SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required) For the fiscal year ended June 30,
1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from
__________ to __________.
Commission file number 2-99212-A
PALLET MANAGEMENT SYSTEMS, INC.
(Name of small business issuer in its charter)
Florida 59-2197020
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One South Ocean Boulevard Suite 305
Boca Raton, Florida 33432
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (561) 338-7763
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
None.
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year:
$16,848,000
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of December 31, 1996 -
$1,289,029.
<PAGE>
Part I
Item 1. Description of Business.
Introduction
Pallet Management Systems, Inc. (the "Company" or "Pallet") is engaged
in the manufacture, sale, repair and retrieval of wooden, plastic, and metal
pallets as well as other product packaging required for the shipment of goods.
The Company was formed by mergers and acquisitions of several companies and
currently has operations in, Florida, Georgia, and Virginia.
The pallet, a little-known entity to the consumer, is a key factor to
almost all industrial businesses. Pallets are the foundation for packaging of
products for shipment, an indispensable platform for the world-wide movement of
goods. Without pallets, shipping by land, sea and air would be severely
hampered.
A pallet is a portable platform for the storing or moving of cargo or freight.
Most commonly made of wood, its standard size is about 4 feet square. It is
designed to be picked up with its goods and transported by a forklift.
The pallet industry in the United States has grown to more than a six
billion dollar ($6,000,000,000) industry. Although the pallet plays such a vital
role in transportation today, management believes that the pallet industry
itself has not matured. The industry is fragmented into many small, localized
and/or specialized companies that usually have an operating radius of less than
100 miles, none of which individually has any appreciable market impact.
History of the Company
The Company was incorporated in the State of Florida on June 10, 1982,
under the name Air Bags, Inc. On June 7, 1985, the Company changed its name to
Enterprise Capital Corporation ("ECC"). After its organization, the Company
remained in a development stage, expending funds investigating business
opportunities, until it merged with Pallet Recycling Technologies, Inc. ("PRTI")
on October 7, 1994. With this merger, the Company acquired all of the
outstanding common stock of a Delaware corporation, in exchange for 567,777
shares of the Company's Common Stock. The Company changed its name to Pallet
Management Systems, Inc. in November 1994.
Pursuant to a Merger Agreement and Plan of Reorganization
dated June 29, 1995, among Abell Lumber Corporation, a Virginia
corporation ("Abell"); the Company; PMSI Acquisition Corporation,
<PAGE>
wholly-owned by the Company; and certain shareholders of Abell and
the Company, on June 29, 1995, (i) the shareholders of Abell
acquired 67.33% of the outstanding shares of the Company's Common
Stock and (ii) Abell became a wholly-owned subsidiary of the
Company. (The "Merger.")
Upon completion of the Merger, John C. Lucy, Jr., held 1,538,761
shares, or 45.84%, of the Company's issued and outstanding shares of Common
Stock, and the other members of Mr. Lucy's family held an aggregate of 685,724
shares, or 20.43%, of the Company's issued and outstanding shares of Common
Stock.
Upon closing of the Merger, John C. Lucy, Jr., John C. Lucy, III,
Carolyn S. Lucy, Dawn LaPuasa, and M. Leroy Drummond, all of whom were directors
of Abell, were elected Directors of the Company and John C. Lucy, III, was
elected Chairman. In February 1996, Carolyn S. Lucy, Dawn LaPuasa, and M. Leroy
Drummond resigned as directors and M. Bruce Adelberg of Salem, South Carolina,
Jack Simon of Boca Raton, Florida, and Tom Rohman Esq., CPA, of Richmond,
Virginia, were elected to the board. The Company's other officers and directors
remained in the capacities to which they were elected prior to the Merger.
The Pallet Industry
The pallet industry is considered part of the overall transportation
packaging industry and is critical to global commerce. This industry is
extremely fragmented, substantially free from government regulation and has no
market dominator. Considered a "staple" industry, pallets are an integral part
of industrial production. Nearly every item manufactured or processed is shipped
and/or stored on pallets.
According to the National Wooden Pallet and Container Association
(NWPCA), in 1995, there were approximately 500 million new wood pallets produced
in the United States with hundreds of millions sold on a used or recycled basis.
New pallet sales are in excess of $4 billion annually, and have been growing at
an average rate of 12.2% per year over the past 18 years. Sales of recycled
pallets have increased 20% in both 1992 and 1993 and 26% in 1994, according to
Pallet Enterprise Magazine; however, recent growth rates in all segments of the
industry have been stagnant as a reaction to the slowed manufacturing and retail
economy.
Due to the high cost of plastics and other materials, wood is the
preferred and more environmentally conscious material for pallets, though some
customers require plastic pallets for closed loop supply systems where pallet
sanitation is critical and accountability can be controlled. According to a
NWPCA survey, 99%
<PAGE>
of pallet users reported using wood pallets. Of the participants only 2.5%
reported using any material other than wood.
PRIMARY INDUSTRY USERS OF PALLETS:
1) food and beverage 3) steel and metal 5) chemical and
fluid
2) paper and fiber 4) automotive 6) printing
The industry is highly fragmented with over 3,000 pallet companies
scattered across the United States. Most of these companies tend to specialize
in only one segment of the industry: new pallet sales, recycled pallet sales,
pallet rental, or pallet repair, without any single company dominating any
market. Pallet companies, except for those involved in pallet rental, are
generally small independent businesses that operate within a limited radius from
their facilities.
The fragmentation of the industry is becoming more and more frustrating
to pallet users. As their demand for service increases, they become burdened by
trying to integrate independent companies to service their regional or national
requirements--a task they are typically unable to accomplish effectively.
Customers are quickly recognizing the significant benefits of
returnable packaging and are virtually begging for a truly integrated system
that can effectively manage and service their needs. One response to this demand
for service has been the development of pallet rental pools, though this
response is only a small piece of the overall solution. Chep, the world's
largest pallet rental company with over 50 million pallets in over 16 countries,
dominates this segment of the market in the grocery industry.
Products and Services
The Company finds total solutions for its customers' pallet
requirements through comprehensive products and services classified as New
Products and Remediation.
New Products
New Wood Pallets
The Company manufactures, sells, and distributes new pallets in large
quantities. New wood pallets are manufactured at the Company's Lawrenceville,
Virginia and Ocala, Florida plants, with daily capacities of 8,000 and 1,200
pallets, respectively. Due to
<PAGE>
rising costs and increased competition, the Company's gross profit per new
pallet has decreased over the years.
Other Transport Packaging
The Company is also a wholesale distributor of various returnable
transport packaging. These items include: plastic and metal pallets; plastic,
collapsible bulk boxes; wood, plastic, and metal slave pallets; wooden boxes and
crates. Profits vary by item as they are typically outsourced. Due to lack of
demand, sales of pallets made from materials other than wood are minimal.
Remediation
Remediation is the systematic collection, repair, return and reuse of
pallets and other types of packaging. Creating new and comprehensive remediation
products and services is the focus of the Company's expansion.
Recycled Wood Pallets
Recycled pallets generally come from companies that are "end users."
End users receive products delivered on pallets that cannot be used for their
own shipping. These end users accumulate thousands of unwanted pallets which the
Company retrieves, sorts and processes. These pallets are then sold as recycled
pallets, disassembled for replacement components, or are mulched.
Pallet Warehousing
At select locations, the Company sorts and stores pallets for customers
indoors to provide higher quality recycled pallets. Although margins are low,
this typically provides a value-added service and a marketing advantage. It is
expected that this service will be in higher demand in the future as pallet
users increasingly demand moisture controlled pallets.
Third Party Pallet Management
The Company offers an on-site repair and sorting system that provides
professional management and significant savings to large volume customers. These
operations can produce substantial savings for the customer by reducing their
costs through better utilization of their pallet resources, and generate higher
margins due to limited competition.
Pallet Retrieval
This service provides companies with a system for lowering
pallet cost-per-trip by creating a closed-loop return system
between the manufacturer, their customers, and their vendors. The
Company currently manages several retrieval programs on a regional
basis and plans to expand this system nationally. Retrieval
<PAGE>
produces the highest level of profitability due to a lack of
competition and low overhead.
Suppliers
There is generally ample supply of the Company's raw material
components. Hardwood and softwood, used lumber, used pallets, and nails make up
the main raw material components. Due to the Company's size and current buying
practices, the purchasing of raw materials has been one of its advantages and
will continue to improve as the Company consolidates its purchasing efforts. The
Company's primary supply items are hardwood, softwood lumber and used pallets.
The Company has several principal suppliers which are rotated depending on
availability. The Company currently buys approximately 32% of its lumber supply
from Clary Lumber Co., Inc.,("Clary"), which is owned by John C. Lucy, Jr.,
majority shareholder and a director of the Company. A purchasing committee
ensures that lumber is purchased from Clary at market price or less.
Used pallet inventory is a concern for pallet recyclers. Depending on
the season and/or other circumstances, the used pallet supply tends to vary in
cycles from region to region. The Company has a competitive advantage due to its
size and geographical diversity.
Operations
Operations are grouped into regions, MidAtlantic, and SouthEast, which
consist of geographical areas encompassing several states. These regions manage
local operations, which include control of manufacturing, inventory,
transportation, manpower, customer pallet usage, handling systems, program
costs, pricing structure, payroll, and general administrative and accounting
matters. These functions are reviewed and monitored at the Company's Boca Raton,
Florida, corporate office. Additional regions will be added as required.
The Company services customers with three different types of
operations: Repair Depots/Depots, Manufacturing Plant, Affiliate
Companies.
