding. The preferred shares were designated and issued upon such terms and
conditions as the Board of Directors determined appropriate and as more
particularly defined in the Board of Directors Resolution dated April 10, 1999.
The terms and conditions stated the following: a) Payment of a quarterly
dividend at the annual rate of 6.0%; b) Said dividends to be cumulative and have
priority over the Common Stock; (c) The Preferred Stock will not be convertible
and shall have no voting rights; and (d) The Preferred Stock will have a value
of $100.00 per share. No additional shares of preferred stock have been issued.
If additional shares are issued, the conditions that may be set by the Board of
Directors include, but are not limited to, the entitlement of the holders of the
preferred shares to (a) cumulative, non-cumulative or partially cumulative
dividends, (b) the preference over any other class or classes of shares as to
the payment of dividends, (c) the preference in the assets of the corporation
over any other class or classes of shares upon the voluntary or involuntary
liquidation of the corporation, (d) the convertibility, if any, into shares of
any class or into shares of any series of the same or any other class, and (e)
voting rights, if any.
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PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
MARKET INFORMATION.
Currently the Company's equity is not publicly traded.
HOLDERS.
As of August 2, 1999, the Company has a total of 72 holders of its common stock.
DIVIDENDS.
There have been no cash dividends declared on the Company's common stock since
the Company's inception. Dividends will be declared at the sole discretion of
the Company's Board of Directors.
ITEM 2. LEGAL PROCEEDINGS.
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
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ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company pursuant to Item 304 of Regulations S-B.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES AND
USE OF PROCEEDS
From November 20, 1998 through April 6, 1999, the Company issued 1,814,187
shares of its common stock to a total of 71 individuals in an offering exempt
from registration under Rule 504 of Regulation D promulgated pursuant to the
Securities Act of 1933. On April 9, 1999, the Company issued an aggregate of
4,435,813 shares in an offering exempt from registration under Section 4(2) of
the Securities Act of 1933, in exchange for all of the issued and outstanding
common stock of JRB Marketing of South Florida, Inc.
USE OF PROCEEDS: All funds generated will be used by the Company for working
capital.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act eliminates the personal liability of the
Company's Directors to the Company and its shareholders for monetary damages as
a result of a breach of fiduciary duty with certain exceptions. Such a provision
makes it more difficult to assert a claim and obtain damages from a director in
the event of breach of his fiduciary duty.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
MAY 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION
IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
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SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
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OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
TABLE OF CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 16
FINANCIAL STATEMENTS
Balance Sheet 17
Statements of Operations 18
Statements of Stockholders' Equity 19
Statements of Cash Flows 20
Notes to Financial Statements 21
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Silk Botanicals.Com, Inc.
formerly known as Diversified Restaurant Holdings, Inc.
We have audited the accompanying balance sheet of Silk Botanicals.Com, Inc.,
formerly known as Diversified Restaurant Holdings, Inc. (a development stage
company), as of May 31, 1999, and the related statements of operations,
stockholders' equity and cash flows for the period October 2, 1996 (inception)
to May 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Silk Botanicals.Com, Inc.,
formerly known as Diversified Restaurant Holdings, Inc. (a development stage
company), as of May 31, 1999, and the results of its operations and its cash
flows for the period October 2, 1996 (inception) to May 31, 1999 in conformity
with generally accepted accounting principles.
The Company is in the development stage and to date has had no significant
operations. The continuation of the Company's business is dependent upon its
ability to obtain adequate financing arrangements and ultimately, future
profitable operations.
/s/ Sweeney, Gates & Co.
Ft. Lauderdale, FL
August 11, 1999
16
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MAY 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Inventory $ 57,353
---------
Total current assets 57,353
Property and equipment 1,500
License rights 269,485
---------
$ 328,338
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,414
Due to related party 138,338
---------
Total current liabilities 159,752
---------
STOCKHOLDERS' EQUITY
Series A preferred stock, $.001 par value, 1,900 shares
authorized, issued and outstanding 2
Preferred stock, $.001 par value, 4,998,100 authorized,
none issued and outstanding -
Common stock, $.001 par value, 25,000,000 shares authorized,
6,250,000 shares issued and outstanding (Note 8) 6,250
Additional paid-in capital 861,458
Deficit accumulated during the development stage (699,124)
---------
Total stockholders' deficit 168,586
---------
$ 328,338 0
=========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
17
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
October 2,
1996
(inception)
Year ended May 31, through
------------------------ May 31
1999 1998 1999
-------- ---------- ---------
<S> <C> <C> <C>
Revenues:
General and administrative expenses $(694,688) - $(699,124)
Net loss $(694,688) $ - $(699,124)
---------- ---------- ----------
Net loss per share of common stock:
Basic and diluted $ (0.14) $ -
========= ==========
Weighted average number of common shares:
Basic and diluted 4,865,095 4,435,813
========= ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
18
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during the
Preferred Stock Common Stock paid-in development
Shares Amount Shares Amount capital stage Totals
------ -------- ------ ------ ---------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 2, 1996 (inception) - $ - - $ - $ - $ - $ -
Issue founders shares ($.001 per share) - - 4,435,813 4,436 - - 4,436
Net loss - - - - - (4,436) (4,436)
------ -------- --------- ----------- -------- ------------ ---------
Balance, May 31, 1997 - - 4,435,813 4,436 - (4,436) -
Net loss - - - - - - -
------ -------- --------- ----------- -------- ------------ ---------
Balance, May 31, 1998 - - 4,435,813 4,436 - (4,436) -
Issuance of preferred stock 1,900 2 - - 189,998 - 190,000
Issuance of stock to additional
founding stockholders - - 335,187 335 - - 335
Issuance of stock in a 504 offering - - 1,452,750 1,453 671,460 - 672,913
Issuance of stock for services rendered - - 26,250 26 - - 26
-
Net loss - - - - - (694,688) (694,688)
------ -------- --------- ----------- -------- ------------ ---------
Balance, May 31, 1999 1,900 $ 2 6,250,000 $ 6,250 $861,458 $(699,124) $ 168,586
====== ======== ========= ========= ======== ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
19
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
October 2,
1996
(inception)
Year ended May 31, through
---------------------- May 31
1999 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(694,688) $ - $(699,124)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued in noncash transactions 671,821 - 676,257
Changes in assets and liabilities:
Increase in inventory (57,353) - (57,353)
Increase in license rights (79,485) - (79,485)
Increase in accounts payable 21,414 - 21,414
Increase in due to related parties 138,338 - 138,338
--------- ---------- ----------
Net cash used in operating activities 47 - 47
Cash flows from investing activities:
Purchase of property and equipment (1,500) - (1,500)
Cash flows from financing activities:
Proceeds from issuance of common stock 1,453 - 1,453
--------- ---------- ----------
Change in cash - - -
Cash at beginning of period - - -
--------- ---------- ----------
Cash at end of period $ - $ - $ -
========= ========== ==========
Supplemental disclosures:
Cash payments during the development stage:
Interest $ - $ - $ -
========= ========== ==========
Income taxes $ - $ - $ -
========= ========== ==========
Noncash disclosure of investing and financing
activities:
Preferred stock issued for licensing rights $190,000 $ - $ 190,000
========= ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
20
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
1. ORGANIZATION
NATURE OF ORGANIZATION - Silk Botanicals.Com, Inc. (the "Company"), formerly
known as Diversified Restaurant Holdings, Inc., was organized November 20, 1998
in the state of Florida. The Company is a development stage company and plans to
develop, market and distribute high quality artificial flowers, artificial
greenery and floral arrangements under the trademark names, Living Silk and
Forever Fresh.
On April 9, 1999, the Company acquired all the outstanding common stock of JRB
Marketing of South Florida, Inc., ("JRB") a Florida corporation formed October
2, 1996. For accounting purposes, the transaction has been treated as a reverse
acquisition of the Company by JRB and as a recapitalization of JRB. The
recapitalization resulted in the issuance of 4,435,813 shares and the recording
of $4,436 in expenses. The historical financial statements prior to November 20,
1998 are those of JRB. No pro forma information is presented, as the acquisition
is not a business combination. At the time of this transaction, JRB had no
assets or operations. As such, the financial statements of the Company reflect
the accounting for JRB as if JRB had been the reporting entity from inception.
Prior to acquiring JRB, the Company owned 99% of the stock of Southern Dragon,
Inc. ("Southern"), also a development stage company, in the restaurant industry.
On March 31, 1998, the Company sold the stock of Southern back to Southern and
began concentrating on the development, marketing and distribution of artificial
flowers, greenery and floral arrangements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORY - Inventory at May 31, 1999, consisted primarily of finished floral
and greenery arrangements and is valued at the lower of cost or market.
FURNITURE AND EQUIPMENT - Furniture and equipment are recorded at cost.
Depreciation will be provided on a straight-line basis over the estimated useful
lives of the assets.
LICENSE RIGHTS - The rights to various licenses acquired by the Company have
been recorded at cost. The rights will be amortized, when placed in service, on
the straight-line basis over the term of the license rights agreements, which is
six years.
INCOME TAXES - The Company accounts for income taxes on an asset and liability
approach to financial accounting. Deferred income tax assets and liabilities are
computed annually for the difference between the financial statement and tax
basis of assets and liabilities that will result in taxable or deductible
amounts in the future, based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period, plus or minus the change during the period
in deferred tax assets and liabilities.
21
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATES - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EARNING PER SHARE - The Company has utilized Financial Accounting Standards No.
128, "Earnings per Share" ("FAS 128"). FAS 128 requires presentation of earnings
or loss per share on basic and diluted earnings per share. The Company does not
have any potentially dilutive shares outstanding. Earnings or loss per share is
computed by dividing net income by the weighted average number of shares
outstanding during the period.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates the recoverability of
its property and equipment, and other assets in accordance with Statement of
Financial Accounting Standards No.121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires recognition
of impairment of long-lived assets in the event the net book value of such
assets exceeds the estimated future undiscounted cash flows attributable to such
assets or the business to which such intangible assets relate. No impairments
were required to be recognized during the period from October 2, 1996 to May 31,
1999.
SEGMENT REPORTING - In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information"("SFAS 131"). This statement
requires companies to report information about operating segments in interim and
annual financial statements. It also requires segment disclosures about products
and services, geographic areas and major customers. The Company has determined
that it did not have any separately reportable operating segments as of May 31,
1999, or for the period October 2, 1996 to May 31, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS - In April 1998, the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). SOP 98-5 requires that start-up costs, including
organizational costs, be expensed as incurred. The Company has accepted early
adoption of SOP 98-5 and expensed all start-up costs.
22
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
3. LIQUIDITY AND GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business.
The Company has minimal capital available to meet future obligations and to
carry out its planned operations. The Company reported a net loss, has negative
working capital, and to date has not commenced the marketing and distribution of
artificial floral and greenery arrangements.
To address this issue, the Company signed a manufacturing agreement with an
established manufacturer of silk botanical products (the "Manufacturer") (see
Note 4). The Company will concentrate on marketing quality products to new
wholesale markets. Management anticipates funding the Company's initial
operations through advances from the Manufacturer. If circumstances permit, the
Company intends to pursue other sources of capital in the equity market. The
Company cannot predict whether the operating and financing plans described above
will be successful. If the Company is unable to successfully commence operations
or obtain additional financing, it may not be able to continue as a going
concern and may be unable to meet its obligations. The financial statements do
not include any adjustments that might result from the outcome of the
uncertainty.
4. RELATED PARTY TRANSACTIONS
The Company will purchase its silk botanical products from the Manufacturer
owned by the Company's President and majority stockholder. On April 1, 1999, the
Company entered into a manufacturing and distribution agreement with the
Manufacturer for a term of six years with the right to extend the agreement for
six additional six-year terms. The Manufacturer will invoice the Company for
products and distribution of the products at rates to be negotiated periodically
between the Company and the Manufacturer.
Additionally, the Company shares office facilities, certain office equipment and
certain employees with the Manufacturer. At May 31, 1999, the Company had issued
1,900 shares of preferred stock to the majority stockholder for the license
rights to the trademark Living Silk /registered trademark/ and certain
manufacturing processes. The Company owed the Manufacturer $138,338 at May 31,
1999, for the purchase of inventory, a computer and software, and monies the
Manufacturer had advanced the Company in acquiring the trademark and
manufacturing process rights to the Forever Fresh /registered trademark/ line of
floral arrangements.
23
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
5. LICENSE RIGHTS
On December 21, 1998, the Company purchased an exclusive license for the right
to assemble and distribute the "water-look" floral arrangements and the
trademark and copyright materials of Forever Fresh /registered trademark/ from a
producer in South Florida. The term of the license agreement is for six years
with the right to extend for additional terms of six years each, unless
terminated by either party at the end of any six-year term. As part of the
agreement, the Company paid $72,260 for inventory and the license rights. The
Manufacturer advanced the funds for the payment. Additionally, the Company
agreed to make royalty payments of 5% of the net amount invoiced by the Company
or any affiliate, for Forever Fresh /registered trademark/ products during the
initial six year term. For additional periods of up to six, six-year terms, the
Company agreed to pay one quarter of one percent (.25%) of its net sales per
annum of all Forever Fresh /registered trademark/ products sold to any third
party.
