SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20509
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
September 24, 1998
Date of Report
(Date of Earliest Event Reported)
INTERNATIONAL HERITAGE, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Nevada 002-97690-D 87-0421191
(State or other juris- (Commission File No.) (IRS Employer
diction of incorporation) I.D. No.)
Carolina Place
2626 Glenwood Avenue, Suite 200
Raleigh, North Carolina 27608
(Address of Principal Executive Offices)
(919)571-4646
Registrant's Telephone Number
Item 1. Changes in Control of Registrant.
None; not applicable.
Item 2. Acquisition or Disposition of Assets.
None; not applicable.
Item 3. Bankruptcy or Receivership.
None; not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
None; not applicable.
Item 5. Other Events.
On September 24, 1998, the Company filed an action in the General Court of
Justice, Superior Court Division, Wake County, North Carolina, versus Douglas
L. Sims, David L. Tillman, Mark Ledger, Kim Ledger, Jon Slade Lewis, Cindy
Lewis, Tim Angus, Lana Angus, Jeff Yates, Alice Yates, Adam Ragland and Unique
Opportunities, Inc., case number 98 CVS 11169. The Company alleges inter
alia: breach of contract, breach of fiduciary duty, tortious interference with
contract, and as a result of the immediate and irreparable harm that will be
created by the ongoing and continuous breach of the Defendants' contracts and
tortious interference with the contractual relationship between the Company
and its current Independent Retail Sales Representatives ("IRSRs"),
Plaintiff's have requested a temporary restraining order and preliminary and
permanent injunction be entered by the Court.
The facts of the case giving rise to the causes of action asserted by the
Company against the Defendants are as follows. The Company (or "IHI") is
engaged in the direct sale of nutritional and skin care products,
telecommunications products, fine gold and precious stone jewelry,
collectibles and pro-line golf products and accessories in the United States
and Canada. IHI uses a network distribution system to market these products
of recognized value through catalog sales using a network of IRSRs. IRSRs are
independent contractors who sell products from IHI at retail to the public or
purchase them for personal consumption. IHI develops unique, proprietary
materials for selling their products and training their IRSRs to sell their
products. In addition to purchasing products from IHI, IRSRs also have the
option to sell products to retail customers who have no direct affiliation
with IHI. IRSRs also have the option to build a retail sales organization of
other IRSRs, from whom the individual IRSR may have a right to earn override
commissions based upon the sales of product by their retail sales
organization. Like most network marketing companies, the primary asset of IHI
is its relationship and contractual agreements with its IRSRs.
There is no contractual relationship between an IRSR and the IRSRs that he or
she may recruit to become part of his or her retail sales organization, rather
the contractual relationship between each IRSR is directly with IHI. That
contract provides in relevant part that: the IRSR will not disclose or exploit
any proprietary or confidential information of IHI; the IRSR will not solicit
IRSRs from IHI for a period of six months after their departure from IHI; the
IRSR will not participate in any other direct sales program while engaged as
an IRSR of IHI or so long as he or she derives compensation from any IHI
Representative Business and that the Company is entitled to enforce its
contract with an IRSR by an action for specific performance, injunction and an
action for monetary damages.
The Defendants, other than Unique Opportunities ("Individual Defendants"),
were all IRSRs of IHI. They all earned significant income from IHI from 1995
to 1998. Due to their success with IHI, the Individual Defendants were
provided with public recognition as sales leaders and as such were provided
access to certain confidential information of IHI. At some point in 1998, the
Individual Defendants decided to become sales representatives for Unique
Opportunities and directly or indirectly used, disclosed or exploited the
proprietary or confidential information of IHI, not limited to using this
information to solicit IRSRs of IHI to join Unique Opportunities, in violation
of their contract with IHI and with the consent of Unique Opportunities. Upon
information and belief, and through the encouragement and assistance of the
Individual Defendants and Unique Opportunities, IRSRs of IHI have terminated
their contractual relationships with IHI and have initiated contractual
relationships with Unique with the understanding that the Defendants would
financially benefit from this new association with Unique.
Plaintiff alleges that by using, disclosing or exploiting the proprietary and
confidential information provided by IHI to the Individual Defendants and
other IRSRs and by soliciting, inducing or otherwise attempting to persuade
other IHI IRSRs to sell, resell, or promote the products of and business
opportunities of Unique, and by soliciting, inducing or otherwise attempting
to persuade other IRSRs to cease being an IHI representative, the Individual
Defendants have breached their contract with IHI, have breached their
fiduciary duty to IHI, have intentionally and wrongfully interfered with the
contracts between IHI and numerous IRSRs, have caused forseeable damage to IHI
in the form of lost business and therefore have given rise to claims for
damages to include punitive damages. Further, the wrongful actions of the
Defendants will cause irreparable and immediate harm and therefore a temporary
restraining order and preliminary and permanent injunction is necessary to
prevent the Defendants from continuing to engage in the activities which give
rise to the action.
Plaintiffs pray the Court to recover: judgment in excess of $500,000, punitive
damages in excess of $10,000, a temporary restraining order and preliminary
and permanent injunction be entered against the Defendants preventing the
Defendants from tortiously interfering with the contract between IHI and its
IRSRs and preventing the Individual Defendants from continuing to breach their
contracts with IHI, costs, attorney fees and other relief the Court deems just
and proper.
On October 1, 1998, the Court entered a Temporary Restraining Order pursuant
to the provision of N.C.G.S. Section 1A-1, Rule 65, restraining and enjoining
the Defendants from tortiously interfering with the contractual relationship
between IHI and its current IRSRs; restraining and enjoining the Individual
Defendants from directly or indirectly using, disclosing, or exploiting any
proprietary or confidential information provided by IHI to them or to any
other IRSR in any form or otherwise violating the terms of the agreements
between IHI and the Individual Defendants; restraining and enjoining the
Defendants from distributing any false or misleading information regarding IHI
or acting in concert with any person who is distributing false and misleading
information regarding IHI. The Temporary Restraining Order is in full force
and effect until dissolved or until brought on for hearing on a motion for
preliminary injunction which is set to be heard October 12, 1998.
Item 6. Resignations of Registrant's Directors.
None; not applicable.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
None; not applicable.
Item 8. Change in Fiscal Year.
None; not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL HERITAGE, INCORPORATED
Date: 10/05/98. By: /s/ Stanley H. Van Etten
______________________________________
President, CEO and Chairman of the Board