Repair Depots/Depots
The Company currently has major Repair Depots in Virginia and Florida. These
facilities have a minimum of 40,000 square feet of covered workspace and indoor
storage, and up to 8 acres for outside storage. While the Depot is designed to
sort and store pallets, the Repair Depot also includes automation for 75
employees, and have been opened in markets where existing customers have major
distribution centers and pallet retrieval. The Repair Depot in
<PAGE>
Florida has several satellite operations which provide pallet repair and outside
pallet storage.
Manufacturing Plant
The Company currently has one major manufacturing plant located in Virginia, and
does not plan to expand in the high volume new pallet production market. This
facility is capital intensive with "state of the art" automation for new pallet
manufacturing. It employs over 100 personnel and maintains a transportation
fleet for product delivery. Limited manufacturing is performed at the Ocala,
Florida, facility.
Affiliate Program
With the Company expanding its sales and marketing on a national basis, but
concentrating its operating facilities in the MidAtlantic and SouthEast regions,
it has developed a program where pallet companies can be affiliated with the
Company to service its national customer base. The Company provides sales,
marketing, administrative support and receivable financing to these companies as
they are charged a fee to service the Company's customers. The Company has
several of these affiliates in operation and is expanding this program.
Marketing and Distribution
The Company has a customer base of over 450 customers, many of which
are Fortune 500 companies, including Allied-Signal, Bausch & Lomb, Chep,
Coca-Cola, Food Lion, K-Mart, Office Depot, Metal Container, Stop & Shop,
Wal-Mart, Walt Disney World, Winn-Dixie, and various governmental agencies. Many
of these customers have facilities in multiple geographic locations that require
geographically diverse pallet services. The Company has been successful in using
national customers to expand sales and marketing to new locations. This method
of expansion creates immediate cash flow with reduced risk.
The marketing plan of the Company focuses on service, and the related
savings. Service no longer means just delivering pallets on time, it also means
helping customers in every way possible to manage their packaging resources.
Company analysis shows that when customers receive more service, they also save
money. A value-added aspect of this service is the Company's ability to process
rental, non-rental and odd sized pallets, normally a logistical problem for the
customer.
Seasonality
In the pallet industry, sales typically remain constant with small
increases before major holidays.
<PAGE>
Competition
Competition consists mainly of small, single-location pallet companies
with limited resources, though there are several large pallet manufacturing
plants with which the Company competes. While new pallet manufacturers can
service up to a 300 mile radius, recyclers rarely market beyond a 100 mile
radius.
Employees
The Company currently has 234 employees. These include 179 production
workers who work on new and recycled pallets, 1 full-time Quality Systems
Facilitator, 5 drivers, 9 clerical personnel, 19 facility management personnel,
5 regional management personnel, a 4 person sales force, 6 customer service
personnel, 4 staff personnel, and 2 executive personnel.
Government Regulations
There are no government regulations which are applicable to the
manufacture and recycling of wooden pallets.
Item 2. Description of Properties
Petersburg, VA, Repair Depot: This facility has the capacity to
process, repair, and store all types of pallets. It contains a 40,000 square
foot warehouse on eight acres of Company-owned property with a $500,000 ten year
mortgage with NationsBank at 2% above prime. Forty eight persons are employed at
this facility and contains "state of the art" automated equipment.
Lakeland, FL, Repair Depot: This facility was opened April
1996 at a 60,000 sq. foot facility on five acres of yard with a 5
year, $15,600 per month lease terminating March 2001. It employs
forty-four employees and can process all types of pallets on an
automated line. This facility also supports two satellite
operations located in Citra and Orlando, Florida. These facilities
contain a 5000 sq. ft. building on 5 acres leased for 5 years at
$1,600 per month and a 15,000 sq. ft. building on 3 acres leased
for 8 years at $5,300 per month terminating July, 2000, and August,
2004, respectively.
Douglas Georgia Repair Depot: This facility is a twelve employee sort
and repair operation on two acres of fenced yard and 1,000 square feet of indoor
workspace leased month to month at 1,800 per month. The Company is in the
process of reorganizing this facility to handle limited operations and plans to
service some of the Georgia customers through affiliate companies.
Lawrenceville, VA, Manufacturing Plant: This is a Company
owned manufacturing facility where the majority of the new pallet
<PAGE>
production is performed. Pallet recycling and repairs also take place at this
facility which has 60,000 square feet of manufacturing buildings and a 3,000
square foot office building located on 70 acres and employs over 100 personnel.
Corporate Offices are located at One South Ocean Boulevard, Suite 305,
Boca Raton, Florida, where the Company rents 1,009 square feet of office space
for $1,241 per month with a lease ending May 2000.
Item 3. Legal Proceedings.
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company or any of
its subsidiaries is a party or of which any of their property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fiscal year ended June 30,
1996.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock is quoted on the NASD electronic bulletin
board under the symbol PALT and for each quarterly period during the two fiscal
years ended June 30, 1996, the following high and low bid quotations reported
for the Company's Common Stock were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Bid Prices
Period High Low
Fiscal Year 1997
First Quarter 5/8 1/4
Second Quarter * 1 1/4
Fiscal Year 1996
First Quarter 10 3/4 10 1/2
Second Quarter 10 1/2 8
Third Quarter 8 7
Fourth Quarter 7 1/4 5/8
Fiscal Year 1995
First Quarter 5 3/4 1/2
Second Quarter 6 1/8 5 1/2
Third Quarter 7 5 1/2
Fourth Quarter 9 7/8 6 7/8
</TABLE>
* Gives effect to stock split effective October 3, 1996.
<PAGE>
The quotations in the foregoing table represent prices between dealers
and do not include retail markup, markdown, or commissions paid and may not
represent actual transactions. Such quotations are not necessarily
representative of actual transactions or of the value of the Company's
securities.
As of December 31, 1996, there were 115 holders of record of the
Company's Common Stock. The Company has not declared or paid any dividend on its
Common Stock in the last two fiscal years.
Item 6. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis should be read in conjunction
with the Financial Statements appearing elsewhere in this Report.
Fiscal Year Ended June 30, 1996 Compared to Fiscal Year Ended June
30, 1995
Net revenues in the fiscal year ended June 30, 1996 ("Fiscal 1996")
decreased by $12,597,000, or 43%, as compared to net revenues in the fiscal year
ended June 30, 1995 ("Fiscal 1995"). This decrease was due to a sharp decline in
new pallet sales which accounted for 59% of net revenues, as opposed to 83% of
net revenues the previous year. Revenues from pallet remediation increased to
38% in Fiscal 1996 from 15% in Fiscal 1995. As the Company has expanded into
higher volume, lower cost pallet remediation, the number of units sold has
increased.
The decrease in new pallet sales resulted from the following;
First, the manufacturing and retail economy experienced a decline in
Fiscal 1996 when compared to Fiscal 1995. This slow down adversely affected the
pallet and packaging industry. As the Company increases its focus on pallet
remediation, the cyclical economic impact of the economy should have a smaller
effect on the Company's growth rate.
Second, a substantial portion of the sales in Fiscal 1995 was
attributable to a dramatic increase from two major customers which accounted for
approximately 57% of Fiscal 1995 sales and a 58% overall increase in sales from
fiscal year 1994. To meet this increased demand, the Company outsourced a
considerable amount of new pallet manufacturing thus reducing profit margins.
Orders from these customers during Fiscal 1996 declined very significantly as
the demand was met in Fiscal 1995.
Cost of sales for Fiscal 1996 was $15,981,000 (95 % of gross sales) as
compared to $25,494,000 (87% of gross sales) for Fiscal 1995. The increase from
87% to 95% of gross sales is attributable to new pallet production not at
optimum capacity and expenses associated with the expansion programs.
<PAGE>
Selling, general and administrative expenses were $2,816,000 (17% of
gross sales) in Fiscal 1996 as compared to $3,344,000 (11% of gross sales) in
Fiscal 1995. This decrease in selling, general and administrative expenses is
due to the decrease in sales. Savings that should have been realized by
consolidation of operations were off-set by expenses associated with the
expansion and acquisition programs.
Interest expense increased to $401,000 in Fiscal 1996 from $305,000 in
Fiscal 1995. This increase is due to financing of this year's working capital,
increased borrowing for expansion, and increased interest rates.
The net loss for Fiscal 1996 was $1,778,000 compared to a net loss of
$51,000 for Fiscal 1995. This loss was a result of decreased sales and added
expenses associated with the consolidation and expansion.
In Fiscal 1996, the Company wrote-off $48,000 of costs associated with
two private placements, and all costs associated with opening and closing
facilities.
During the year the Company focused on integrating the Pallet and Abell
organizations following the Merger. This included integrating and consolidating
a company-wide computer system and an expansion program which included three new
pallet remediation facilities and a campaign to acquire other pallet companies.
Despite the industry's trend toward consolidation, management found that pallet
companies were demanding excessive purchase prices and demands. Consequently, no
acquisitions were consummated.
Liquidity and Capital Resources
The Company's financing needs depend primarily upon sales volume and
controlled variable expenses. The Company has financed its working capital needs
through, borrowings and issuance of common stock.
The Company had cash on hand of $17,000 at the end of Fiscal 1996,
versus $449,000 at the beginning of the fiscal year. This decrease is
attributable to operational losses resulting from opening three new facilities,
closing unprofitable facilities, reduction in new pallet sales volume, increased
competition, the acquisition program, and higher interest charges. In addition,
prepaid expenses increased $119,000, accounts payable decreased $416,000, and
the Company acquired $792,000 of fixed assets. These items were partially
off-set by accounts receivable decreasing $336,000, accrued liabilities
increasing $334,000, inventory decreasing $555,000, net proceeds from lenders of
$1,058,000 which
<PAGE>
includes $256,000 from a private subordinated debt offering and a $742,000
subordinated note payable from a related party. The Company also sold 72,000
shares of common stock which raised $430,000 net of offering expenses.