During April 1999, the Company entered into an exclusive license agreement to
market and distribute artificial greenery and floral arrangements with the
Living Silk and Silk Botanicals trademarks owned by the Manufacturer.
Additionally, the license agreement granted the Company the exclusive right to
use the manufacturing process of the Living Silk (TM) and Silk Botanicals (TM)
products. As consideration for the license agreement, the Company issued
preferred stock to the Manufacturer valued at $190,000. The Company further
agreed to pay the Manufacturer royalty payments of 5% of the net amount invoiced
by the Company, or any affiliate, for Living Silk (TM) or Silk Botanicals (TM)
products invoiced to any third party during the initial six-year term. For
additional periods of up to six, six-year terms, the Company agreed to pay one
quarter of one percent (.25%) of its net sales per annum for all Living Silk
(TM) and Silk Botanicals (TM) products sold to any third party.
6. EQUITY
PREFERRED STOCK - The Company is authorized to issue 5,000,000 shares of
preferred stock of which a total of 1,900 shares were designated as Series A
preferred stock. This series is entitled to receive dividends at the rate of
$6.00 per share per annum payable quarterly. Such dividends are cumulative and
hold a preference over any other distribution. This series shall have no voting
rights nor conversion features. The rights, preferences and limitations of any
additional series of preferred stock will be determined by the Board of
Driectors.
COMMON STOCK -On November 20, 1998, the Company issued 335,188 shares of common
stock to additional founders of the Company and recorded an expense of $335 for
the issuance. These shares were issued at par value since no operations existed
in the Company. On November 30, 1998, the Company issued 25,000 shares of common
stock as compensation for services rendered and recorded an expense of $100,
which was expensed by Southern prior to the Company's recapitalization. From
January 2, 1999 until March 31, 1999, the Company issued 99,000 shares of common
stock for cash of $49,500, which was utilized by Southern prior to the
recapitalization. Additionally, during the same period, the Company issued 1,250
shares of common stock in compensation for services rendered and recorded an
expense of $625, which was expensed by Southern prior to the Company's
recapitalization. The Company issued, from April 1, 1999 through April 6, 1999,
1,353,750 shares of common stock and recorded an expense of approximately
$671,460, which approximates market value. All of the stock issued has been
restated to reflect the reverse stock split of 1 for 4 (see Note 8).
24
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
6. INCOME TAXES
The Company had no taxable income since its inception, and as a result recorded
no tax expense. The Company had available at May 31, 1999, approximately $20,000
of unused operating loss carryforwards that may be applied against future
taxable income that expires through 2019. The Company has recorded a deferred
tax asset of approximately $5,000, and has offset the deferred tax asset with a
valuation allowance of $5,000, since realization of the deferred tax asset is
uncertain. Utilization of the operating loss carryforwards may be severely
limited by the change of business and control.
8. SUBSEQUENT EVENTS
On July 29, 1999, the Company's Board of Directors approved a 1 for 4 reverse
split of its common stock, retroactively effective as of May 31, 1999. All
common shares and the per share amounts in the accompanying audited financial
statements have been restated for the effects of the reverse split.
On August 2, 1999, the Company officially changed its name to Silk
Botanicals.Com, Inc.
25
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
The Exhibits listed below are filed as part of this Registration Statement.
EXHIBIT NUMBER DOCUMENT
-------------- ---------
2.1 Articles of Incorporation
2.2 Articles of Amendment to Articles of
Incorporation of Diversified Restaurant
Holdings, Inc.
2.3 Articles of Amendment to Articles of
Incorporation of Silk Botanicals. Com, Inc.
2.4 Bylaws
6.1 License Agreement Between Forever Fresh,
Inc. and JRB Marketing of South Florida, Inc.
6.2 Manufacturing and Distribution Agreement
6.3 Agreement Between Diversified Restaurant
Holdings, Inc. and Joseph R. Bergmann
6.4 License Agreement Between JRB Enterprises,
Inc. and JRB Marketing of South Florida,
Inc./Diversified Restaurant Holdings, Inc.
23.1 Consent of Sweeney, Gates & Co., Auditors
to the Company
26
<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.
Dated: August 24, 1999 SILK BOTANICALS.COM, INC.
By: /s/ Joseph R. Bergmann
-----------------------
Joseph R. Bergmann
Its: President and Secretary
27
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
2.1 Articles of Incorporation
2.2 Articles of Amendment to Articles of
Incorporation of Diversified Restaurant
Holdings, Inc.
2.3 Articles of Amendment to Articles of
Incorporation of Silk Botanicals. Com, Inc.
2.4 Bylaws
6.1 License Agreement Between Forever Fresh,
Inc. and JRB Marketing of South Florida, Inc.
6.2 Manufacturing and Distribution Agreement
6.3 Agreement Between Diversified Restaurant
Holdings, Inc. and Joseph R. Bergmann
6.4 License Agreement Between JRB Enterprises,
Inc. and JRB Marketing of South Florida,
Inc./Diversified Restaurant Holdings, Inc.
23.1 Consent of Sweeney, Gates & Co., Auditors
to the Company
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
DIVERSIFIED RESTAURANT HOLDINGS, INC.
FIRST: The name of the corporation is Diversified Restaurant Holdings,
Inc. (the "Corporation").
SECOND: The corporation is authorized to issue twenty five million
(25,000,000) shares of Common Stock, $.OOI par value, which shall be designated
"Common Shares" and five million (5,000,000) shares of Preferred Stock, $.OOI
par value, which shall be designated "Preferred Shares." The Preferred Shares
shall be designated and issued in such series and upon such terms and conditions
as the Board of Directors may from time to time see fit. Such terms and
conditions shall include, but not be limited to, the entitlement of the holders
of the Preferred Shares to (a) cumulative, non-cumulative or partially
cumulative dividends, (b) the preference over any other class or classes of
shares as to the payment of dividends, (c) the preference in the assets of the
corporation over any other class or classes of shares upon the voluntary or
involuntary liquidation of the corporation, (d) the convertibility, if any, into
shares of any other class or into shares of any series of the same or anv other
class, and (e) voting rights, if any.
THIRD: The Corporation is organized for the purpose of transacting any
and all lawful business.
FOURTH: The number of directors constituting the initial Board of
Directors of the corporation is one and the name and address of the person who
is to serve as the initial director is:
Larry M. Reid
4 Via Lucindia North
Stuart, Florida 34996
1
<PAGE>
FIFTH: The name and address of the incorporator, the street address of
theCorporation's initial registered office and the name of its initial
registered agent at that office are:
Jonathan B. Reisman
5 1 00 Town Center Circle
Boca Raton, FL 33486
SIXTH: The street address of the initial principal office and the
mailing address of the corporation is:
4 Via Lucindia North
Stuart, Florida 34996
SEVENTH: The Corporation elects not to be governed by Section 607.0901
of the Florida Business Corporation Act.
DATED: November 17, 19998
- -------------------------------------
Jonathan B. Reisman
Incorporator and Initial Registered Agent
ACCEPTANCE OF REGISTERED AGENT
The undersigned registered agent for Diversified Restaurant Holdings,
Inc. hereby accepts such appointment and is familiar with, and accepts the
obligations of that position.
---------------------------------
Jonathan B. Reisman
2
EXHIBIT 2.2
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
DIVERSIFIED RESTAURANT HOLDINGS, INC.
1. The following provision of the Articles of Incorporation of
Diversified Restaurant Holdings, Inc., a Florida corporation (the "Company")
filed in Tallahassee on November 20, 1998, and pursuant to Sections 607.0704,
607.0725, 607.0726, 607.1001 and 607.1003 of the Florida Business Corporation
Act, be and hereby is amended to read as follows:
ARTICLE FIRST be and hereby is amended to read as follows:
The name of the corporation is Silk Botanicals.Com, Inc.
2. The foregoing amendment was adopted by a majority of the Company's
Shareholders on the 29th day of July, 1999, in accordance with the provisions of
the Florida Business Corporation Act.
IN WITNESS WHEREOF, the undersigned President and Secretary of the
Company has executed this Article of Amendment on the 30th day of July, 1999.
DIVERSIFIED RESTAURANT HOLDINGS, INC.
-------------------------------------------
Joseph R. Bergmann, President and Secretary
1
<PAGE>
STATE OF FLORIDA
COUNTY OF PALM BEACH
On this 30th day of July, 1999, before me, a Notary Public, duly
authorized in the State and County named above to take acknowledgments,
personally appeared JOSEPH R. BERGMANN, to me known to be the person whose name
is subscribed to the within instrument, and he acknowledged that he executed the
same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
- --------------------------------
Notary Public - State of Florida
My Commission Expires:
2
EXHIBIT 2.3
ARTICLES OF AMENDMENT TO ARTICLES
OF INCORPORATION
SILK BOTANCIALS.COM, INC.
1. The following provisions of the Articles of Incorporation of
Diversified Restaurant Holdings, Inc., a Florida corporation, filed in
Tallahassee on November 20, 1998, document number P98000098924 and amended on
August 2, 1999, be and they hereby are amended in the following particulars:
The Second Article of the Articles of Incorporation is hereby amended
to read as follows:
SECOND
The Company is authorized to issue 25,000,000 shares of Common Stock
having a par value of $.001 each. Additionally, the Company is
authorized to issue 5,000,000 shares of Preferred Stock, having a par
value of $.001 each. The Preferred Stock may be issued in series from
time to time with such designation, rights, preferences and limitations
as the Board of Directors of the Company may determine by resolution. A
total of 1,900 shares of the Preferred Stock are hereby designated as
Series A Preferred Stock, and the preferences for this Series A are set
forth below in Article XI. The rights, preferences and limitations of
any additional series of Preferred Stock (other than the Series A
Preferred Stock) may differ with respect to such matters as may be
determined by the Board of Directors, including, without limitation,
the rate of dividends, method and nature of payment of dividends, terms
of redemption, amounts payable on liquidation, sinking fund provisions
(if any), conversion rights (if any), and voting rights."
1
<PAGE>
Article Eighth - Preferred Stock Provisions for Series A Preferred
Stock is hereby added to the Articles of Incorporation, as follows:
"ARTICLE EIGHTH"
PREFERRED STOCK PROVISIONS FOR SERIES A PREFERRED STOCK
The Company has created a class of Preferred Stock which shall be
issued in connection with transactions wherein the Company will execute a
license agreement for the use of certain trademarks.
A. DIVIDENDS
The holders of shares of Series A Preferred Stock shall be
entitled to receive, out of any assets at the time legally available
therefor and when and as declared by the Board of Directors, dividends
at the rate of Six Dollars ($6.00) per share per annum, and no more,
payable in cash quarterly commencing on June 30, 1999 and thereafter on
the last day of September, December, March and June of each year that
any Series A shall be outstanding. Such dividends are prior and in
preference to any declaration or payment of any distribution (as
defined below) on the Common Stock of this corporation. Such dividends
shall accrue on each share of Series A from day to day from the date of
initial issuance thereof whether or not earned or declared so that if
such dividends with respect to any previous dividend period at the rate
provided for herein have not been paid on, or declared and set apart
for, all shares of Series A at the time outstanding, the deficiency
shall be fully paid on, or declared and set apart for, such shares
before any distribution shall be paid on, or declared and set part for
the Common Stock.
For purposes of the above paragraph, "distribution" shall mean the
transfer of cash or property without consideration, whether by way of
dividend or otherwise, payable other than in common stock, or the
purchase or redemption of shares of this corporation for cash or
property, including any such transfer, purchase or redemption by a
subsidiary of this corporation.
2
<PAGE>
B. VOTING RIGHTS AND CONVERSION RIGHTS
The shares of Series A Preferred Stock shall have no voting rights, and
shall have no conversion rights.
C. NEGATIVE COVENANTS
(1) This corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this section and in the taking of
all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Series A Preferred Stock
against impairment.
D. CHANGES AFFECTING SERIES A PREFERRED STOCK
(1) So long as any shares of Series A Preferred Stock are
outstanding, the corporation shall not, without first obtaining the
approval by vote or written consent, in the manner provided by law, of
the holders of at least a majority of the total number of shares of
Series A Preferred Stock outstanding, voting separately as a class, (1)
alter or change any of the powers, preferences, privileges, or rights
of the Series A Preferred Stock; or (2) amend the provisions of this
paragraph (G); or (3) create any new class or series of shares having
preferences prior to or being on a parity with the Series A Preferred
Stock as to assets."
2. The foregoing amendments were adopted by all of the Directors of the
corporation on the 10th day of April, 1999.