The Company completed a new financing agreement with NationsBank on
September 30, 1995 which increased the line of credit available to the Company
to $2.5 million, from the former $1.2 million line, at an interest rate of prime
plus 2% and is secured by priority lien upon substantially all the assets of
Abell and is guaranteed by two major shareholders. Advances are based on 80% of
eligible accounts receivable and 50% of inventory. The note has a three year
term with provisions for annual renewals thereafter. In addition, the Company
obtained a $500,000 ten year term loan from NationsBank for the Petersburg,
Virginia facility at prime plus 2%. The proceeds of this loan were used to repay
short term indebtedness. This loan is to be repaid in equal monthly installments
of principal plus interest. The Company is currently in violation of covenants
in its line of credit and is in the process of seeking a replacement lending
institution.
The Company believes that it will have sufficient capital and borrowing
power to sustain operations as it seeks new financing due to significant cost
cutting and increased sales through June 30, 1997. During the first two quarters
of fiscal year 1997 (Fiscal 1997), management has continued restructuring of
operations and management. Sales for the 13 week period ending September 30,
1996 had sales of $3,731,000 with a loss of $198,000, compared to sales of
$3,826,000 and a loss of $ 245,000 for the same period last year. Sales for the
26 week period ending December 28, 1996 had sales of $9,020,000 with a loss of
$176,000, compared to sales of $8,223,000 and a loss of $543,000 for the same
period last year.
On a monthly basis, sales have nearly doubled since the beginning of
the first fiscal quarter. This sales increase is mainly in new pallet sales with
several new contracts and one customer ordering a significant number of new
pallets.
Through reductions and reassignment of management and production
personnel, new pallet manufacturing is operating at optimum capacity. In
addition, management anticipates improved cost controls and additional
efficiencies resulting from implementation of a new computer system and upgraded
accounting software.
Expansion was slowed and unprofitable operations were closed in Fort
Myers and Tampa, Florida, and Hartford, Connecticut. The customer base in the
New England area is maintained by the Company through an affiliate pallet
company providing products and
<PAGE>
services. Plans for a New Jersey facility have been suspended and operations in
the Baltimore, Maryland area have also been turned over to an affiliated
Company. As a result of these actions, the Company has been able to eliminate a
layer of management infrastructure and focus on operational efficiency. In
addition, the Company's Chairman and CEO and its' President have each reduced
their salaries to $52,000 annually and assumed the operational responsibilities
of the COO who resigned to pursue other non-pallet interests.
<PAGE>
Automation has been installed at the Lakeland facility which
should decrease labor costs and increase sales capacity. The
Orlando facility also increased sales capacity by building a 15,000
sq. ft. repair and storage building.
Item 7. Financial Statements
(i).......Report of Independent Certified Public
Accountants..............................................F-1
(ii) Consolidated Balance Sheet as of
June 30, 1995 and 1996...................................F-2
(iii) Consolidated Statements of Operations
for the years ended June 30, 1996, and 1995..............F-3
(iv) Consolidated Statement of Stockholders'
Equity for the years ended June 30,
1996, and 1995....................................... ...F-4
(v) Consolidated Statements of Cash Flows for
the years ended June 30, 1996, and 1995............... ..F-5
(vi) Notes to Consolidated Financial Statements...............F-6
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
There were no disagreements on any manner of accounting principles or
practices of financial statement disclosure during the most recent financial
statements included herein.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
As of December 31, 1996, the executive officers and directors of the
Company were as follows:
Names and Addresses Age Position
John C. Lucy, III 38 Chairman of the Board of
Directors and CEO
Zachary Richardson 41 President, Secretary,
Treasurer and Director
M. Bruce Adelberg 60 Director
<PAGE>
John C. Lucy, Jr. 62 Director
Donald Radcliffe 51 Director
Tom Rohman Esq., CPA 41 Director
Jack Simon 70 Director
Each director will serve until the next annual meeting of shareholders
and until his or her successor is duly elected and qualifies. Each officer will
serve until the first meeting of the Board of Directors following the next
annual meeting of the shareholders and until his or her successor is duly
elected and qualifies.
John C. Lucy, III joined Abell on a full-time basis in 1980 after
graduating from Virginia Tech with a B.S. in business. For the past five years
Mr. Lucy was the president of Abell Industries and after the Merger became
Chairman and CEO of the Company. He has extensive experience in pallet and
lumber manufacturing and has spent the last ten years with Abell focusing on
sales and marketing to large, national customers. In addition to being President
of Abell and an officer of the Company, he is President of Clary, a hardwood
lumber sawmill located in Gaston, North Carolina, and is Vice-President of
Blacksburg Enterprises, Inc., which operates Baskin-Robbins and Sub-Station II
franchises in Blacksburg, Virginia. He is currently serving his second
three-year term on the Board of Directors of the National Wooden Pallet and
Container Association after having completed a two year term as Chair of its
military packing task force and three years as its Chair of its research
steering committee. He was elected Chairman and CEO of the Company on June 29,
1995.
Zachary Richardson founded PMSI of America, a pallet company, and was
its President since its inception in January 1992, until its merger with PRTI in
October 1993. He became President and a Director of the Company on October 7,
1994 when it merged with PRTI. Mr. Richardson has been involved with management
and sales for over 19 years. After graduating from Franklin and Marshall College
in 1977, Mr. Richardson attended Aviation Officer School and was commissioned in
the United States Navy and designated a Naval Aviator. In 1985 he transferred to
the Naval Reserves and pursued a career in the investment industry with several
investment firms. In 1988, Mr. Richardson founded and became president of
Skeezix Communications, Inc., a professional investment consulting firm, which
was acquired by PRTI in November 1993. During the past five years, Mr.
Richardson has been president of the Company or one of its predecessor companies
and he maintains his status as a Lieutenant Commander in the Naval Reserve.
<PAGE>
M. Bruce Adelberg joined the board in February, 1996 after
working as a consultant to the Company for over a year. He has had
an extensive career with Institutional Investors. Mr. Adelberg is
president of MBA Research Group, which he founded in 1989. Prior
to forming his own company, he was Vice President, Institutional
Equity Sales for Merrill Lynch & Co. on Wall Street. He had been
with Merrill Lynch & Co. since 1978. Prior to Merrill Lynch, he
worked for Dreyfus & Co. and then Strasbourger, Pearson, Tulcin,
Wolff, Inc., both in institutional sales at their New York offices.
He is currently on the Board of Directors of Comstock Partners
Funds, a mutual fund group. Mr. Adelberg has an MS in Management
from the Columbia University Graduate School of Business, and a
B.S. in Management from the NYU School of Business. He is also an
active member on the panel of arbitrators of the NYSE, NASD, and
the American Arbitration Association. Mr. Adelberg intends to
devote less than 5% of his time to the affairs of the Company.
John C. Lucy, Jr. founded Abell in 1966 after having worked in a family
lumber and pallet manufacturing business for approximately ten years. In 1969,
he acquired Clary Lumber Co., Inc., to supply lumber to Abell, and remains the
chairman of Clary Lumber Co. In 1976, he acquired Shelbyville Enterprises which
operates a motel/restaurant in Shelbyville, Tennessee. In 1980 he formed
Blacksburg Enterprises to operate food service operations in Blacksburg,
Virginia. He attended Richmond Polytechnic Institute for two years, beginning in
1953, prior to serving two years in the military.
Donald Radcliffe has been a director of the Company since April 25,
1985, and was re-appointed to the Company's Board in October, 1994. From June
1984, Mr. Radcliffe has served as the Chief Operating Officer, Executive Vice
President and Director of World Wide Business Centers, a company which provides
businesses with office space and facilities. From June 1970 through June 1984,
Mr. Radcliffe was a partner in the accounting firm of Main Hurdman. In addition,
Mr. Radcliffe has served as President and Director of Radcliffe Enterprises,
Inc., a financial consulting company, since May 1982. Mr. Radcliffe received his
Bachelor of Science degree with honors from Lehigh University in 1967, and a
Masters in Business Administration degree, with distinction, from the Amos Tuck
School, Dartmouth College. Mr. Radcliffe is also a certified public accountant
in the State of New York. Mr. Radcliffe intends to devote less than 5% of his
time to the affairs of the Company.
Tom Rohman Esq. CPA, became a director in February 1996. Mr.
Rohman is currently a partner with the law firm McGuire, Woods,
Battle & Boothe, LLP, Richmond, Virginia, which he joined in 1983.
Prior to joining the law firm, he was a certified public accountant
with KPMG Peat Marwick in New York. Mr. Rohman received his B.S.
degree in accounting from the University of Notre Dame, a law
<PAGE>
degree, and masters of laws from the New York University School of
Law. Mr. Rohman intends to devote less than 5% of his time to the
affairs of the Company.
Jack Simon became a director in February 1996. Mr. Simon has
been heavily involved in the finance industry and a pioneer in
equipment and machinery asset leasing. He founded and presided as
CEO of several financing and leasing companies including: Resource
Funding Corp., National Funding Corp., Continental Asset Systems,
Key Funding Corp., Eastern Factors, Inc. and Universal Asset
Management Corp. He has also served on the board of several other
leasing and financing companies and has been a member of the Board
of the National Conference of Commercial Finance Companies. Mr.
Simon received a degree in Political Science and Economics from
Williams College in 1948. Mr. Simon intends to devote less than 5%
of his time to the affairs of the Company.
<PAGE>
Item 10. Executive Compensation.
The following table sets forth the cash and cash equivalents paid
during the fiscal years ended June 30, 1994, 1995 and 1996 to all individuals
serving as the Company's executive officers during the last fiscal.