IN WITNESS WHEREOF, the undersigned President and Secretary of this
corporation have executed these Articles of Amendment this 18th day of August,
1999.
-------------------------------------------
Joseph R. Bergmann, President and Secretary
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STATE OF FLORIDA
COUNTY OF PALM BEACH
BEFORE ME, the undersigned authority, personally appeared Joseph R.
Bergmann, President of the corporation, known to me to be the person who
executed the foregoing Articles of Amendment and he acknowledged before me that
he executed such instrument for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 18th day
of August, 1999.
--------------------------------------------
Notary Public - State of Florida
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EXHIBIT 2.4
BYLAWS
OF
DIVERSIFIED RESTAURANT HOLDINGS, INC.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be established and maintained at 4 Via Lucinda North, Stuart, in the State
of Florida. SECTION 2. OTHER OFFICES. The Corporation may have other offices,
either within or without the State of Florida, at such place or places as the
Board of Directors may determine from time to time or the business of the
Corporation may require.
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ARTICLE II
SEAL
The Corporation shall have a corporate seal which shall be in circular form and
have inscribed thereon the name of the Corporation and the year of its
incorporation and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced upon any paper or
document.
ARTICLE III
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETING. All meetings of the shareholders shall be
held at such place within or without the State of Florida as shall be designated
from time to time by the Board of Directors and stated in the notice of such
meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. The annual meeting of the shareholders of
the Corporation shall be held the first Friday in May, beginning in 1999. If the
day fixed for the annual meeting shall be a legal holiday in the State of
Florida or the state or jurisdiction where the meeting is to be held, such
meeting shall be held on the next succeeding business day. The purpose of the
annual meeting of shareholders shall be to elect directors and to transact such
other business as may come before the meeting. If the election of directors
shall not be held on the day designated herein for the annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors shall cause
such election to be held at a special meeting of the shareholders as soon
thereafter as conveniently may be.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, may be called by the Board of Directors or the holders
of not less than one-tenth (1/10) of all the shares entitled to vote at the
meeting, or the President.
SECTION 4. NOTICE OF MEETINGS. Whenever shareholders are required or
authorized to take any action at a meeting, a notice of such meeting, stating
the place, day and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered, not
less than ten (10) nor more than sixty (60) days before the date set for such
meeting, either personally or by first-class mail, by or at the direction of the
President or the Secretary, to
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each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder, at his address as it appears on the stock transfer
books of the Corporation, with first-class postage prepaid thereon. Written
waiver by a shareholder of notice of a shareholders' meeting, signed by him
whether before or after the time stated thereon, shall be equivalent to the
giving of such notice.
SECTION 5. ACTION BY CONSENT IN WRITING. Any action required or
permitted to be taken at any annual or special meeting of the shareholders of
this Corporation may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of all of the outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
SECTION 6. QUORUM. The majority of the shares entitled to vote thereat,
present or represented by proxy at any meeting, shall constitute a quorum of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Articles of Incorporation. If, however, such quorum shall not
be present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting, subject to the provisions of Section 4 hereof.
SECTION 7. REQUIRED VOTE. If a quorum is present at any meeting, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders,
unless the question is one for which, by express provision of the law or
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of the Articles of Incorporation or these Bylaws, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
SECTION 8. VOTING AND PROXIES. Except as otherwise provided in the
Articles of Incorporation or by the terms of any outstanding series of Preferred
Stock of the Corporation, each shareholder shall be entitled at each meeting and
upon each proposal presented at such meeting to one vote in person or by proxy
for each share of voting stock recorded in his name on the books of the
Corporation on the record date fixed as below provided, or if no such record
date was fixed, on the day of the meeting. Every proxy must be signed by the
shareholder or his attorney in fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the shareholder
executing it, except as otherwise provided by law. If a proxy expressly
provides, any proxy-holder may appoint in writing a substitute to act in his
place.
SECTION 9. VOTING LISTS. The Secretary shall have charge of the stock
ledger and shall prepare and make, or cause to be prepared and made, at least
ten (10) days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each shareholder and the number of shares registered
in the name of each shareholder. Such list shall be open to the examination of
any shareholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list also shall be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder or proxy who is present. Upon the willful neglect
or refusal of the directors to require the Secretary to produce such a list at
any meeting for the election of directors, such directors shall be ineligible
for election to any office at such meeting. The stock ledger shall be the only
evidence as to who are the shareholders entitled to examine the stock ledger,
the list required by this section or the books of the Corporation, or to vote in
person or by proxy at any meeting of shareholders.
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SECTION 10. RECORD DATE. In order that the Corporation may determine
the shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix in advance,
but shall not be required to, a record date which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. A determination of shareholders of
record entitled to notice of or to vote at a meeting of the shareholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. POWERS. The business of the Corporation shall be managed and
its corporate powers shall be exercised by its Board of Directors, except as
otherwise provided by statute or by the Articles of Incorporation.
SECTION 2. NUMBER. Until the number is changed by resolution of the
Shareholders at any time and from time to time, the Board shall consist of no
more than two (2) directors.
SECTION 3. ELECTION AND TERM OF OFFICE. Directors shall be elected at
the annual meeting of shareholders, except as provided in Sections 4 and 5 of
this Article. At each meeting of shareholders for the election of directors at
which a quorum is present, the persons receiving the greatest number of votes,
up to the number of directors to be elected, shall be the directors. Each
director shall hold office until the next succeeding annual meeting, or until
his successor is elected and qualified, or until his earlier resignation by
written notice to the Secretary of the Corporation, or until his removal from
office.
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SECTION 4. VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the directors
then in office, though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected until the next annual meeting of the
shareholders. If there are no directors in office, then any officer or any
shareholder or an executor, administrator, trustee or guardian of a shareholder
or other fiduciary entrusted with like responsibility for the person or estate
of a shareholder, may call a special meeting of shareholders for the purpose of
electing a new Board of Directors.
SECTION 5. REMOVAL. At a special meeting of the shareholders, duly
called expressly for that purpose as provided in these Bylaws, any director or
directors, by the affirmative vote of the holders of a majority of all the
shares of stock outstanding and entitled to vote for the election of directors,
may be removed from office, either with or without cause, and the remaining
directors, in the manner provided in these Bylaws, shall fill any vacancy or
vacancies created by such a removal.
SECTION 6. PLACE OF MEETINGS. Meetings of the Board of Directors of the
Corporation, regular or special, may be held either within or without the State
of Florida.
SECTION 7. REGULAR MEETINGS. The Board of Directors shall hold a
regular meeting each year immediately after the annual meeting of the
shareholders at the place where such meeting of the shareholders was held for
the purpose of election of officers and for the consideration of any other
business that may be properly brought before the meeting. No notice of any kind
to either old or new members of the Board of Directors for such regular meeting
shall be necessary.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by any director, the Chairman of the Board or the President or
Secretary on two (2) days' written notice to each director, either personally or
by mail or by telegram. Notice of any special meeting of the Board of Directors
need not be given to any director who signs a waiver of notice either before or
after the meeting. Attendance by a director at a special meeting shall
constitute a waiver of notice of such special meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because such special meeting is not lawfully convened.
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SECTION 9. QUORUM. A majority of all the directors shall constitute a
quorum for the transaction of business. The affirmative vote of the majority of
directors present at a meeting where a quorum is present shall be the act of the
Board of Directors. If a quorum shall not be present at any meeting of the Board
of Directors, a majority of the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 10. COMPENSATION. The Board of Directors shall have the
authority to fix the compensation of directors, and the directors may be paid
their expenses, if any, for attendance at each meeting of the Board of
Directors.
SECTION 11. EXECUTIVE COMMITTEE. The Board, by resolution passed by a
majority of the whole Board, may designate from among its members an executive
committee and one or more other committees, which committees, to the extent
provided in such resolution, shall have and exercise any or all of the authority
of the Board of Directors, except that no such committee shall have the
authority to approve or recommend to the shareholders actions or proposals
required by law to be approved by the shareholders, designate candidates for the
office of director, fill vacancies on the Board of Directors or any committee
thereof, amend the Bylaws, authorize or approve the re-acquisition of shares
unless pursuant to a general formula or method specified by the Board of
Directors, or authorize or approve the issuance or sale of, or any contract to
issue or sell, shares or designate the terms of a series of a class of shares,
unless pursuant to a general formula or method specified by the Board of
Directors, within specifications authorized by law.
SECTION 12. PRESENCE AT MEETINGS. Members of the Board of Directors or
an executive committee shall be deemed present in person at a meeting of such
Board or committee if a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other
is used.
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SECTION 13. WRITTEN CONSENT. Any action of the Board of Directors or of
any committee thereof, which is required or permit taken at a regular or special
meeting, may be taken without a meeting if consent in writing, setting forth the
action so to be taken, signed by all of the members of the Board of Directors or
of the committee, as the case may be, is filed in the minutes of the proceedings
of the Board of Directors or committee.
ARTICLE V
OFFICERS
SECTION 1. DESIGNATION. The Corporation shall have a President and a
Secretary. The Corporation also may have, at the discretion of the Board of
Directors, a Chairman of the Board and one or more Vice Presidents (however
titled). Assistant Secretaries and Assistant Treasurers, and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
SECTION 2. ELECTION. The officers of the Corporation, except such
officers as may be elected in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be elected annually by the Board of Directors,
and each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his successor shall be elected and
qualified. Officers shall be elected by the affirmative vote of the majority of
directors present at a meeting where a quorum is present.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may elect 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 are provided in these Bylaws or as the Board of Directors may determine from
time to time.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by the affirmative vote of the majority of directors
present at any meeting where a quorum is present, or, except in the 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.
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Any officer may resign at any time by giving written notice to the
Board of Directors, or to the Chairman of the Board, if one shall have been
elected, or the President or the Secretary of the Corporation. 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 because of death,
resignation, removal, disqualification or any other cause shall be filled by the
Board of Directors.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
shall be such an officer, if present, shall preside at all meetings of the Board
of Directors and exercise and perform such other powers and duties as may from
time to time be assigned to him by the Board of Directors or prescribed by these
Bylaws.
SECTION 7. PRESIDENT. The President shall be the chief executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall have general supervision, direction and control of the business
and affairs of the Corporation. He shall preside at all meetings of the
shareholders, and in the absence of the Chairman of the Board, shall preside at
all meetings of the Board of Directors. He shall execute deeds, bonds, mortgages
and other instruments on behalf of the Corporation, except where required or
permitted by law to be signed and executed otherwise and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. He shall be
ex-officio a member of all the standing committees, if any, shall have the
general powers and duties of management usually vested in the office of the
chief executive officer of a corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
SECTION 8. VICE PRESIDENTS. The Vice Presidents, if any, shall have
such powers and perform such duties as may be prescribed from time to time for
them respectively by the Chairman of the Board, the President, the Board of
Directors or these Bylaws.
SECTION 9. SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes at the registered or principal office, or such other place as
the Board of Directors may order, of all
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meetings of directors and shareholders, with 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 directors' meetings, the number of shares
present or represented at shareholders' meetings and the proceedings thereof.
The Secretary shall give, or cause to be given, notice of all the
meeting of the shareholders and of the Board of Directors required by these
Bylaws or by law to be given, and he shall keep the seal of the Corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these Bylaws.
SECTION 10. TREASURER. The Treasurer, if any, 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. Any surplus, including earned surplus, paid-in surplus and
surplus arising from a reduction of stated capital, shall be classified
according to source and shown in a separate account. The books of account shall
be open at all reasonable times to inspection by any director.
The Treasurer shall deposit all monies 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, shall
render to the President and any director, whenever requested, an account of all
his transactions as Treasurer and of the financial condition of the Corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or these Bylaws. As required by the Board
of Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
SECTION 11. COMPENSATION. The compensation of the officers and agents
of the Corporation shall be fixed from time to time by the Board of Directors,
or by such officer or officers as said Board shall direct, and no officer shall
be prevented from receiving such compensation by reason of the fact that he is
or was a director of the Corporation.
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ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. DESCRIPTION. Every shareholder shall be entitled to have for
each kind, class or series of stock held a certificate certifying the number of
shares thereof held of record by him. Certificates shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary, and
may be sealed with the seal of the Corporation. The seal may be facsimile,
engraved or printed. Where such certificate is signed by a transfer agent or a
registrar other than the Corporation itself, the signature of any of those
officers named herein may be facsimile. In case any officer who signed, or whose
facsimile signature has been used on, any certificate shall cease to be such
officer for any reason before the certificate has been delivered by the
Corporation, such certificate may nevertheless be adopted by the Corporation and
issued and delivered as though the person who signed it or whose facsimile
signature has been used thereon had not ceased to be such officer.