SUMMARY COMPENSATION TABLES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name and Principal Position Year Annual Long-
Compensa Term
tion Compens
ation
Awards
Payouts
Salary Bonus Other Restricted Optio LTIP All
($) (3) ($) ($) Stock ns/SA Other
Awards Rs
---------------------
John C. Lucy, III, 1996 86,800
1995 114,758 64,000
1994 100,135 16,000
Chairman (1) (5)
Zachary Richardson, 1996 100,117
1995 81,453
1994 81,453
President, Director (2) (5)
Eugene Dignoti Sr. 1996 127,420
1995 81,453 50,000
1994 81,453
Chairman, CEO, COO (2)(4)(6)
======================================= ===================== ======== ============ ================== =========
</TABLE>
(1) Mr. Lucy's compensation was paid to him by Abell, which became a subsidiary
of the Company on June 29, 1995. He was elected Chairman of the Company on June
29, 1995.
(2) The compensation of Messrs. Dignoti and Richardson was paid to them by PRTI
and its predecessors prior to the Company's acquisition of PRTI on October 7,
1994. Mr. Dignoti was Chairman and Chief Executive Officer until June 29, 1995,
when he was elected Chief Operating Officer.
(3) Includes medical insurance reimbursements.
(4) The bonus paid to Mr. Dignoti includes cash of $37,020.29 and forgiveness of
$12,979.71 in debt.
(5) Messrs. Lucy and Richardson reduced their annualized salaries from $95,000
to $52,000 in June.
(6) Mr. Dignoti resigned as an officer of the Company and member of the board
effective September 1, 1996.
The Company has a Compensation Committee which determines the basis for
the value of an officer or a contracted service to the Company based on
compensation by other companies of like size for comparable services, and other
factors specific to each determination of compensation. The Company has an audit
committee which will select the independent certified public accountant to audit
the Financial Statements at year end and review the internal financial controls
of the Company. The independent certified public accountant will provide the
audit committee with their findings.
<PAGE>
The Company has entered into similar five year employment agreements
expiring on June 30, 2000 with John C. Lucy, III, and Zachary Richardson. These
agreements provide for an annual base salary of $95,000. In addition, the
agreements are anticipated to provide certain allowances and entitlements. These
will include, but will not be limited to, an automobile allowance, accident and
health insurance, disability insurance, and contributions to retirement plans.
Messrs. Lucy and Richardson have elected to temporarily reduce their salary to
an annualized $52,000.
No compensation is paid to any director, for his or her services. The
Company may, but presently does not intend to, authorize travel expenses for
actual attendance at each regular or special meeting of the Board. Under the
Company's Articles of Incorporation and By-Laws, the Directors may set their own
compensation for service as officers.
Don Radcliffe was under a one year $3,500 per month contract to the
Company to handle public relations which was terminated early in March 1996 by
mutual consent of both parties. During the first half of the fiscal year, Mr.
John C. Lucy Jr. was compensated $69,000 for his services to the Company. This
compensation was terminated in February 1996 by mutual consent.
The Company currently has key man life insurance on John C.
Lucy, III, and is seeking key man life insurance for Mr.
Richardson. The Company has no key man insurance on the life of
any other officer or director.
The Company has adopted a combined stock option and appreciation rights
plan to attract and to induce officers, directors and key employees of the
Company to remain with the Company. The plan will provide for options which will
qualify as incentive stock options under Section 422(a) of the Internal Revenue
Code of 1986, as amended, as well as for options which do not so qualify. No
more than fifteen percent (15%) of the Common Stock outstanding will be reserved
for issuance upon exercise of options to be granted from time-to-time.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The table below sets forth information with respect to the beneficial
ownership of the Common Stock by (i) each person who is
<PAGE>
known to the Company to be the beneficial owner of more than five percent of the
Common Stock, (ii) all directors and nominees, (iii) each executive officer, and
(iv) all directors and executive officers as a group. Unless otherwise
indicated, the Company believes that the beneficial owner has sole voting and
investment power over such shares. The Company does not believe that any
shareholders act as a "group," as that term is defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended. As of June 30, 1996, the
Company had issued and outstanding 3,428,930 shares of Common Stock and as of
December 31, 1996, this number increased to 4,849,956 after the 2 for one split
and conversion of Notes as described in Item 12. The following chart indicates
holdings after the split.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Amount and
Name and Address Nature of Percent Warrants
of Beneficial Owner Beneficial of Class
(1) Ownership
John C. Lucy, III (2) 371,389 7.66% 10,870
(4)
Zachary Richardson 124.996 2.58% 25,000
(2)(5)
M. Bruce Adelberg(3) 35,000 .72% 25,000
John C. Lucy, Jr. 2,124,761 43.81% 500,000
(3)(6)
Donald Radcliffe (3) 34,000 .70% 15,000
Tom Rohman (3) 0 0% 0
Jack Simon (3) 17,536 .36% 10870
Dawn LaPuasa (4) 360,519 7.43% 0
All officers and 2,707,682 55.83% 586,740
Directors as a group
(7 persons)
</TABLE>
(1) The address of all beneficial owners in this table is
Suite 305, One S. Ocean Boulevard, Boca Raton, Florida 33432.
(2) An officer and director.
(3) Director only.
(4) Includes 16,000 shares held in custody for children.
(5) Does not include 307,810 shares held by Sequoia Capital Corp.,
of which Mr. Richardson is majority shareholder.
(6) Includes stock owned by Clary Lumber of which Mr. Lucy Jr.
is majority shareholder
(7) Two year warrants with $1.25 exercise price.
Item 12. Certain Relationships and Related Transactions.
Clary Lumber Corp., which is owned by the family of John C. Lucy, Jr.,
a Director and principal shareholder of the Company, sold Abell $2,178,000 and
$1,980,000 which is 32% and 7.5% of Abell's lumber purchases for the years ended
June 30, 1996 and 1995 respectively. Abell sold approximately $159,000 of lumber
to Clary in the year ended June 30, 1996. The Company believes that these
purchases were made at market prices in the ordinary course of business. Clary
has loaned the Company money to acquire property and provide additional working
capital during Fiscal 1996. As of June 30, 1996, Clary converted $742,000 into a
2 year 12% note. The Company has paid $52,000 in salary reimbursement to Clary
for compensation to John C. Lucy III who performs services for both Clary and
the Company. In August 1996, Abell sold to Clary real estate at the market price
of $200,000.
Pursuant to the Merger, (i) the shareholders of Abell acquired
67.33% of the outstanding shares of the Company's Common Stock and
<PAGE>
(ii) Abell became a wholly-owned subsidiary of the Company. Upon completion of
the Merger, John C. Lucy, Jr., held 1,538,761 shares, or 45.84%, of the
Company's issued and outstanding shares of Common Stock, and the other members
of Mr. Lucy's family held an aggregate of 685,724 shares, or 20.43%, of the
Company's issued and outstanding shares of Common Stock.
On September 27th, the board of directors approved a 2 for 1 stock
split to shareholders of record date October 3, 1996, payable as of November 15,
1996. Prior to the declaration of the split, certain inside shareholders who
held in excess of 75% of the outstanding shares waived their rights to receive
additional shares a stock split during calendar year 1996.
The Company's board of directors approved on December 3, 1996, a dollar
for dollar exchange of outstanding notes into newly formed "A Units". Each A
Unit consisted of one share of Pallet Management Systems' common stock, and one
two year warrant to purchase one share of Pallet Management Systems' common
stock at an exercise price of $1.25. At the time of the offer, the Company had
notes valued at $681,740 and a commitment from the majority shareholder to
invest an additional $300,000 into the Company prior to the end of the calendar
year. From the $981,740 eligible for this exchange offer, $607,000 was converted
into 607,000 A Units of which $576,740 was held by Company board members.
Item 13. Exhibits and Reports on Form 8-K
Exhibits
(I) Articles of Incorporation
(II) Amendment to Articles of Incorporation filed June 7, 1985.
(III) Amendment to Articles of Incorporation filed
July 10,1985.
(IV) Amendment to Articles of Incorporation filed October 12, 1994.
(V) Amendment to Articles of Incorporation filed November 21, 1994.
(VI) Amended and Restated By-Laws
(VII) PMSI Omnibus Stock Plan - 1995
(VIII) Sample stock certificate
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Pallet Management Systems, Inc.
We have audited the accompanying consolidated balance sheet of Pallet Management
Systems, Inc. and Subsidiaries (a Florida corporation) as of June 30, 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the two years in the period ended June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pallet Management
Systems, Inc. and Subsidiaries as of June 30, 1996, and the consolidated results
of their operations and their consolidated cash flows for each of the two years
in the period ended June 30, 1996, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B, the Company is
in default of certain debt covenants which could result in the lender demanding
payment under the Company's long-term debt agreements, raising substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note B. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
GRANT THORNTON LLP
Miami, Florida
September 4, 1996 (except for Notes B and N, as to which the date is January 28,
1997 and October 3, 1996, respectively)
F-1
<PAGE>
Pallet Management Systems, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
June 30, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 16,891
Accounts receivable, net of allowance
for doubtful accounts of $ 62,000 1,181,068
Inventories 1,020,243
Prepaid expenses 144,197
Income tax refunds receivable 517,771
Total current assets 2,880,170
Property, plant and equipment - net 2,877,809
Other assets 147,377
$ 5,905,356
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,150,634
Accounts payable 1,023,591
Accrued liabilities 614,846
Total current liabilities 3,789,071
LONG-TERM LIABILITIES
Deferred income taxes 167,972
Long-term debt 1,578,051
1,746,023
STOCKHOLDERS' EQUITY
Common stock, authorized 10,000,000 shares at $.001 par
value; issued and outstanding 4,243,216 shares 4,243
Additional paid-in capital 2,041,387
Accumulated deficit (1,675,368)
370,262
$ 5,905,356
The accompanying notes are an integral part of this statement.