SECTION 2. LOST CERTIFICATES. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed. The Corporation may require the
owner of the lost, stolen or destroyed certificate, or his legal representative,
to give the Corporation a bond sufficient to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
SECTION 3. PREFERENCES. If the Corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the
distinguishing characteristics of each class or series, including designations,
the relative rights and preferences or limitations as regards dividend rates,
redemption rights, conversion privileges, voting powers or restrictions or
qualifications of voting powers, or such other distinguishing characteristics as
shall be stated either in the Articles of Incorporation or in the resolution or
resolutions providing for the issue of such stock adopted by the Board of
Directors or a duly constituted executive committee shall be set forth in full
on the face or
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back of the certificate which the Corporation shall issue to represent such
kind, class or series of stock, provided that, in lieu of the foregoing
requirements, said provisions may be either (a) summarized on the face or back
of the certificate, or (b) incorporated by reference made on the face or back of
the certificate where such reference states that a copy of said provisions,
certified by an officer of the Corporation, will be furnished by the Corporation
or its transfer agent, without cost, to and upon request of the certificate
holder.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of this Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 5. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls, to the extent permitted by law, a person registered on its
books as the owner of shares, and shall not be bound to recognize any equitable
or other claim to interest in such shares on the part of any other person,
regardless of whether it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. The Board of Directors, at any regular or special
meeting thereof, subject to any restrictions contained in the Articles of
Incorporation, may declare and pay dividends upon the shares of its capital
stock in cash, property or its own shares, except when the Corporation is
insolvent or when the payment thereof would render the Corporation insolvent.
SECTION 2. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may designate from time to time.
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SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall end on
the 31st day of December.
SECTION 4. EXECUTION OF DEEDS, CONTRACTS AND OTHER DOCUMENTS. Except as
otherwise provided by the Articles of Incorporation and the Board of Directors,
all deeds and mortgages made by the Corporation and all other written contracts
and agreements to which the Corporation shall be a party may be executed on
behalf of the Corporation by the Chairman of the Board, if one shall have been
elected, the President or one or more Vice Presidents, if any shall have been
elected, and may be attested to and the corporate seal affixed thereto by the
Secretary or Assistant Secretary. The Board of Directors may authorize the
execution of deeds, mortgages and all other written contracts and agreement to
which the Corporation may be a party by such other officers, assistant officers
or agents, as may be selected by the said Chairman of the Board or President
from time to time and with such limitations and restrictions as authorization
may prescribe.
ARTICLE VIII
AMENDMENT TO BYLAWS
These Bylaws may be altered, amended, repealed or added to by the vote
of a majority of the Board of Directors present at any regular meeting of the
said Board, or at a special meeting of the directors called for that purpose,
provided a quorum of the directors is present at such meeting, unless reserved
to the shareholders by the Articles of Incorporation. These Bylaws, and any
amendments thereto, and new Bylaws added by the directors, may be amended,
altered or repealed by the shareholders and the shareholders may prescribe in
any Bylaw made by them that such Bylaw shall not be altered, amended or repealed
by the Board of Directors.
ARTICLE IX
INDEMNIFICATION
SECTION 1. GENERAL. The Corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding,
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whether civil, criminal, administrative or investigative (other than an action
by, or in the right of the Corporation) by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
any other corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney's fees), judgments, fines, amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, including any appeal thereof, if he acted in good
faith in a manner he reasonably believed to be in, or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe that 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 shall
not create, of itself, a presumption that the person did not act in good faith
or in a manner which he reasonably believed to be in, or not opposed to, the
best interests of the Corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. EXPENSES. To the extent that a director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 1 above, or in
any defense of any claim, issue or matter therein, he shall be indemnified
against expenses, including attorney's fees, actually and reasonably incurred by
him in connection therewith.
SECTION 3. STANDARD OF CONDUCT. Any indemnification shall be made
hereunder, unless pursuant to a determination by a court, only if a
determination is made that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the applicable
standard of conduct set forth in Section 1 above. Such determination shall be
made either (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) by the shareholders who were not parties to such action, suit or
proceeding.
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SECTION 4. ADVANCE EXPENSES. Expenses incurred in defending any action,
suit or proceeding may be paid in advance of the final disposition of such
action, suit or proceeding as authorized in the manner provided in Section 3
above upon receipt of any undertaking by or on behalf of the director, officer,
employee or agent to repay such amount, unless it shall ultimately be determined
that he is entitled to be indemnified by the Corporation as authorized in this
Article.
SECTION 5. BENEFIT. The indemnification provided by this Article shall
be in addition to the indemnification rights provided pursuant to Chapter 607 of
the Florida Statutes, and shall not be deemed exclusive of any other rights to
which any person seeking indemnification may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent of the Corporation and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 6. INSURANCE. The Corporation shall be empowered to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article.
SECTION 7. AFFILIATES. For the purposes of this Article, references to
"the Corporation" include all constituent corporations absorbed in a
consolidation or merger, as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other
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enterprise shall stand in the same position under the provisions of this Article
with respect to the resulting or surviving corporation as he would if he had
served the resulting or surviving corporation in the same capacity.
SECTION 8. SURVIVAL. Upon the death of any person having a right to
indemnification under this Article, such right shall inure to his heirs and
legal representatives. In addition, such heirs and legal representatives shall
be entitled to indemnification, under the terms of this Article, against all
expenses (including attorney's fees, judgments, fines and amounts paid in
settlement) imposed upon or reasonably incurred by them in connection with any
claim, action, suit or proceeding described in the foregoing Section 1 on
account of such deceased person.
ARTICLE X
SEVERABILITY
The provisions of these Bylaws shall be separable each from any and all
other provisions of these Bylaws, and if any such provision shall be adjudged to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, or the powers granted to this Corporation by
the Articles of Incorporation or Bylaws.
Adopted this 27th day of November, 1998.
DIVERSIFIED RESTAURANT HOLDINGS, INC.
By:
-------------------------------------------
Larry M. Reid, President and Secretary
16
EXHIBIT 6.1
LICENSE AGREEMENT
AGREEMENT made and entered into this 21st day of December, 1998, by and
between FOREVER FRESH, INC., a corporation organized and existing under the laws
of the State of Florida, having its principal office at 5371 Hiatus Road,
Sunrise, FL 33351, hereinafter referred to as "FFI", and JRB MARKETING OF SOUTH
FLORIDA, INC., a corporation organized and existing under the laws of the State
of Florida, having its principal office at 975 S. Congress Avenue, Suite 102,
Delray Beach, FL 33445, hereinafter referred to as "JRB".
W I T N E S S E T H:
WHEREAS, FFI possesses technical information and know-how relating to
the assembling and distribution of "water-look" floral arrangements, and owns
and has used the trademark, "FOREVER FRESH(R)" and WHEREAS, FFI desires to grant
an exclusive license to JRB, and JRB desires to license, the right to assemble
and distribute "water-look" floral arrangements with the "Forever Fresh(R)"
trademark; and NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is mutually agreed as follows:
1. DEFINITIONS. For the purposes of this Agreement, the following
definitions shall apply:
(a) The term "trademark" shall mean the "Forever Fresh(R)"
trademark used in connection with the assembly and distribution of the
"water-look" floral arrangements (artificial flowers set in clear epoxy).
(b) The term "affiliate" shall mean any corporation 50 percent
or more of the outstanding voting stock of which is, at the time in question,
owned by FFI, or an affiliate or affiliates of FFI.
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(c) The term "net sales" shall mean the actual invoice cost of
product exclusive of other charges such as freight, postage, interest, etc.
2. GRANT OF RIGHT TO USE ASSEMBLY PROCESS. FFI hereby grants to JRB for
the term of this Agreement the exclusive right to use FFI'S assembly process.
3. GRANT OF RIGHT TO USE TRADEMARKS AND COPYRIGHT MATERIALS.
(a) FFI hereby permits JRB, during the term of this Agreement,
to use the trademarks and its distinctive insignia, shown in Exhibit "A"
attached hereto, and the copyright materials shown on Exhibit "B" attached
hereto, in the advertising and marketing of JRB'S business under the terms and
conditions specified hereinafter, and for the duration of the Agreement, FFI
waives the right accruing to it under the trademark to object to such use of the
trademark by JRB.
(b) FFI will remain an operating company engaged in
wholesaling artificial plants, decorative accessories and gifts and will be
renamed "U.S. Gift and Floral Co., Inc." Evidence of the filing of the name
change with the Secretary of State of Florida will be delivered to JRB upon the
closing of this transaction.
(c) There is no territorial restriction upon the use of the
trademark by JRB in conjunction with JRB business.
4. RESTRICTIONS ON LICENSEE. Labels or brochures and other marketing
materials used by JRB bearing the trademark shall conform to the requirements of
the law of any jurisdiction in which the trademark may be used and shall be
subject to the consent of FFI. JRB shall not make any change in the trademark
without prior written consent of FFI.
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(a) JRB shall refrain from any act or acts, which may
prejudice the validity of the title of FFI to the trademark.
(b) In the event of any actual, threatened or suspected
infringement of, or other misconduct with respect to, any of FFI's Names or
Marks or the confidential and proprietary information, which comes to the
attention of JRB, JRB shall promptly report the same in writing to FFI and fully
advise FFI of all pertinent facts known by JRB. JRB agrees to be a named party
in any demand, suit or action which FFI may determine to institute in connection
with such matters. In addition, if JRB is named as a party in any suit or action
in which any part of the intellectual property is alleged to violate the rights
of any other person, JRB shall promptly report that in writing to FFI and fully
advise FFI of all facts known by JRB about it. JRB shall, at its expense, take
over the defense of any such action and maintain and control such defense, and
shall further, at its expense, solely determine how to respond to any such
challenge, whether to institute any demand, suit or action, and how to maintain
or prosecute it. In any such matters JRB shall cooperate in all ways and take
all action and do all things reasonably requested by FFI, and shall take such
steps as FFI and JRB may deem advisable against the infringement or otherwise
for the protection of its rights. FFI may, at its own expense, defend any
suspected infringement.
(c) JRB shall immediately notify FFI in writing concerning,
and forward to FFI copies of and otherwise fully advise FFI with respect to, any
and all actual or threatened demands, notices, suits or actions or other legal
process served on or otherwise coming to the attention of JRB, and any facts,
circumstances or events that might result in a suit or action against FFI or
JRB.
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(d) JRB will at all times recognize and enforce the validity
of the trademark and the ownership thereof by FFI, and the exclusive right and
jurisdiction of FFI to control the use of the trademark. JRB shall take all
appropriate measures for the protection of the trademark, and will not at any
time put in issue the validity of the trademark and will faithfully observe and
execute all the requirements, procedures and directions of FFI with respect to
the use and the safeguarding of the trademark. JRB further undertakes that in
the event of any infringement of the rights of FFI to any of the trademarks and
copyright material by persons or entities other than JRB, its agents or
employees, coming to the notice of JRB during the term of this Agreement, JRB
shall promptly notify FFI in writing.
(e) Upon termination or cancellation of this Agreement, JRB
will not use at any time for any purpose any trademark, trade name, symbol or
other like product bearing any resemblance to the trademarks or copyright
material licensed hereby.
5. PROMOTIONAL ACTIVITIES. JRB will use all reasonable and proper
effort and means to further and preserve the good will and reputation of the
trademarks and copyright material.
6. TERM. The term of this Agreement shall extend for a period of six
(6) years from the execution hereof. Unless terminated by JRB within 60 days of
the end of any term, this Agreement shall continue for another term of six (6)
years.
7. COMPENSATION. As consideration and compensation for this License
Agreement, JRB agrees to pay royalties as follows:
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(a) JRB shall purchase, from FFI, the inventory and other
products set forth on the attached purchase orders (at the prices and quantities
therein set forth); provided that (i) at least $50,000 of goods are purchased by
December 30, 1998 and (ii) all deliveries with respect to the remaining purchase
orders are made on or before March 31, 1999. All invoices with respect to
purchase orders shall be paid in full by JRB within ten (10) days of delivery
thereof.
(b) During the term hereof, the license payment will be 5% of
the net amount invoiced by JRB or any affiliate of JRB for all "Water-Look"
and/or "Forever Fresh(R)" sales (hereinafter referred to as "net sales") made to
any third party with the license payment and report to be made within 30 days of
the invoice for such goods sold.
(c) JRB is granted six (6) additional six-year terms during
which JRB agrees that It will pay FFI a total royalty payment of one quarter of
one (.25%) percent of its net sales revenues per annum, for all "Water-Look"
and/or "Forever Fresh(R)" sales to any third party.