</TABLE>
F-2
<PAGE>
Pallet Management Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1996 1995
Net sales $ 16,847,597 $ 29,444,264
Cost of goods sold 15,980,771 25,494,151
Gross profit 866,826 3,950,113
Selling, general and administrative expense 2,816,045 3,344,338
Operating (loss) profit (1,949,219) 605,775
Other income (expense)
Other income 82,738 106,051
Interest expense (400,773) (305,393)
Other income (expense) (318,035) (199,342)
Income (loss) before income taxes (2,267,254) 406,433
Income taxes expense (benefit) (489,049) 457,690
Net loss $ (1,778,205) $ (51,257)
Net loss per common share $ (.42) $ (.01)
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Pallet Management Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Retained
Additional Earnings
Common Stock Paid-In (Accumulated
Shares Amount Capital Deficit) Total
Balance at July 1, 1994 3,441,196 $ 3,441 $ 744,573 $ 154,094 $ 902,108
Subordinated debt
conversion to stock 307,620 308 448,926 - 449,234
Issuance of common
stock 350,400 350 418,000 - 418,350
Net loss - - - (51,257) (51,257)
Balance at June 30,
1995 4,099,216 4,099 1,611,499 102,837 1,718,435
Issuance of common
stock 144,000 144 429,888 - 430,032
Net loss - - - (1,778,205) (1,778,205)
Balance at June 30,
1996 4,243,216 $ 4,243 $ 2,041,387 $ (1,675,368) $ 370,262
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
Pallet Management Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1996 1995
Cash flows from operating activities:
Net loss $(1,778,205) $(51,257)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 384,077 358,101
Bad debt expense 51,542 20,379
(Increase) decrease in operating assets:
Accounts receivable 336,052 (50,160)
Inventories 554,630 131,350
Prepaid expenses (119,271) 36,041
Income tax receivable (517,771) -
Other assets 36,276 3,978
Increase (decrease) in operating liabilities:
Accounts payable (416,125) 201,311
Accrued liabilities 334,094 65,020
Income taxes (2,346) (11,895)
Deferred income taxes 19,171 (14,931)
Net cash (used in) provided by operating activities (1,117,876) 687,937
Cash flows from investing activities:
Purchase of fixed assets (801,500) (1,036,951)
Net cash used in investing activities (801,500) (1,036,951)
Cash flows from financing activities:
Proceeds from lenders 5,901,901 642,530
Repayments to lenders (4,844,338) (909,172)
Issuance of stock 430,032 867,584
Net cash provided by financing activities 1,487,595 600,942
(Decrease) increase in cash (431,781) 251,928
Cash at beginning of period 448,672 196,744
Cash at end of period $ 16,891 $ 448,672
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $ 404,054 $ 316,592
Income taxes $ - $ 155,626
Noncash investing and financing activity:
Net assets of businesses acquired in 1995
Book value of assets acquired $ - $ 6,382,597
Less: Cash acquired - 352,790
- 6,029,807
Liabilities assumed - 4,794,210
$ - $ 1,235,597
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies
consistently applied in the preparation of the accompanying consolidated
financial statements follows:
1. Nature of Operations
Pallet Management Systems, Inc. and Subsidiaries (the "Company"/"Pallet") is
principally engaged in the manufacture and repair of wooden pallets. The Company
operates in Connecticut, Florida, Georgia, Maryland and Virginia. The Company's
revenues are derived primarily from the sale of new and used pallets. The
Company allows its customers uncollateralized credit for various periods of
time.
2. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries Pallet Recycling Technology, Inc.
("PRTI") and Abell Lumber, Inc. ("Abell"). Intercompany balances and
transactions are eliminated in consolidation.
3. Accounts Receivable
Trade receivable accounts are primarily located on the Eastern coast
of the United States and are comprised of large distributors, national
retail chains, major manufacturers and the U.S. Government. The Company
evaluates each account receivable balance to establish an estimate for
uncollectible accounts.
4. Inventories
Inventories, consisting of raw materials, work in process, and finished goods,
are stated at the lower of cost or market. Cost is determined by the first-in,
first-out method.
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Major renewals and improvements are capitalized. Repairs and
maintenance are expensed as incurred. Depreciation is computed by using the
straight-line method over the expected useful lives of the related assets
which are as follows:
Years
Machinery and equipment 5-15
Vehicles 5-10
Buildings and improvements 3-40
Furniture and equipment 3-10
F-6
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. Estimates
In preparing financial statements in accordance with generally
accepted accounting principles, management makes estimates and assumptions
that affect the reported amounts and disclosures of assets and liabilities
at the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
7. Income Taxes
The Company accounts for income taxes under the liability method.
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
8. Earnings Per Share
Earnings (loss) per share is computed by dividing net earnings by the
weighted average number of shares of common stock and common stock
equivalents (common stock options outstanding during the year unless such
inclusion is anti-dilutive). The weighted average number of shares are
based upon the weighted average number of common stock shares and common
equivalent shares outstanding during each year. The total number of such
weighted average shares was 4,200,754 and 3,620,147 at June 30, 1996 and
1995, respectively.
9. Financial Instruments
Statement of Financial Accounting Standards No. 107 requires
disclosure of the estimated fair value of financial instruments. The
carrying values of cash, accounts receivable and accounts payable
approximate fair value due to the short-term maturities of these
instruments. The carrying value of debt approximates fair value due to the
length of the maturities, the interest rates being tied to market indices
and/or due to the interest rates not being significantly different from the
current market rates available or offered to the Company.
10. Stock Options (FAS 123)
Options granted under the Company's Stock Option Plan are accounted
for under APB Opinion 25, Accounting for Stock Issued to Employees and
related interpretations. In October 1995, the Financial Accounting
Standards Board issued Statement No. 123, Accounting for Stock-Based
Compensation (SFAS 123), which will require additional proforma disclosures
for companies that will continue to account for employee stock options
under the intrinsic value method specified in APB25. The Company plans to
continue to apply APB 25 and the only effect of adopting SFAS 123 in 1997
will be the new disclosure requirement.
(continued)
F-7
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
11. Reclassifications
Certain prior year amounts within the accompanying financial
statements have been reclassified to conform to the current year
presentation.
NOTE B - REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. Currently, the Company is
not in compliance with certain financial covenants under the bank loan
agreements ("Debt"). Accordingly, the debt is classified as current in the
accompanying consolidated balance sheet. The note is secured by
substantially all of the assets of the Company.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts shown in
the accompanying balance sheet is dependent upon continued operations of
the Company, which in turn is dependent upon the Company's ability to meet
its financing requirements on a continuing basis, to maintain present
financing, and to succeed in its future operations. The financial
statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or amounts and classification
of liabilities that might be necessary should the Company be unable to
continue in existence.
Management has taken steps to reduce its operating expenses and
streamline its operations. In addition, a shareholder and an affiliated
Company (Note I) have contributed $500,000 of cash for operating purposes.
The Company continues to seek alternative sources of financing and capital.
Management believes the aforementioned steps are sufficient to provide the
company with sufficient cash flow to meet its operating needs.
NOTE C - INVENTORIES
Inventories consist of the following at June 30, 1996:
Raw materials $ 455,031
Work in process 279,988
Finished goods 285,224
$ 1,020,243
F-8
<PAGE>
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at June 30,
1996:
Machinery and equipment $ 2,936,694
Building and improvements 1,518,852
Vehicles 938,634
Furniture and equipment 277,849
Land 136,044
5,808,073
Less: Accumulated depreciation 2,930,264
$ 2,877,809
Depreciation expense was $360,600 and $358,101 in 1996 and 1995,
respectively, and is included in "cost of goods sold" and "selling, general
and administrative" expenses in the accompanying consolidated financial
statements.
NOTE E - INCOME TAXES
The provision for (benefit from) income taxes consists of the
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
following:
Years Ended June 30,
1996 1995
Current
Federal $(425,109) $ 354,580
State (83,111) 71,705
(508,220) 426,285
Deferred
Federal 16,369 28,375
State 2,802 3,030
19,171 31,405
$(489,049) $ 457,690
Deferred tax assets are comprised of the following at:
June 30,
1996 1995
Deferred tax assets
Net operating loss
carryforward $701,000 $ 391,821
Other 74,000 25,718
775,000 417,539
Valuation allowance (775,000) (417,539)
Total $ - $ -
</TABLE>
F-9
<PAGE>
NOTE E - INCOME TAXES - Continued
Deferred tax liabilities are comprised of the following at:
June 30,
1996 1995
Depreciation $167,972 $ 148,801
The major elements contributing to the difference between the federal
statutory tax and the effective tax rates are as follows:
Years Ended June 30,
1996 1995
Statutory rate $ (770,866) $ 138,187
State or local income taxes (80,309) 33,327
Increase in valuation allowance 357,461 229,397
Permanent differences and other 4,665 56,779
$ (489,049) $ 457,690
The fiscal 1995 tax provision is in excess of the statutory rate as a
result of permanent differences, state taxes, an increase in the valuation
allowance and restrictions placed on the use of the net operating losses of
PRTI due to the change in ownership and separate return year limitation
rules. The fiscal 1996 tax benefit is less than the statutory rate
primarily as a result of limitations placed on the amount of the net
operating loss that could be carried back and an increase in the valuation
allowance related to the additional net operating loss carryforwards.
As of June 30, 1996, the Company has a net operating loss carryforward
of approximately $1,864,000 which expires in the fiscal year ending June
30, 2011. Approximately $1,109,000 of these net operating losses are
subject to substantial restrictions imposed under the change in ownership
and separate return limitation year rules.
F-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NOTE F - DEBT
$2,500,000 revolving credit agreement with a bank. The agreement
expires on September 30, 1998, includes interest at the bank's prime rate
plus 2.0% (10.25% at June 30, 1996). The line is collateralized by
substantially all the assets of the Company. The loan is guaranteed by a
majority stockholder. Advances are based on 80% of eligible accounts
receivable and 50% of eligible inventories. The revolving credit agreement
contains certain restrictive covenants as defined. The Company had zero
borrowing availability as of June 30, 1996. At June 30, 1996, Abell was in
violation of various restrictive covenants and the Bank waived each
violation as of June 30, 1996; however, subsequent to year end, Abell is
again in violation of these covenants. Accordingly, the loan has been
classified as current at June 30, 1996 and is subject to demand by the
bank. $1,326,669
Bank Term Loans:
The following bank term loans are collateralized by substantially all
the assets of the Company and are subjected to the same restrictive
covenants as the related revolving credit agreement. Accordingly, these
loans have been classified as current at June 30, 1996 and are subject to
demand by the bank. The loans are guaranteed by a majority stockholder.
Bank note payable in monthly installments of $8,580, plus
interest at prime plus 2.0% (10.25% at June 30, 1996). Final
payment due December 1997. 154,434
Bank note payable in monthly installments of $ 4,166, plus
interest at prime plus 2.0% (10.25% at June 30, 1996). Final
payment due October 2005. 466,667
Bank note payable in monthly installments of $4,000, plus
interest at 9.0%. Final payment due January 1997.
28,000
Related party note payable, interest payable monthly at 12%;
subordinated to all non-trade debt and uncollateralized. Principal due
July 1998.
742,282
F-11
<PAGE>
NOTE F - DEBT - Continued
Bank Term Loans: - Continued
Notes payable to investors; interest payable quarterly at 9%; each
$25,000 principal amount is convertible into 1% of the Company's common
stock, as defined; subordinated to all non-trade debt and uncollateralized.
Principal due November 1998.
$225,000
Notes payable to investors; interest payable quarterly at 10%;
convertible to 32,093 shares of the Company's common stock;
subordinated to all non-trade debt and uncollateralized. Principal due
April 1998. $256,410
Bank notes payable in monthly installments ranging from $219 to
$3,498; including interest ranging from 8% to 14%; collateralized by
equipment and vehicles; maturing at various dates through January
2000. $141,592
Industrialized development notes payable; quarterly installments of
$3,381 beginning December 1997; interest at 5.25%; maturing
October 2017. 167,000
Capital Lease Obligations
Obligation to credit corporation under capital leases payable in
monthly installments of $267 to $2,634, including interest ranging
from 10% to 19%, collateralized by equipment and vehicles; maturing
at various dates through May 2001. 220,631
Total debt 3,728,685
Less: Current portion 2,150,634
$ 1,578,051
Scheduled maturities of long-term debt are as follows:
Year Ended June 30,
1997 $ 2,150,634
1998 1,083,055
1999 283,338
2000 42,946
2001 23,002
145,710
$ 3,728,685
</TABLE>
F-12
<PAGE>
NOTE G - ACCRUED LIABILITIES
Accrued expenses consist of the following at June
30, 1996:
Accrued compensation $ 126,078
Other accrued expenses 488,768
$ 614,846
NOTE H - COMMITMENTS AND CONTINGENCIES
The Company leases office space, equipment and vehicles under
non-cancelable operating leases. The following is a schedule by years of
the minimum rental commitments remaining on leased property and equipment:
Year Ended June 30,
1997 $ 380,216
1998 335,766
1999 285,689
2000 277,934
2001 450,198
Total $ 1,729,803
Total rent expense was $583,783 and $374,505 for the years ended June 30, 1996
and 1995, respectively.
NOTE I - RELATED PARTY TRANSACTIONS
ClaryLumber, currently owned by an officer and directors of the Company, has
loaned the Company money to facilitate the acquisition of property. The
outstanding balance of the note at June 30, 1996, was $742,282. The Company
has paid approximately $55,000 to Clary Lumber for compensation of certain
employees who perform services for both Clary Lumber and the Company.
The Company purchased approximately $2,178,000 and $1,980,000 of lumber from
Clary Lumber in 1996 and 1995, respectively. This amounted to 32.0% and
7.5% of the Company's inventory purchases for the years ended June 30, 1996
and 1995, respectively.
The Company sold approximately $159,000 and $70,000 of lumber to Clary Lumber
for the year ended June 30, 1996 and 1995, respectively.
During August 1996, the Company sold a real estate investment to Clary Lumber
for $200,000 to increase its working capital. The net book value was
approximately $93,000 at the time of sale.
F-13
<PAGE>
NOTE I - RELATED PARTY TRANSACTIONS - Continued
During 1992, an officer of the Company provided a loan to the Company. During
the year ended June 30, 1995, these funds were converted under the terms of
the subordinated debt agreements into the Company's common stock.
NOTE J - EMPLOYMENT AGREEMENT
The Company has employment agreements with two senior executives that provide
for minimum annual compensation totalling $190,000 and additional
compensation as defined in the agreement. The contracts expire in June 30,
2000. Payments under these agreements for the year ended June 30, 1996 and
1995 totaled $201,758 and $212,905, respectively. The Company's remaining
commitments at June 30, 1996 under such contracts is $760,000.
NOTE K - STOCKHOLDERS' EQUITY
Common Stock Offering
In September 1995 and January 1995, the Company completed private placement
offerings for 144,000 and 350,400 shares of its common stock, respectively.
The stock was sold to unrelated investors at offering prices of $3.50 and
$1.46, per share, respectively. The net proceeds of these transactions
increased the Company's equity by $430,032 and $418,350, respectively.
Stock Option Plan
In July 1995, the Company established a Stock Option Plan which authorizes the
Company to issue options to employees, directors and outside consultants of
the Company. The issuance and form of the options shall be at the
discretion of the Company's board of directors, except that the exercise
price may not be less than 85% of the fair market value at the time of
grant. No options as of June 30,1996 have been granted.
NOTE L - SIGNIFICANT CUSTOMERS
The Company has sales to one significant customer which represents
approximately 27% of net sales for the year ended June 30, 1996. In fiscal
1995, the Company had sales to two significant customers which represent
approximately 46% and 11% of net sales, respectively.
NOTE M - ACQUISITION OF ABELL LUMBER CORPORATION
On June 29, 1995, the Company acquired all the common stock of Abell in
exchange for 2,260,143 shares of the Company's common stock. Abell is a
manufacturer of pallets in Virginia. The merger qualifies as a tax-free
reorganization and was accounted for as a pooling of interest and ,
accordingly, the consolidated financial statements for all periods
presented, have been restated to include the results of Abell. Abell's
fiscal year has been changed from November 30 to June 30 to conform to the
Company's new fiscal year-end.
F-14
<PAGE>
NOTE N - SUBSEQUENT EVENT
The Company's Common Stock was split two-for-one on October 3, 1996.
Certain shareholders, consisting primarily of officers and directors, waived
their right to this dividend resulting in an increase of 814,286 shares. All
stock data and per share amounts in the consolidated financial statements have
been restated to give effect to the stock split.
F-15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this Annual Report and any
subsequent amendments thereto to be signed on its behalf by the undersigned,
thereunto duly authorized.
PALLET MANAGEMENT SYSTEMS, INC.,
a Florida corporation
By: John C. Lucy, III, Chairman
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons in their respective capacities
with the Registrant and on the dates indicated.
Signatures Title Date
Chairman,
John C. Lucy, III Director February 27, 1997
President,
Zachary M. Richardson Secretary, Treasurer
and Director February 27, 1997
M. Bruce Adelberg Director February 27, 1997
John C. Lucy, Jr. Director February 27, 1997
Donald Radcliffe Director February 27, 1997
Tom Rohman Esq., CPA Director February 27, 1997
Jack Simon Director February 27, 1997
<PAGE>
ARTICLES OF INCORPORATION
OF
AIR BAGS, INC.
ARTICLE I - Name and Address
The name and address of this Corporation is:
AIR BAGS, INC.
2120 S.W. 28th Terrace
Ft. Lauderdale, Florida 33312
ARTICLE II - Duration
This Corporation shall have perpetual existence commencing on the date
of filing of these Articles of Incorporation.
ARTICLE III - Purpose
This Corporation is organized for the following purpose:
For the distribution and sales of Air Bags for automobiles and
other motor vehicles.
In addition, this Corporation may engage in any and all lawful business
permitted under the laws of the United States and of the State of Florida.
ARTICLE IV - Capital Stock
This Corporation is authorized to issue SIX HUNDRED (600) shares of ONE
DOLLAR ($1.00) par value common stock which shall be designated "Common Shares."
ARTICLE V - Preemptive Rights
Every shareholder, upon the sale for cash of any new stock of this
Corporation of the same kind, class, or series as that which he already holds,
shall have the right to purchase his pro rata share thereof (as nearly as may be
done without issuance of fractional shares) at the price at which it is offered
to others.
ARTICLE VI - Initial Registered Office and Agent
The street address of the initial registered office of this
Corporation is: 2120 S.W. 28th Terrace
Ft. Lauderdale, FL 33312
and the name of the initial Registered Agent of this Corporation at
that address is: Richard Deutsch
<PAGE>
ARTICLE VII - Initial Board of Directors
This Corporation shall have one director initially. The number of
directors may be either increased or diminished from time to time by the By-Laws
but shall never be less than one. The names and addresses of the initial
directors of this Corporation are:
Name Address
Richard Deutsch 2120 S.W. 28th Terrace
Pres./Sec./Dir. Ft. Lauderdale, FL 33312
ARTICLE VIII - Incorporators
The names and addresses of the persons signing these Articles of
Incorporation are:
Name Address
Richard Deutsch 2120 S.W. 28th Terrace
Pres./Sec./Dir. Ft. Lauderdale, FL 33312
ARTICLE IX - By-Laws
The power to adopt, alter, amend or repeal By-Laws shall be vested in
the Board of Directors and the shareholders.