(d) FFI shall be JRB's exclusive sales agent for sales made to
or within the Territory (as defined below). The exclusive agency shall be
granted for a one-year period, commencing on the date hereof and terminating on
the one-year anniversary of the date hereof (the "Agency Term"), provided, the
Agency Term shall continue for consecutive one year periods unless and until
FFI, or JRB with cause, provides notice to the other party within 60 days of the
end of any Agency Term of its intent to terminate the exclusive agency. FFI
shall receive, in addition to any royalty or license fee paid or owing pursuant
to Section 7(b) or otherwise pursuant to this Agreement, 20% (inclusive of any
showroom and/or show expenses) of the net sales, at wholesale price without
discounts, of all "Water-Look" and "Forever Fresh(R)" and similar products
originating or emanating from or sales to any person or entity within the
Territory; provided, however, the
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commission for sales with respect to a purchase order solicited by JRB (1) from
a previous customer of JRB, or (2) a FFI customer that has not placed an order
with JRB or FFI for the previous six (6) month period shall be 5% (and not 20%)
of net sales (in addition to the 5% to be paid pursuant to Section 7 (b)
hereof). Payment, with a commission statement, to FFI shall be made within 30
days of the invoice date with respect to such sale or order. For purposes
hereof, the "Territory" shall mean and include the Western United States,
including the states of Washington, Oregon, California, Colorado, Arizona,
Nevada, Utah, New Mexico, Idaho, Montana, Wyoming and Hawaii. Notwithstanding
the above, no commission will be due FFI on any "house account" customers as
listed on Exhibit C attached hereto.
(e) FFI shall have the right of first refusal during the
initial term of this Agreement to develop franchised Silk, Silk, Silk, or
similar concept stores, in the Territory. Such right shall be exercised within
60 days after receipt of notice from JRB of such an offer. After such 60 day
period, if such right is not exercised by sending written notice to JRB, JRB
shall have 60 days to offer such franchise rights on the same terms and
conditions as offered to FFI to any third party.
(f) For the sole purpose of verifying and confirming monetary
obligations hereunder, FFI, at all times, shall be afforded access to the books
and records of JRB and shall be provided copies of all invoices and purchase
orders upon request.
(g) In the event that JRB and FFI have a good faith dispute
with respect to the amount of any invoice, any particular purchase order, or any
other amount due and owing FFI, JRB shall not be in default hereunder provided
JRB pays any undisputed amount within 30 days of the invoice date and endeavors
in
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good faith to resolve the dispute within 60 days of the invoice date. If a
dispute lasts longer than 60 days, an independent accounting firm shall be
chosen by mutual agreement to resolve the dispute and the party who is in error
(or more in error) shall pay the costs of such firm.
7. CANCELLATION.
(a) If JRB is in default of this Agreement, then FFI has the
right to cancel the same on sixty (60) days' written notice to JRB; provided,
however, that if JRB shall cure the breach or default within such sixty (60) day
period, the Agreement shall continue in full force and effect.
(b) Should FFI terminate this Agreement because of JRB's
monetary default during the first six-year term hereunder, JRB hereby agrees to
pay to FFI, as liquidated damages, 12 times (12X) the average monthly license
fee received or earned under this Agreement by FFI from JRB during the 12 month
period (or such shorter period as necessary) preceding the default. If
termination and default occur before 12 months, the monthly fee amount will be
$10,000 for the missing months' averaged with the actual months' fees. Such
amount shall be paid to FFI within 30 days after delivery of a notice to JRB of
the default and the expiration of the 30- day cure period. Such amount shall
accrue interest at 10% per annum if not paid on such date. FFI shall also be
entitled to recover all reasonable fees and expenses, providing it prevails, of
collection and enforcement of this Agreement, including attorney's fees and
expenses.
(c) Upon termination of this Agreement, in addition to
refraining from using the "Forever Fresh(R)" and "Water-Look" tradenames and
trademarks, JRB shall not solicit or sell any "Water-Look" products or goods to
any previous customers on FFI's customer list as provided on date of closing.
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(d) FFI shall have the right to cancel this Agreement at any
time in the event of the appointment of a receiver or trustee in bankruptcy for
JRB, or in the event JRB shall take advantage of any insolvency or similar laws.
9. CONSTRUCTION. This Agreement shall be construed in accordance with
the laws of the State of Florida, United States of America.
10. ASSIGNMENT. This Agreement may not be assigned without the prior
written consent of FFI.
11. NOTICES. Any notice required or permitted to be given under this
Agreement by either of the parties hereto shall be deemed to have been
sufficiently given for all the purposes hereof if mailed by registered mail,
postage prepaid, addressed to the party to be notified at its address shown at
the beginning of this Agreement or at such other address as may be furnished to
the notifying party in writing.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
WITNESSES: FOREVER FRESH, INC.
- -------------------------- -----------------------------------------
By: Steven Horowitz, President
JRB MARKETING
OF SOUTH FLORIDA, INC.
------------------------------------------
By: Joseph R. Bergmann, President
9
EXHIBIT 6.2
MANUFACTURING AND DISTRIBUTION AGREEMENT
JRB Marketing of South Florida, Inc., a Florida corporation ("MKTG")
and JRB Enterprises, Inc., a Florida corporation ("ENT") agree this 1st day of
April 1999 as follows:
1.) ASSIGNMENT. MKTG hereby assigns to ENT all MKTG's obligations with
respect to manufacturing and distribution of the Goods pursuant to the purchase
orders submitted by MKTG.
2.) ASSUMPTION. ENT hereby assumes and agrees to perform the
manufacturing and distribution functions of MKTG, and all related obligations of
MKTG, under the Contract.
3.) MANUFACTURE. ENT shall manufacture the Goods at its facility or
facilities in Florida, using ENT employees and using materials purchased by ENT
directly from vendors and suppliers.
4.) DISTRIBUTION. ENT shall distribute finished Goods to all MKTG
Customers in operation from time to time while this agreement is in effect.
5.) QUANTITY AND QUALITY. ENT shall manufacture Goods in sufficient
quantity to fulfill MKTG's purchase orders as submitted. The Goods shall
reasonably conform in quality, workmanship and materials to the designs and
samples provided to ENT by MKTG pursuant to this agreement.
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6.) BILLING. ENT shall prepare and deliver all invoices to MKTG for
shipments made to MKTG customers. Each invoice shall call for payment to ENT.
7.) OWNERSHIP OF DESIGNS AND PROCEDURES. All designs and methods that
are disclosed to ENT by MKTG under this agreement are trade secrets and shall
remain the sole property of MKTG. Nothing in this agreement shall be construed
to be an assignment of any interest in title to any intellectual property rights
in and to any designs or methods disclosed to ENT by MKTG, including but not
limited to trade secret rights, patent rights, design patent rights, trademarks
or other intellectual property rights; nor shall anything in this agreement be
construed to be a grant of any right or a license to use or make derivative
works of any subject of such intellectual property rights, unless such
assignment or grant of rights is expressly provided in a written agreement and
such use of rights are limited only to those purposes that are expressly
provided in such agreement. MKTG acknowledges that ENT's principal shareholder,
directly or indirectly through other corporations which he controls, has been
engaged for some time in the design, fabrication and sale of artificial plants,
florals and trees similar to the Goods. Nothing in this agreement is intended to
prohibit ENT or affiliated organizations from continuing with their respective
existing businesses.
8.) CONFIDENTIALITY OF TRADE SECRETS. ENT shall keep and hold
confidential all Proprietary Information or Materials, as defined below, and
shall not disclose, divulge,
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reveal, report, publish, transfer or use such Proprietary Information or
Materials for any purpose whatsoever, except as expressly provided by this
agreement, or with the prior written consent of MKTG. ENT shall return all
Proprietary Information and Materials provided to it by MKTG immediately upon
written request to do so, and destroy all other copies made thereof. The parties
acknowledge and agree that the unauthorized use or disclosure of Proprietary
Information or Materials may result in irreparable harm to MKTG, and agree that
in the event of any use or disclosure of such materials contrary to the
provisions of this agreement, MKTG, in addition to any other remedies that may
be available to MKTG under law or equity, may obtain injunctive relief or
specific performance of the ownership and trade secret provisions of this
agreement.
9.) NON-COMPETITION. During the term of this agreement, and during a
period of time two years following the termination of this agreement, neither
ENT nor its presently controlling shareholder, or any subsidiary or related
corporation or partnership or other business entity controlled by or related to
ENT or its presently controlling shareholder, shall engage in the business of
manufacturing or marketing any products similar to the Goods for sale to
customers of MKTG. It is agreed that solicitation or acceptance of any business
shall constitute engaging in business in violation of this paragraph. The period
of time during which ENT is prohibited from engaging in the business practices
set forth herein shall be extended by any length of time during which ENT is in
breach of these
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covenants or any other provisions of this agreement. The existence of any claim
or cause of action of ENT against MKTG, other than non-payment to ENT by MKTG,
whether predicated on this agreement or otherwise, will not constitute a defense
to the enforcement by ENT of the covenants set forth in this agreement.
If any portion of the covenants set forth in this Section 9 are held to
be unreasonable, unenforceable, arbitrary or against public policy, then such
portion of such covenant shall be considered divisible both as to time and
geographic area. If any court of competent jurisdiction determines the specified
time period or the specified geographic area applicable to this paragraph to be
unreasonable, arbitrary or against public policy, then a lesser time period or
geographic area which is determined to be reasonable, non-arbitrary and not
against public policy may be enforced against ENT. The foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by MKTG.
10.) TERM. The term of this agreement shall be for six (6) years, with
six consecutive six-year renewals that occur automatically unless one or both of
the parties gives written notice of its decision not to renew dated at least
four (4) months prior to the then current term.
11.) PROHIBITION AGAINST ASSIGNMENT. Neither party may assign this
agreement, in
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whole or in part, without the other's consent (which may be withheld with or
without reason), except to an entity under common control with the assignor,
provided that either party may assign its accounts receivable arising in
connection with this agreement absolutely or as collateral.
12.) NO FRANCHISE OR PARTNERSHIP. This agreement is not intended to
create or grant a franchise to either party, or to create a partnership or joint
venture.
13.) REMEDIES.
A.) TERMINATION. MKTG may terminate this agreement for cause
consisting of ENT's refusal, failure or inability to manufacture and/or
distribute the Goods (I) in such a manner as to comply with the requirements of
the contract between MKTG and its Customers or (ii) in reasonable conformity
with the designs furnished by MKTG from time to time. MKTG may terminate this
agreement pursuant to this provision only after written notice to ENT describing
the deficiency affording ENT an opportunity to cure the breach or default in not
less than ninety (90) days.
B.) ATTORNEYS' FEES. The prevailing party in any action for
damages or injunctive relief in connection with this agreement shall be entitled
to recover its reasonable attorneys' fees and costs.
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C.) Each party may seek any remedy provided by law or statute,
including equitable relief and injunction.
14.) CHOICE OF LAW. This agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
15.) ENTIRE AGREEMENT/AMENDMENTS. This agreement contains the entire
agreement between the parties and supersedes prior oral and written agreements,
if any. This agreement may be amended only by a writing signed by both parties.
16.) EFFECTIVE DATE. The effective date of this agreement shall be the
day this agreement is signed by the second of the two parties.
17.) SEVERABILITY. If any term of provision of this agreement is
determined to be unlawful and/or unenforceable, it shall have no effect on the
remaining terms and provisions of this agreement.
JRB Marketing of South Florida, Inc. JRB Enterprises, Inc.
By: ________________________________ By:____________________________________
Date: ______________________________ Date: _________________________________
Witness: ___________________________ Witness: ______________________________
6
EXHIBIT 6.3
AGREEMENT
AGREEMENT (the "Agreement") made this 9th day of April, 1999 by and
between Diversified Restaurant Holdings, Inc., a Florida Corporation ("DRH") and
Joseph R. Bergmann, having offices at 975 S. Congress Avenue, Delray Beach,
Florida 33445 ("Bergmann").
WITNESSETH
WHEREAS, DRH has agreed to exchange 17,743,250 shares of the Common
Stock of DRH, (the "DRH Shares") for 100 shares of the Common Stock of JRB
Marketing of South $.OOI par value Florida, Inc., a Florida Corporation
("Marketing") .001, par value (the "Marketing Shares") on the terms and
conditions hereinbelow set forth; and
WHEREAS, Bergmann has agreed to exchange to 100 Marketing Shares for
17,743,250 DRH Shares on the terms and conditions hereinbelow set forth
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NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. EXCHANGE.
(a) DRH hereby agrees to issue and deliver to Bergmann the DRH
Shares.
(b) Bergmann hereby agrees to transfer, assign and deliver to
DRH the Marketing Shares.
2. CLOSING DATE. The closing of the transactions contemplated herein
(the "Closing") shall take place simultaneously with the execution hereof on the
date hereof (the "Closing Date"). At the Closing:
(a) The certificates representing the Marketing Shares duty
registered in the name of DRH and duty endorsed for transfer to DRH shall be
delivered thereto. The following legend shall be placed on such certificate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
STATE SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SHARES,
OR AN OPINION OF THE REGISTERED HOLDER'S COUNSEL REASONABLY
ACCEPTABLE TO THE ISSUERS COUNSEL TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
(b) The certificates representing the DRH Shares bearing the
above be issued in the name of and delivered to Bergmann.
(c) Bergmann shall be elected to the Board of Directors of DRH
and all existing officers and directors of DRH shall resign in writing.