ARTICLE X - Restrictions on Transfer of Stock
Shares held by the initial shareholders listed above, may not be resold
or otherwise transferred to other persons unless such shares are first offered
to the remaining shareholders of the Corporation. The price and terms at which,
and the time within which, such share may be offered and sold shall be further
specified by written agreement among all if the shareholders of this
Corporation.
ARTICLE XI - Calling of Special Meetings
Special meetings of shareholders may be called by written notice,
delivered to each shareholder, ten (10) business days prior to the meeting date.
ARTICLE XII - Shareholder Quorum and Voting
FIFTY-ONE PERCENT (51%) of the share entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of the shareholders.
If a quorum is present, the affirmative vote of FIFTY-ONE PERCENT (51%) of the
share represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders.
- 2 -
<PAGE>
ARTICLE XIII - Management of Corporation by Directors
All corporate powers shall be exercised by or under the authority of,
and the business affairs of this Corporation shall be managed under the
direction of the Board of Directors of this Corporation.
ARTICLE XIV - Removal of Directors
The shareholders of this Corporation shall not be entitled to remove
any director from office without cause.
ARTICLE XV - Director Quorum and Voting
A majority of the director shall constitute a quorum for a meeting of
Directors. If a quorum is present, the affirmative vote of a majority of the
Directors present shall be the act of the Board of Directors.
ARTICLE XVI - Meetings by Conference Telephone
Members of the Board of Directors may participate in meetings of the
Board of Directors by means of conference telephone as provided by law.
ARTICLE XVII - Action by Directors Without a Meeting
The Directors of this Corporation may take action by written consent,
as provided by law.
ARTICLE XVIII - Dividends
Dividends may be paid to shareholders (only out of the unreserved and
unrestricted earned surplus of the Corporation).
ARTICLE XVIX - Amendment
This Corporation reserves the right to amend or repeal any provision in
these articles of Incorporation, or any amendment thereto, and any right
conferred upon the shareholders is subject to this reservation.
ARTICLE XX - Indemnification
The Corporation shall indemnify any officer of director, or any former
officer or director, to the full extent permitted by law.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the undersigned subscriber has executed these
Articles of Incorporation on this 2nd day of June, 1982.
/s/ Richard Deutsch
Subscriber and Registered Agent
STATE OF FLORIDA
ss:
COUNTY OF BROWARD
BEFORE ME, the undersigned authority, personally appeared Richard
Deutsch to me known, and known by me to be the person who executed the above and
foregoing Articles of Incorporation, for all those purposes therein expressed.
WITNESS my hand and official seal and the State and County last
aforesaid on this 2nd day of June, 1982.
/s/ Michael L. Alvant
Notary Public, State of Florida
at Large
- 4 -
<PAGE>
ARTICLES OF AMENDMENT
OF
AIR BAGS, INC.
APRIL 23, 1985
The Articles of Incorporation of AIR BAGS, INC., shall be amended as
follows:
The following Articles of the Articles of Incorporation shall be
deleted in their entirety and the following shall be added in their place:
"Article I. Name.
The name of the Corporation is hereby amended to Enterprise
Capital Corporation."
"Article II. Purpose.
This Corporation is organized under the laws of the State of Florida as
a corporation for profit, generally engaged in any business activities permitted
by law."
"Article IV. Capital Stock.
This Corporation is authorized to issue SIX HUNDRED THOUSAND (600,000)
shares of Common Stock, $.001 par value per share."
The foregoing amendments were adopted on April 23, 1985, by all of the
shareholders and all of the directors of the corporation, pursuant to Section
607.181(3), Florida Statutes, as evidenced by their signatures on a Unanimous
Consent manifesting their intention that the foregoing amendments to the
Articles of Incorporation be adopted.
IN WITNESS WHEREOF, the undersigned President and Secretary of this
corporation has executed these Articles of Amendment, this 23rd day of April,
1985.
AIR BAGS, INC.
By: /s/ Richard Deutsch
President, Secretary and
Sole Director
/s/ Richard Deutsch
Notarized at Hollywood, Fla
6-5-85
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
ENTERPRISE CAPITAL CORPORATION
Richard Deutsch and Martin Demsky, the President and secretary,
respectively, of ENTERPRISE CAPITAL CORPORATION, do hereby certify ask follows:
1. The name of the corporation is ENTERPRISE CAPITAL
CORPORATION. The corporation was originally incorporated under the
name "AIR BAGS, INC."
2. Article V ("Preemptive Rights") and Article X ("Restrictions on
Transfer of Stock") are hereby deleted in their entirety and shall no longer be
in force or effect.
3. The foregoing amendments were adopted on July 1, 1985, by all of the
shareholders and all of the directors of the corporation, pursuant to Section
607.181(3), Florida Statutes, as evidenced by their signatures on a Unanimous
Consent manifesting their intention that he foregoing amendments to the Articles
of Incorporation be adopted.
IN WITNESS WHEREOF, the undersigned President and Secretary of this
corporation has executed these Articles of Amendment this _____ day of July,
1985.
ENTERPRISE CAPITAL CORPORATION
By: /s/ Richard Deutsch
Richard Deutsch, President
By: /s/ Martin Demsky
Martin Demsky, Secretary
<PAGE>
ARTICLES OF AMENDMENT
OF
ENTERPRISE CAPITAL CORPORATION
OCTOBER 4, 1994
The Articles of Incorporation of Enterprise Capital Corporation shall
be amended as follows:
The following Articles of the Articles of Incorporation shall be
deleted in their entirety and the following shall be added in their place:
"ARTICLE IV - Capital Stock.
The Corporation is authorized to issue Ten Million (10,000,000) shares
of Common Stock, $.001 par value per share."
The foregoing amendments were adopted on October 4, 1994, by fifty-one
percent (51%) of the shareholders of the Corporation and all of the directors of
the Corporation, pursuant to Section 607.0704 of the Florida Business
Corporations Act, the Corporation's Articles of Incorporation, as amended, and
Section 13 of the Corporation's By-Laws manifesting their intention that the
foregoing amendments to the Articles of Incorporation be adopted.
IN WITNESS WHEREOF, the undersigned Directors and shareholders
representing fifty-one percent (51%), which was a sufficient number of
Shareholders to pass the Amendment, have executed these Articles of Amendment
this 4th day of October, 1994.
ENTERPRISE CAPITAL CORP.
By: /s/ Richard Deutsch
Richard Deutsch
Its: President/Director
By: /s/ Donald Radcliffe
Donald Radcliffe
Its: Vice President/Director
By: /s/ Martin Demsky
Martin Demsky
Its: Secretary/Treasurer/Director
<PAGE>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF
ENTERPRISE CAPITAL CORPORATION
The undersigned, being the President of ENTERPRISE CAPITAL CORPORATION,
a Florida corporation (the "Corporation"), hereby executes these Articles of
Amendment to the Articles of Incorporation of the Corporation, on behalf of the
Corporation, and further states as follows:
1. The name of this Corporation is Enterprise Capital
Corporation.
2. Article I of the Articles of Incorporation is amended in
its entirety to read as follows:
"ARTICLE I. Name.
The name of this Corporation is Pallet Management
Systems, Inc."
3. The foregoing amendment was adopted by all of the members of the
Board of Directors on October 21, 1994, and by a majority of the shareholders of
the Common Stock of this Corporation (being this Corporation's only authorized
class of shares) in written consents dated the 12th day of November, 1994. The
number of shares voted in favor of the amendment was sufficient for approval.
IN WITNESS WHEREOF, the undersigned President of this Corporation has
executed these Articles of Amendment to the Articles of Incorporation this 15th
day o November, 1994, all in accordance with Section 6097.1006, Florida
Statutes.
/s/ Zachary M. Richardson
Zachary M. Richardson, President
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
PALLET MANAGEMENT SYSTEMS
June 29, 1995
ARTICLE 1
MEETINGS OF SHAREHOLDERS
1.1 Annual Meeting
The annual meeting of the shareholders of the Corporation
shall be held at the time and place designated by the Board of
Directors of the Corporation.
1.2 Special Meetings
Special meetings of the shareholders shall be held when
directed by the President, or the Chairman of the Board of
Directors, if there be one, or -the Board Directors, or when
requested in writing by the holders of not less than ten percent
(10%) of all the shares entitled to vote at the meeting.
1.3 Place of Meetings
The Board of Directors may designate any place, either
within or without the State of Florida, as the place of meeting
for any annual or special meeting of the shareholders. If no
designation is made, the place of meeting shall be the principal
place of business of the Corporation.
1.4 Notice
Except as otherwise provided in Chapter 607, Florida
Statutes, written notice stating the place, day and hour of the
meeting and in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date
of the meeting, either personally or by first class mail, by, or
at the direction of the Chairman of the Board of Directors, if
there be one, the President, the Secretary or the officer or
persons calling the meeting, to each shareholder of record
entitled to vote at the meeting. If mailed, the notice shall be
deemed effective 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 postage prepaid.
When a meeting is adjourned to another time or place, it
shall not be necessary to give any notice of the adjourned
meeting if the time and place to which the meeting is adjourned
<PAGE>
are announced at the meeting at which the adjournment is taken.
At the adjourned meeting any business may be transacted that
might have been transacted on the original date of the meeting.