(d) Bergmann shall enter into an Employment Agreements with
Marketing in the form attached hereto as Exhibit "A."
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BERGMANN. Bergmann
hereby represents warrants and covenants to DRH that:
(a) Bergmann has full authority and legal capacity to
execute and deliver this
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Agreement and to perform this Agreement. This Agreement has been duly and
validly executed and delivered by Bergmann, and constitutes the valid and
binding obligation of Bergmann, enforceable against him in accordance with its
terms.
(b) The Marketing Shares when sold by Bergmann pursuant hereto
will be legally issued, fully paid and non-assessable with no personal liability
attaching thereto .
(c) The execution and delivery of this Agreement does not and
will not violate any provision of any agreement or conflict with any restriction
of any kind or nature to which Marketing or Bergmann is a party or by which they
are bound, nor will such execution and delivery allow any party to any such
agreement to terminate such agreement or alter the terms or conditions thereof.
On the Closing Date, the consummation of the transactions contemplated hereby
will not violate any provision of any agreement or conflict with any restriction
of any kind or nature to which Marketing or Bergmann is a party or by which they
are bound and Bergmann will have the unqualified right to assign and deliver the
Marketing Shares to DRH and to pass to it good and valid title thereto, free and
clear of any and all liens, claims, charges or encumbrances whatsoever.
(d) Marketing does not now have nor ever had any Subsidiary.
For the purposes hereof, the term "Subsidiary" shall mean a subsidiary as
defined in Rule 405 under the Securities Act of 1933 (the "Act").
(e) Marketing has been duly organized under the laws of
Florida and is validly existing and in good standing therein, and has the
requisite corporate power and authority to carry on its business to the extent
presently conducted.
(f) The authorized capital stock of Marketing consists of
50,000,000, $.OOI par value common shares, of which l00 of such shares are
issued and outstanding and the number of common shares outstanding shall, except
as otherwise set forth herein, remain unchanged until the earlier of the Closing
or the termination of this Agreement pursuant to its terms. There is not now,
and as of the Closing Date there will not be any outstanding options, warrants
or other rights to subscribe for or purchase any shares of capital stock of
Marketing nor is there or will there be outstanding any security or other
instrument convertible into or exchangeable for shares of capital stock of
Marketing; nor has Marketing entered into any agreement, arrangement or
understanding to issue any of the foregoing. All of the outstanding equity
securities of Marketing have been duly authorized, validly issued and are fully
paid and non-assessable with no personal liability attaching thereto.
(g) Neither the execution nor delivery hereof nor the
consummation of the transactions contemplated hereby constitutes a violation by
Bergmann or Marketing of any law, rule, regulation, order, judgment or decree of
any court or of any local governmental authority or any laws, rules, policies or
regulations of any United States federal or state regulatory agenty or of
Marketing's organizational documents or bylaws, and any actions necessary to
consummate such transactions have been duly taken as may be required by
Marketing.
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(h) Bergmann has delivered to DRH a copy of Marketing
unaudited balance sheet as of March 31, 1999 (the Marketing Balance Sheet Date")
together with the unaudited statement of operations for the period from October
7, 1996 through March 31, 1999 (collectively the "Marketing Financial
Statements").
(i) The Marketing Financial Statements accurately reflect in
all material respects Marketing's financial condition as of the respective dates
of the balance sheets and the results of its operations and cash flows and
statement of stockholders' equity for the period reflected therein and have been
prepared in accordance with generally accepted accounting principles
consistently applied.
(j) Except to the extent reflected or reserved Against in the
Marketing Financial Statements, Marketing did not have, as of the date thereof,
any liabilities or obligations of any nature whatsoever, whether absolute,
accrued, contingent or otherwise due, including, without limitation, liabilities
as a result of taxes with respect to or measured by income or liabilities for
taxes arising from any transaction or state of facts entered into or in
existence prior to such date.
(k) Marketing has duly filed any tax reports and returns
required to be filed thereby and has duly paid all taxes and other charges due
or claimed to be owed by all taxing authorities (including, without limitation,
taxes due in connection with property or the use thereof, income, franchises,
licenses, duties, excises, tangible assets, sales and payrolls).
(l) There are no pending or, to the best of the knowledge of
Marketing andBergmann, threatened administrative, equitable or legal proceedings
or notices thereof against Marketing, including, but not limited to tax audits,
relating to, or claims asserted for, taxes or assessments against Marketing.
(m) Bergmann is aware that DRH has transferred its investment
in Southern Dragon, Inc. thereto for $I. 00 and the Bergmann hereby, irrevocably
waives any claim he may now have or ever have against such company or others in
connection with such transfer.
(n) Other than with respect to the transactions contemplated
hereby and described herein, since the Marketing Balance Sheet Date, has not:
(1) Suffered a Material Adverse Effect, as that term
is hereinafter defined, as to the financial condition of Marketing or as to any
of its assets, liabilities, prospects, suppliers, customers or respective
results of operations or businesses, including but not limited to any such
change resulting from any change in any statute, ordinance, rule or regulation.
For all purposes under this Agreement , "Material Adverse Effect" shall be
defined as any occurrence that adversely affects the actual or projected
financial condition, revenues, expenses, business or prospects of Marketing in
any material manner or any other occurrence the consequence of which would
materially impair or alter the ability of Marketing to continue to own, use or
operate any of the assets and/or conduct or operate the business of Marketing as
the case may be, in the same manner as same is owned, used, operated and
conducted as of the date immediately prior to the date of any such occurrence;
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(2) Incurred any obligation or liability, whether
absolute, accrued or contingent, other than in connection with this Agreement or
in the ordinary course of its business;
(3) Paid any claim or satisfied any lien, encumbrance
or liability, whether absolute, accrued or contingent, other than liabilities
reflected in the Marketing Financial Statements or incurred in accordance with
subparagraph (2) above other than in the ordinary course of its business;
(4) Permitted or allowed any of its assets, whether
tangible or intangible, to be mortgaged, pledged or otherwise subjected to any
liens or encumbrances;
(5) Canceled any debtor claims, waived any rights of
substantial value, or sold or transferred any of its assets, except in the
ordinary course of business or as is consistent with their past practices;
(6) Disposed of or permitted to lapse any patents,
trademarks, service marks or copyrights, or any patent, trademark, service mark
or copyright application, or disposed of or disclosed to any person any trade
secret, formula, process or know-how;
(7) Granted or promised any increase in the
compensation of any employee, including any such increase pursuant to any bonus,
pension, profit sharing or other plan, or any increase in any such compensation
payable or to become payable by them to any employee other than in the ordinary
course of business;
(8) Made any capital expenditure or commitment for
capital improvements, property, equipment or otherwise;
(9) Declared, paid or set aside for payment to
stockholders any dividend or other distribution, or redeemed, purchased or
otherwise acquired any of its capital stock or any option relating thereto, or
agreed to take any such action-,
(10) Made any material change in any method of
accounting or accounting practice;
(11) Experienced any material labor difficulties;
(12) Engaged in any transaction outside of the
ordinary course of business;
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(13) Entered into, amended or terminated any
contract, agreement or understanding, whether oral or written, which entry,
amendment or termination has had or is reasonably likely to have a Material
Adverse Effect;
(14) Engaged in any action or failed to act where the
result is likely to interfere with the consummation of the transactions
contemplated hereby;
(15) Failed to keep in good standing and in full
force and effect all insurance policies and coverage, if any, in such
commercially reasonable amounts which are necessary in order to properly operate
the businesses of Marketing as such business is presently operated; or
(16) Failed to keep the business records of Marketing
in good order.
(o) Marketing is not the subject of an order, writ,
injunction, decree or judgment of any arbitrator, arbitration panel or any court
or other federal, state or other governmental agency, department, commission
board or instrumentality, either domestic or foreign, the result of which would
have a Material Adverse Effect.
(p) There is no outstanding contract or commitment that, upon
the completion or the performance thereof, after allowance for expenses, is
likely to result in a Material Adverse Effect to Marketing or that, in the
aggregate, is not likely to result in normal profits to Marketing consistent
with past practice.
(q) Bergmann has been the only shareholder of Marketing since
its formation.
(r) There is no default on the part of Marketing under any
material contract or obligation thereof.
(s) There are no claims for brokerage commissions or finder's
fees in connection with the transactions contemplated hereby that have arisen or
may arise from any act or failure to act of Marketing or any person or entity
authorized to act on its behalf.
(t) No petition in bankruptcy has been filed by or against
Marketing nor has it made any assignment for the benefit of creditors.
(u) Marketing will acquire the DRH Shares solely for
investment purposes for its own account, and not with a view to the
distribution, fractionalization or other disposition thereof or any interest
therein.
(v) Marketing is able to bear the economic risk of the
investment in the DRH Shares, and is aware of the limited ability to sell,
transfer or otherwise dispose of them.
(w) Marketing has such knowledge and experience in financial
and business matters that it can evaluate the merits and risks of the purchase
of the DRH Shares.
(x) Bergmann understands that:
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<PAGE>
(1) He must bear the economic risk of an investment
in the DRH Shares for an indefinite period of time, since the DRH Shares have
not been registered under the Act or any other applicable federal or state
statute and they cannot be transferred, sold or otherwise disposed of unless
registered under the Act or pursuant to an exemption therefrom;
(2) The hereinabove described legend will be placed
on the certificate evidencing the DRH Shares.
and
(3) DRH will issue "stop-transfer" instructions to
its transfer agent with respect to the DRH Shares or so indicate on its internal
records.
(y) Bergmann is aware that Rule 144 under the Act, as such
rule is presently written and as herein relevant, permits public sales of
restricted securities such as the DRH Shares only if a minimum of one year, as
calculated in accordance with the provisions of such Rule, has elapsed between
the later of the date of the acquisition of such securities from the Issuer or
an affiliate of the Issuer, and with respect to any resale of such securities in
reliance on Rule 144 for the account of either Bergmann or any subsequent holder
of such securities, such one year period to begin at the time that such
securities are fully paid as contemplated in such Rule, and only upon
satisfaction of the other conditions to the availability of such Rule. If such
Rule is available to Bergmann, Bergmann may make only routine sales of such
securities in limited amounts in accordance with the terms and conditions of
such Rule.
(z) Bergmann understands that DRH is the only party which may
register the Shares under the Act and that DRH has no intention or obligation to
do so.
(aa) Bergmann has had the opportunity to discuss the business,
management and financial condition of DRH with the management of DRH and has had
the opportunity to ask questions of the management of DRH. DRH has made
available to Bergmann all documents and information Bergmann has requested in
order for Bergmann to evaluate the merits and risks of an investment in the DRH
Shares.
(bb) DRH has provided Bergmann with the opportunity to make
such business, accounting and legal review, examination or investigation as
Bergmann has wished as to the business affairs of DRH. DRH has furnished
Bergmann and his representatives with all such information and copies of such
documents concerning the affairs of DRH as he has requested, and DRH has
cooperated fully in connection with such review and examination and in making
full disclosure to them of all material facts affecting the financial condition
and business operations of DRH.
No investigation by DRH shall diminish or obviate any of the representations,
warranties, covenants or agreements of Bergmann under this Agreement.
4. REPRESENTATIONS WARRANTIES AND COVENANTS OF DRH. DRH hereby
represents, warrants and covenants to Bergmann as follows:
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(a) DRH has full and legal capacity to execute and deliver
this Agreement and to perform this Agreement. This Agreement has been duty and
validly executed and delivered by DRH and constitutes the valid and binding
obligation of it enforceable against it in accordance with its terms.
(b) The DRH Shares when transferred and delivered to Bergmann
pursuant hereto will be legally issued, fully paid and non-assessable with no
personal liability attaching thereto.
(c) The execution and delivery of this Agreement does not and
will not violate any provision of any agreement or conflict with any restriction
of any kind or nature to which DRH is a party or by which it is bound, nor will
such execution and delivery allow any party to any such agreement to terminate
such agreement or alter the terms or conditions thereof. On the Closing Date,
the consummation of the transactions contemplated hereby will not violate any
provision of any agreement or conflict with any restriction of any kind or
nature to which DRH is a party or by which it is bound and DRH will have the
unqualified right to issue and deliver the DRH Shares to Bergmann and to pass to
him good and valid title thereto, free and clear of any and all liens, claims,
charges or encumbrances whatsoever.
(d) DRH does not now have any Subsidiary or assets.
(e) DRH has been duly organized under the laws of Florida and
is validly existing and in good standing therein, and has the requisite
corporate power and authority to carry on its business to the extent presently
conducted.
(f) The authorized capital stock of DRH consists of
25,000,000, $.001 par value common shares, of which 7,256,750 of such shares are
issued and outstanding, and 5,000,000, $.001 par value preferred shares, of
which none of such shares is issued and outstanding, and the number of common
shares and preferred shares outstanding shall, except as otherwise set forth
herein, remain unchanged until the earlier of the Closing or the termination of
this Agreement pursuant to its terms. There is not now, and as of the Closing
Date there will not be any outstanding options, warrants or other rights to
subscribe for or purchase any shares of capital stock of DRH nor is there or
will there or will there be outstanding any security or other instrument
convertible into or exchangeable for shares of capital stock of DRH; nor has DRH
entered into any agreement, arrangement or understanding to issue any of the
foregoing. All of the outstanding equity securities of DRH have been duly
authorized, validly issued and are fully paid and non-assessable with no
personal liability attaching thereto.
(g) Neither the execution nor delivery hereof nor the
consummation of the transactions contemplated hereby constitutes a violation by
DRH of any law, rule, regulation, order, judgment or decree of any court or of
any local governmental authority or any laws, rules, policies or regulations of
any United States federal or state regulatory agency or of DRH's organizational
documents or bylaws, and any actions necessary to consummate such transactions
have been duly taken as may be required by DRH.
(h) DRH has delivered to Bergmann a copy of its unaudited
balance sheet as of April 6, 1999 (the DRH Balance Sheet Date") together with
the unaudited statement of operations, statement of cash flows and statement of
stockholders equity for the period its inception through April 6, 1999 and notes
thereto (collectively the "DRH Financial Statements").
8
<PAGE>
(i) The DRH Financial Statements accurately reflect in all
material respects DRH's financial condition as of the DRH Balance Sheet Date and
the results of its operations and cash flows for the period reflected therein
and have been prepared in accordance with generally accepted accounting
principles consistently applied.
(j) Except to the extent reflected or reserved against in the
DRH FinancialStatements, DRH did not have, as of the date thereof, any
liabilities or obligations of any naturewhatsoever, whether absolute, accrued,
contingent or otherwise due, including, without limitation, liabilities as a
result of taxes with respect to or measured by income or liabilities for taxes
arising from any transaction or state of facts entered into or in existence
prior to such date.
(k) DRH has duly filed any tax reports and returns required to
be filed thereby and has duly paid all taxes and other charges due or claimed to
be owed by all taxing authorities (including, without limitation, taxes due in
connection with property or the use thereof, income, franchises, licenses,
duties, excises, tangible assets, sales and payrolls)., including, but not
limited to tax audits, relating to, or claims asserted for, taxes or assessments
against DRH.
(m) Other than with respect to the transactions contemplated
hereby and described herein and the disposition by DRH of its investment in
Southern Dragon, Inc. for $1.00, since the DRH Balance Sheet Date, DRH has not:
(1) Suffered a Material Adverse Effect, as that term
is hereinafter defined, as to the financial condition of DRH or as to any of its
assets, liabilities, prospects, suppliers, customers or respective results of
operations or businesses, including but not limited to any such change resulting
from any change in any statute, ordinance, rule or regulation. For all purposes
under this Agreement, "Material Adverse Effect" shall be defined as any
occurrence that adversely affects the actual or projected financial condition,
revenues, expenses, business . manner or any other occurrence the consequence of
or prospects of DRH in any material which would materially impair or alter the
ability of DRH to continue to own, use or operate any of the assets and/or
conduct or operate the business of DRH as the case may be, in the same manner as
same is owned, used, operated and conducted as of the date immediately prior to
the date of any such occurrence;
(2) Incurred any obligation or liability, whether
absolute, accrued or contingent, other than in the ordinary course of business
or in connection with this Agreement;
(3) Paid any claim or satisfied any lien,
encumbrance or liability, whether absolute, accrued or contingent, other than
liabilities reflected in the DRH Financial Statements or incurred in accordance
with subparagraph (2) above;
(4) Permitted or allowed any of its assets, whether
tangible or intangible, to be mortgaged, pledged or otherwise subjected to any
liens or encumbrances;
(5) Canceled any debtor claims, waived any rights of
substantial value, or sold or transferred any of its assets, except in the
ordinary course of business or as is consistent with their past practices,
(6) Disposed of or permitted to lapse any patents,
trademarks, service marks
9
<PAGE>
or copyrights, or any patent, trademark, service mark or copyright application,
or disposed of or disclosed to any person any trade secret , formula, process or
know-how,
(7) Granted or promised any increase in the
compensation of any employee, including any such increase pursuant to any bonus,
pension , profit sharing or other plan, or any increase in any such compensation
payable or to become payable by them to any employee other than in the ordinary
course of business;
(8) Made any capital expenditure or commitment for
capital improvements, property, equipment or otherwise,
(9) Declared, paid or set aside for payment to
stockholders any dividend or other distribution, or redeemed, purchased or
otherwise acquired any of its capital stock or any option relating thereto, or
agreed to take any such action,
(10) Made any material change in any method of
accounting or accounting practice;
(11) Experienced any material labor difficulties,
(12) Engaged in any transaction outside of the
ordinary course of business;
(13) Entered into, amended or terminated any
contract, agreement or understanding, whether oral or written, which entry,
amendment or termination has had or is reasonably likely to have a Material
Adverse Effect;
(14) Engaged in any action or failed to act where
the result is likely to interfere with the consummation of the transactions
contemplated hereby;
(15) Failed to keep in good standing and in full
force and effect all insurance policies and coverage, if any, in such
commercially reasonable amounts which are necessary in order to properly operate
the businesses of DRH as such business is presently operated; or
(16) Failed to keep the business records of DRH in
good order.
(n) DRH is not the subject of an order, writ, injunction,
decree or judgment of any arbitrator, arbitration panel or any court or other
federal, state or other governmental agency, department, commission) board or
instrumentality, either domestic or foreign, the result of which would have a
Material Adverse Effect.
(o) There is no outstanding contract or commitment that, upon
the completion or the performance thereof, after allowance for expenses, is
likely to result in a Material Adverse Effect to DRH or that, in the aggregate,
is not likely to result in normal profits to DRH consistent with past practice.
(p) There is no default on the part of DRH under any material
contract or obligation thereof.
(q) There are no claims for brokerage commissions or finder's
fees in connection
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<PAGE>
with the transaction contemplated hereby that have arisen or may arise from any
act or failure to act of DRH or any person or entity authorized to act on its
behalf.
(r) No petition in bankruptcy has been filed by or against DRH
nor has it made any assignment for the benefit of creditors.
(s) DRH will acquire the Marketing Shares solely for
investment purposes their own account, and not with a view to the distribution,
fractionalization or other disposition thereof or any interest therein.
(t) DRH expects to be able to bear the economic risk of the
investment in the Marketing Shares, and are aware of the limited ability to
sell, transfer or otherwise dispose of them.
(u) DRH has such knowledge and experience in financial and
business matters that it can evaluate the merits and risks of the purchase of
the Marketing Shares
(v) DRH understands that:
(1) DRH must bear the economic risk of an investment
in the Marketing Shares for an indefinite period of time, since the Marketing
Shares have not been registered under the the Act or any other applicable
federal or state statute and they cannot be transferred, sold or otherwise
disposed of unless registered under the Act or pursuant to an exemption
therefrom;
(2) The hereinabove described legend will be placed
on the certificate evidencing the Marketing Shares.
and
(3) Marketing will issue "stop-transfer" instructions
to its transfer agent with respect to the Marketing Shares or note such
restriction on its internal records.
(w) DRH is aware that Rule 144 under the Act, as such rule is
presently written and as herein relevant, permits public sales of restricted
securities such as the Marketing Shares only if a minimum of one year, as
calculated in accordance with the provisions of such Rule, has elapsed between
the later of the date of the acquisition of such securities in reliance on Rule
144 for their account or any subsequent holder of such securities, such one year
period to begin at the time that such securities are fully paid as contemplated
in such Rule, and only upon satisfaction of the other conditions to the
availability of such Rule. If such Rule is available to DRH, it may make only
routine sales of such securities in limited amounts in accordance with the terms
and conditions of such Rule.
(x) DRH understands that Marketing is the only party which may
register the Marketing Shares under the Act and that Marketing has no intention
or obligation to do so.
(y) DRH has had the opportunity to discuss the business,
management and financial
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condition of Marketing with the management of Marketing and has had the
opportunity to ask questions of the management of Marketing. Marketing has made
available to DRH all documents and information DRH has requested in order for
DRH to evaluate the merits and risks of an investment in the Marketing Shares.
(z) Marketing has provided DRH with the opportunity to make
such business, accounting, and legal review, examination or investigation as DRH
has wished as to the business affairs of Marketing. Marketing has furnished DRH
and its representatiaves with all such information and copies of such documents
concerning the affairs of Marketing as DRH has requested, and Marketing has
cooperated fully in connection with such review and examination and in making
full disclosure to DRH of all material facts affecting the financial condition
and business operations of Marketing.
No investigation by Marketing shall diminish or obviate any of the represent
covenants or agreements of DRH or Bergmann under this Agreement.
5 . INDEMNIFICATION.
(a) DRH hereby agrees to indemnify, defend and hold harmless
Bergmann from and against any and all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and attorney's fees and
expenses asserted against, imposed upon or incurred by Bergmann resulting from
or by reason or a breach of any representation , warranty or covenant of DRH
contained herein.
(b) Bergmann hereby agrees to indemnify, defend and hold
harmless DRH from and against any and all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest penalties and attorney's fees and
expenses asserted against, imposed upon or incurred by DRH resulting from or by
reason of a breach of any representation, warranty or covenant of Bergmann
contained herein.
6. CONDITIONS OF INDEMNIFICATION. The obligations and liabilities of
the parties hereunder regarding claims resulting from the assertion of liability
by third parties shall be subject to the following terms and conditions:.
(a) The indemnified party hereby agrees to promptly notify the
indemnifying party in writing of any claims asserted against, imposed upon or
incurred by the indemnified party and the indemnifying party hereby agrees to
undertake the defense thereof by representatives chosen by the indemnifying
party. The indemnifying party shall have the right to control and handle the
conduct of any litigation. The indeminfied party hereby agrees to cooperate with
the indemnifying party in the defense of any litigation. The indemnifying party
hereby agrees to keep the indemnified party informed as to the progress of any
such claim or proceeding; and
(b) In the event that the indemnifying party, within fifteen
(I 5) days after notification by the indemnified party of any claim, fails to
defend, control or handle such matter, the indemnified party shall have the
right, upon written notification to the indemnifying party, to defend,
compromise or settle the same on behalf of and for the account and at the risk
of the indemnifying party. In such event, the indemnifying party hereby agrees
to advance and pay all costs and reasonable attorneys fees of such
indemnification and give full cooperation to the indemnified party, subject,
however, to the right of the
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indemnifying party to assume such defense at any time prior to final settlement,
compromise or determination thereof.
7. REMEDIES. Except as specifically provided for elsewhere herein, all
remedies hereunder shall be cumulative and shall not preclude the assertion by
any party of any other rights or the seeking of any other remedies by it against
the other party, including, but not limited to, the right of specific
performance.
(a) Each of the parties hereto shall execute such documents
and other papers and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby and each of the parties hereto shall use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including causing
party's representations, warranties and covenants set forth herein to remain
true and correct at and as of the Closing Date as though made on and as of the
Closing Date
(b) The parties hereto shall each use their respective best
efforts to obtain or make, at the at the earliest practicable date, all consents
and filings necessary to the consummation of the transactions contemplated
hereby or which are reasonably requested by the other party.
9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All of the
representations, warranties and agreements of the parties hereto shall survive
the Closing of the transactions contemplated hereby.
10. TERMINATION. Without prejudice to other remedies which may be
available to the parties by law or pursuant to the terms of this Agreement, this
Agreement may be terminated:
(a) by mutual consent of the parties hereto; or
(b) by a nondefaulting Party (the "Notifying Party") hereto by
giving written notice of such termination on the Closing Date to the other party
(the "Notified Party") if, as of the Closing Date, any material conditions
precedent to the performance of the obligations of the party giving such notice
shall not have been satisfied and shall not have been waived by such party,
provided, however, that the Notified Party shall be allowed five (5) business
days within which to satisfy any such unsatisfied condition precedent; or
(c) by any party (a "Nondefaulting Party") if the closing of
the transactions contemplated hereunder shall not have been consummated on or
before November 10, 1998, provided such party is not in default hereunder,
unless the Closing Date is extended by written agreement of all the parties
hereto; provided, however, that no party may exercise such right of termination
if the other parties have satisfied all conditions to be satisfied by them
hereunder.
11. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party hereto or related
entity or person shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
consent of Marketing; provided, however, that any party may make any public
disclosure such party believes in good faith is required by applicable law.
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12. MISCELLANEOUS.
(a) BENEFIT. This Agreement shall enure to the benefit of the
parties thereto and there respective successors and assigns.
(b) ENTIRE AGREEMENT. This Agreement, including all schedules
and other instruments or documents referred to herein or delivered pursuant
hereto which form a part hereof, contains the entire understanding of the
parties hereto in respect of the subject matter contained herein. There are no
representations, warranties, promises, covenants or undertakings other than
those expressly set forth herein or therein. This Agreement supersedes all prior
agreements, whether written or oral, between the parties with respect to the
subject matter hereof. This Agreement may be amended only by a written agreement
duly executed by the parties hereto. Any condition to a particular party is
obligations hereunder may be waived in writing by such party. .
(c) HEADINGS. The headings contained in this Agreement have
been inserted for convenience and reference purposes only and shall not affect
the meaning or interpretation hereof in any manner whatsoever.
(d) SEVERABILITY. If any of the terms, provisions or
conditions contained in this Agreement shall be declared to be invalid or void
in any judicial proceeding, this Agreement shall be honored and enforced to the
extent of its validity, and those provisions not declared invalid shall remain
in full force and effect.
(e) REMEDIES. In the event of a breach or threatened breach by
any party of its obligations hereunder, each party acknowledges that the other
parties may not have an adequate remedy at law and shall be entitled to such
equitable and injunctive relief as may be available to restrain the other party
from any violation of such obligations. Nothing herein shall be construed as
prohibiting any party from pursuing any other remedies available for such breach
or threatened breach, including the recovery of damages.
(f) DISCLOSURE. Any disclosure made in any schedule or exhibit
hereto shall be deemed to be disclosure in all other applicable schedules. and
exhibits hereto.
(g) EXHIBITS AND SCHEDULES. All exhibits and schedules hereto
shall be deemed to be a part hereof.
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(h) NOTICES. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be deemed given
when actually received addressed to each of the parties as follows:
If to Bergmann: Joseph R. Bergmann
975 S. Congress Avenue
Suite 102
Delray Beach, Florida 33445
If to DRH: Larry M. Reid
4 Via Lucindia North
Stuart, Florida 33496
or to such other address, or the attention of such other party, as the parties
shall advise the other by notice given in conformity herewith.
(i) GOVERNING LAW. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Florida,
without giving effect to conflicts of law.
(j) COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed an original and all of which together
shall constitute one and the same agreement.
(k) EXPENSES. Each party shall bear all of his or its own
expenses associated with the transactions contemplated hereby.
(1) ASSIGNMENTS. This Agreement may not be assigned by either
party.
(m) FACSIMILE SIGNATURES. Facsimile signatures on counterparts
of this Agreement are hereby authorized and shall be acknowledged as if such
facsimile signatures were an original execution, and this Agreement shall be
deemed as executed when an executed facsimile hereof is transmitted by a party
to any other party.
(n) LITIGATION, JURISDICTION AND VENUE. In the event any
action, suit or proceeding is instituted as a result of this Agreement, the
prevailing party in such action, suit or proceeding shall be entitled to receive
reimbursement of the costs of such action, suit or proceeding at all levels,
including reasonable attorneys' fees. Further, in the event of the institution
of any such action, suit or proceeding, each of the parties hereto hereby
consents to the exclusive jurisdiction and venue of the courts of the State of
Florida located in Palm Beach County, Florida and the United States District
Court in and for the Southern District of Florida with respect to any matter
relating to this Agreement and the performance of the parties' obligations
hereunder and each of the parties hereto hereby further consents to the personal
jurisdiction of such courts. Any action suit or proceeding brought by or on
behalf of either of the parties hereto relating to such matters shall be
commenced, pursued, defended and resolved only in such courts and any
appropriate appellate court having jurisdiction to hear an appeal from any
judgment entered in such courts. The parties hereby agree that service of
process may be made in any manner permitted by the rules of such courts and the
laws of the State of Florida.
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(o) CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DIVERSIFIED RESTAURANT HOLDINGS, INC.
By:
----------------------------------------
Larry M. Reid
----------------------------------------
JOSEPH R. BERGMANN
16
EXHIBIT 6.4
LICENSE AGREEMENT
AGREEMENT made and entered into this 10th day of April 1999, by and
between JPB Enterprises, Inc., a corporation organized and existing under the
laws of the State of Florida, having its principal off ice at 975 S. Congress
Avenue, Delray Beach, Fl 33445, hereinafter referred to as 'ENT' and JRB
MARKETING OF SOUTH FLORIDA, INC. / DIVERSIFIED RESTAURANT HOLDINGS, INC. a
corporation organized and existing under the laws of the State of Florida,
having its principal office at 975 S. Congress Avenue, Suite 102, Delray Beach,
Fl 33445, hereinafter referred to as 'MKTG'.
WITNESSETH:
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WHEREAS, ENT possesses technical information and know-how relating to
the manufacturing and distribution of artificial greenery and floral
arrangements, and owns and has used the trademarks Living Silk and Silk
Botanicals; and
WHEREAS, ENT desires to grant an exclusive license to MKTG and MKTG
desires to license the right to market and distribute artificial greenery and
floral arrangements with the Living Silk and Silk Botanicals trademarks; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is mutually agreed as follows:
1.) DEFINITIONS. For the purposes of this Agreement, the following
definitions shall apply:
a.)The term "trademark" shall mean the Living Silk and Silk
Botanicals trademarks used in connection with the manufacture and distribution
of the artificial greenery and floral arrangements.
b.) The term "affiliate" shall mean any corporation 50 percent
or more of the outstanding voting stock of which is, at the time in question,
owned by ENT or an affiliate or affiliates of ENT.
c.) The term "net sales" shall mean the actual invoice cost of
product exclusive of other charges such as freight, postage, interest, etc.
2.) GRANT OF RIGHT TO USE ASSEMBLY PROCESS, ENT hereby grants to MKTG
for the term of this Agreement the exclusive right to use ENT's manufacturing
process.
3.) GRANT OF RIGHT TO USE TRADEMARKS AND COPYRIGHT MATERIALS,
a.) ENT hereby permits MKTG, during the term of this
Agreement, to use the trademarks and its distinctive insignia, shown in Exhibit
'A' attached hereto, and the copyright materials shown on Exhibit 'B' attached
hereto, in the advertising and marketing of MKTG's
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business under the terms and conditions specified hereinafter, and for the
during of the Agreement, ENT waives the right accruing to it under the trademark
to object to such use of the trademark by MKTG.
b.) ENT will remain an operating company engaged in
manufacturing and distribution of artificial plants, decorative accessories and
gifts.
c.) There is no territorial restriction upon the use of the
trademark by MKTG in conjunction with JRB business.
4.) RESTRICTIONS ON LICENSEE,
a.) Labels or brochures and other marketing materials used by
MKTG bearing the trademark shall conform to the requirements of the low of any
jurisdiction in which the trademark may be used and shall be subject to the
consent of ENT. MKTG shall not make any change in the trademark without prior
written consent of ENT.
b.) MKTG shall refrain from any act or acts, which may
prejudice the validity of the title of ENT to the trademark.
c.) In the event of any actual, threatened or suspected
infringement of, or other misconduct with respect to any of ENT's Names or Marks
oR the confidential and proprietary information, which comes to the attention of
MKTG, MKTG shall promptly report the same in writing to ENT and fully advise ENT
of all pertinent facts known by MKTG. MKTG agrees to be a named party in any
demand, suite or action which ENT may determine to institute in connection with
such matters. In addition, MKTG is named as a party in any suite or action in
which any part of the intellectual property is alleged to violate the rights of
any other person, MKTG shall promptly report that in writing to ENT and fully
advise ENT of all facts known by MKTG about it. MKTG shall, at its expense, take
over the defense of any such action and maintain and control such defense, and
shall further, at its expense, solely determine how to respond to any such
challenge, whether to institute any demand, suite or action, and how to maintain
or prosecute it. In
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any such matters MKTG shall cooperate in all ways and take all action and do all
things reasonably requested by ENT, and shall take such steps as ENT and MKTG
may deem advisable against the infringement or otherwise f or the protection of
its rights. MKTG may, at its own expense, defend any suspected infringement.
d.) MKTG shall immediately notify ENT in writing concerning,
and forward to ENT copies of and otherwise fully advise ENT with respect to, any
and all actual or threatened demands, notices, suits or actions or others legal
process served on or otherwise coming to the attention of MKTG, and any facts,
circumstances or events that might result in a suite or action against ENT or
MKTG.
e.) MKTG will at all times recognize and enforce the validity
of the trademark and the ownership thereof by ENT, and the exclusive right and
jurisdiction of ENT to control the use of the trademark. MKTG shall take all
appropriate measures for the protection of the trademark, and will not at any
time put in issue the validity of the trademark and will faithfully observe and
execute all the requirements, procedure and directions of ENT with respect to
the use and the safeguarding of the trademark.
f.) Upon termination or cancellation of this Agreement, MKTG
will not use at any time for any purpose any trademark, trade name, symbol or
other like product bearing any resemblance to the trademarks or copyright
material licensed hereby.
5.) PROMOTIONAL ACTIVITIES. MKTG will use all reasonable and proper
effort and means to further and preserve the good will and reputation of the
trademarks and copyright material.
6.) TERM. The term of this Agreement shall extend for a period of six
(6) years from the execution hereof. Unless terminated by MKTG within 60 days of
the end of any term, this Agreement shall continue for another term of six (6)
years.
7.) COMPENSATION. As consideration and compensation for this License
Agreement, MKTG agrees to pay $190,000 (One hundred and ninety thousand dollars)
to ENT (payment will be accepted in the form of Preferred Stock of MKTG - see
Exhibit " D") f or the assets listed on Exhibit "C" and, in addition, MKTG
agrees to pay royalties as follows:
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a.) During the term hereof, the license payment will be 5% of
the net amount invoiced by MKTG or any affiliate of MKTG f or all artificial
greenery and floral arrangements Living Silk sales (hereinafter ref erred to as
"net sales") made to any third party with the license payment and report to be
made within 30 days of the invoice for such goods sold.
b) MKTG is granted six (6) additional six-year terms during
which MKTG agrees that it will pay ENT a total royalty payment of one quarter of
one (.25%) percent of its net sales revenues per annum, for all artificial
greenery and floral Living Silk sales to any third party.
c.) For the sole purpose of verifying & confirming monetary
obligations hereunder, ENT, at all times, shall be afforded access to the books
and records of MKTG and shall be provided copies of all invoices and purchase
orders upon request.
d.) In the event that MKTG and ENT have a good faith dispute
with respect to the amount of any invoice, any particular purchase order, or any
other amount due and owing ENT, MKTG shall not be in default hereunder provided
MKTG pays any undisputed amount within 30 days of the invoice date and endeavors
in good faith to resolve the dispute within 60 days of the invoice date. If a
dispute lasts longer than 60 days, an independent accounting firm shall be
chosen by mutual agreement to resolve the dispute and the party who is in error
(or more in error) shall pay the costs of such firm.
8.) CANCELLATION.
a.) If MKTG is in default of this Agreement, then ENT has the
right to cancel the some on sixty (60) days' written notice to MKTG; provided,
however, that if MKTG shall cure the breach or default within such sixty (60)
day period, the Agreement shall continue in full force and effect.
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b.) Upon termination of this Agreement, in addition to
refraining from using the Living Silk trade names and trademarks, MKTG shall not
solicit or sell any artificial greenery and floral products or goods to any
previous customers on ENT's customer list as provided on date of closing.
c.) ENT shall have the right to cancel this Agreement at any
time in the event of the appointment of a receiver or trustee in bankruptcy f or
MKTG, or in the event MKTG shall take advantage of any insolvency or similar
laws.
9. CONSTRUCTION. This Agreement shall be construed in accordance with
the laws of the State of Florida, United States of America.
10. ASSIGNMENT, This Agreement may not be assigned without the prior
written consent of ENT.
11. NOTICES. Any notice required or permitted to be given under this
Agreement by either of the parties hereto shall be deemed to have been
sufficiently given for all the purposes hereof if mailed by registered mail,
postage prepaid, addressed to the party to be notified at its address shown at
the beginning of this Agreement or at such other address as may be furnished to
the notifying party in writing.
IN WITNES5 WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
WITNESSES: JRB ENTERPRISES, INC.
- ---------------------- ------------------------------
By: Joseph R. Bergmann, President
JRB MARKETING OF SOUTH FLORIDA, INC./
DIVERSIFIED RESTAURANT HOLDINGS, INC.
- ---------------------- ------------------------------
By: Joseph R. Bergmann, President
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EXHIBIT "D"
As payment of the $190,000 (One hundred and ninety thousand dollars)
License Fee, ENT agrees to accept Preferred Stock in MKTG under the f allowing
terms and conditions:
1.) Payment of quarterly dividend at the annual rate of 6.0%.
2.) Dividend will be cumulative and have priority over Common Stock.
3.) Preferred Stock will not be convertible and shall have no voting
rights.
4.) Preferred Stock will have a value of $100.00 per share.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Silk Botanicals.Com, Inc.
We hereby consent to the use in this Registration Statement on Form 10SB of our
report dated August 11, 1999, relating to the financial statements of Silk
Botanicals. Com, Inc.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
August 18, 1999