If, however, after the adjournment, the Board of Directors fixes
a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this section to
each shareholder of record on the new record date entitled to
vote at such meeting.
1.5 Waiver of Notice of Meeting
Whenever any notice is required to be given to any
shareholder, a waiver writing signed by the person or persons
entitled to such notice, whether signed before, during, or after
the time of the meeting and delivered to the Corporation
inclusion in the minutes or filing with the corporate records,
shall be equivalent to the giving of such notice. Attendance of
a person at a meeting shall constitute, waiver of (a) lack of or
defective notice of the meeting, unless the person objects the
beginning of the meeting to the holding of the meeting or the
transacting of business at the meeting or (b) lack of defective
notice of a particular matter at a meeting that is not within the
purpose or purposes described in the meeting notice, unless the
person objects to considering the matter when it is presented.
1.6 Fixing of 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, to express consent to corporate
action in writing without a meeting, or to demand special
meeting, the Board of Directors may fix, in advance, a record
date, not more than seventy (70) days before the date of the
meeting or any other action. A determination of shareholders of
record entitled to notice of, or to vote at, a meet of
shareholders shall apply to any adjournment of the meeting unless
the Board Directors fixes a new record date, which it must do if
the meeting is adjourned to a date more than one hundred twenty
(120) days after the date fixed for the origin, meeting.
If no prior action is required by the Board of Directors,
the record date for determining shareholders entitled to take
action without a meeting is the date the first signed written
consent is delivered to the Corporation under Section 1. 14 of
this Article.
1.7 Voting Record
After fixing a record date for a meeting of shareholders,
the Corporation shall prepare an alphabetical list of the names
<PAGE>
of all its shareholders entitled to notice the meeting, arranged
by voting group with the address of, and the number, class and
series, if any, of shares held by, each shareholder. The
shareholders' list may be available for inspection by any
shareholder for a period of ten (10) days before the meeting or
such shorter time as exists between the record date and the meet
and continuing through the meeting at the Corporation's principal
place of business at a place identified in the meeting notice in
the city where the meeting will be or at the office of the
Corporation's transfer agent or registrar. Any shareholder the
Corporation or the shareholder's agent or attorney is entitled on
written demand to inspect the shareholders' list (subject to the
requirements of Section 607.162(3), Florida Statutes) during
regular business hours at the shareholder's expense, during the
period it is available for inspection.
The Corporation shall make the shareholders' list available
at the meeting of shareholders, and any shareholder or the
shareholder's agent or attorney is entitled to inspect the list
at any time during the meeting or any adjournment.
1.8 Quorum
Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Except as otherwise provided
in the articles of incorporation or by law, a majority of the
shares entitled to vote on the matter by each voting group,
represented in person or by proxy, shall constitute a quorum at
any meeting of shareholders, but in no event shall a quorum
consist of less than one-third (1/3) of the shares of each voting
group entitled to vote. If less than a majority of outstanding
shares entitled to vote are represented at a meeting, a majority
of the shares so represented may adjourn the meeting from time to
time without further notice. After a quorum has been established
at any shareholders' meeting, the subsequent withdrawal of
shareholders, so as to reduce the number of shares entitled to
vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any
adjournment thereof.
Once a share is represented for any purpose at a meeting, it
is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new
record date is or must be set for that adjourned meeting.
1.9 Voting Per Share
Except as otherwise provided in the Articles of
Incorporation or by Section 607.0721, Florida Statutes, each
<PAGE>
shareholder is entitled to one (1) vote for each outstanding
share held by him or her on each matter voted at a shareholders'
meeting.
1.10 Voting of Shares
A shareholder may vote at any meeting of shareholders of the
Corporation, either in person or by proxy.
Shares standing the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated
by the bylaws of the corporate shareholder or, the absence of any
applicable bylaw, by a person or persons designated by the board
of directors of the corporate shareholder. In the absence any
such designation or, in the case of conflicting designations by
the corporate shareholder, the chairman of the board, the
president, any vice president, the secretary, and the treasurer
of the corporate shareholder, in that order, shall be presumed to
be fully authorized to vote the shares.
Shares held by an administrator, executor, guardian,
personal representative, or conservator may be voted by him or
her, either in person or by proxy, without a transfer of such
shares into his or her name. Shares standing in the name of a
trustee may be voted by him or her, either in person or by proxy,
but no trustee shall be entitled to vote shares held by him or
her without the transfer of such shares int his or her name or
the name of his or her nominee.
Shares held by or under the control of, a receiver, a
trustee in bankruptcy proceedings, or an assignee for the benefit
of creditors may be voted by such person without the transfer
into his or her name.
If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, tenants by the entirety, or
otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the secretary of
the Corporation is given notice to the contrary and is furnished
with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, then acts
with respect to voting shall have the following effect: (a) if
only one votes, in person or by proxy, that act binds all; (b) if
more than one vote, in person or by proxy, the act of the
majority so voting binds all; (c) if more than one votes, in
person or by proxy, but the vote is evenly split on any
particular matter, each fraction is entitled to vote the share or
shares in questions proportionately; or (d) if the instrument or
order so filed shows that any such tenancy is held in unequal
<PAGE>
interest, a majority or a vote evenly split for purposes hereof
shall be a majority or a vote evenly split in interest.. The
principles of this paragraph shall apply, insofar as possible, to
execution of proxies, waivers, consents, or objections and for
the purpose of ascertaining the presence of a quorum.
1.11 Proxies
Any shareholder of the Corporation, other person entitled to
vote on behalf of a shareholder pursuant to Section 607.0721,
Florida Statutes, or attorney-in-fact for such persons, may vote
the shareholder's shares in person or by proxy. Any shareholder
may appoint a proxy to vote or otherwise act for him or her by
signing an appointment form, either personally or by an attorney-
in-fact. An executed telegram or cablegram appearing to have
been transmitted by such person, or a photographic, photostatic,
or equivalent reproduction of an appointment form, shall be
deemed a sufficient appointment form.
An appointment of a proxy is effective when received by the
secretary of the Corporation or such other officer or agent
authorized to tabulate votes, and shall be valid for up to eleven
(11) months, unless a longer period is expressly provided in the
appointment form.
The death or incapacity of the shareholder appointing a
proxy does not affect the right of the Corporation to accept the
proxy's authority unless notice of the death or incapacity is
received by the secretary or other officer or agent authorized to
tabulate votes before the proxy exercises authority under the
appointment.
An appointment of a proxy is revocable by the shareholder
unless the appointment form conspicuously states that it is
revocable and the appointment is coupled with an interest.
If a proxy for the same shares confers authority upon two
(2) or more persons and does not otherwise provide, a majority of
them present at the meeting or, if on one (1) is present, that
one (1) may exercise all the powers conferred by the proxy but if
the proxy holders present at the meeting are equally divided as
to the right and manner of voting in any particular case, the
voting of the shares shall be prorated.
If a proxy expressly provides, any proxy holder may appoint
in writing a substitute to act in his place.
1.12 Voting Trusts
One (1) or more shareholders of the Corporation may create a
<PAGE>
voting trust, conferring on a trustee or trustees, the right to
vote or otherwise act for them, by signing an agreement setting
out the provisions of the trust and transferring their shares to
the trustee.
1.13 Shareholders' Agreements
Two (2) or more shareholders of the Corporation may provide
for the manner in which they will vote their shares by signing an
agreement for that purpose pursuant to Section 607.0731, Florida
Statutes. Nothing in that agreement shall impair the right of
the Corporation to treat the shareholders of record as entitled
to vote the shares standing in their names.
1.14 Action Without a Meeting
Unless otherwise provided in the Articles of Incorporation,
action required or permitted to be taken at any meeting of the
shareholders may be taken without a meeting, without prior
notice, and without a vote if the action is taken by the holder
of outstanding shares of each voting group entitled to vote on it
having not less than the minimum number of votes with respect to
each voting group that would be necessary to authorize or take
such action at a meeting at which all voting groups and shares
entitled to vote were present and voted. In order to be
effective, the action must be evidenced by one (1) or more
written consents describing the action taken, dated and signed by
approving shareholders having the requisite number of votes of
each voting group entitled to vote, and delivered to the
Corporation at its principal place of business, or to the
corporate secretary or other office or agent of the Corporation
having custody of the book in which proceedings of meetings of
shareholders are recorded. No written consent shall be effective
to take corporate action unless, within sixty (60) days of the
date of the earliest dated consent delivered in the manner
required by this section, written consents signed by the number
of holders required to take action are delivered to the
Corporation.
Any written consent may be revoked before the date that the
Corporation receives the required number of consents to authorize
the proposed action. No revocation is effective unless in
writing and until received by the Corporation at its principal
place of business, or received by the corporate secretary or
other officer agent of the Corporation having custody of the book
in which proceedings of meetings of shareholders are recorded.
Within ten (10) days after obtaining authorization by
written consent, notice must be given to those shareholders who
have not consented in writing or who are not entitled to vote on
<PAGE>
the action. The notice shall fairly summarize the material
features of the authorized action and, if the action is one for
which dissenters' rights are provided under the Articles of
Incorporation or by law, the notice shall contain clear statement
of the right of shareholders dissenting therefrom to be paid the
fair value of their shares upon compliance with applicable law.
A consent signed as required by this section has the effect
of a meeting vote and may be described as such in any document.
Whenever action is taken as provided in this section, the
written consent of the shareholders consenting or the written
reports of inspectors appointed to tabulate such consents shall
be filed with the minutes of proceedings of shareholders.
1.15 Manner of Action
If a quorum is present, action on a matter (other than the
election of directors) by a voting group is approved if the votes
cast within the voting group favoring the action exceed the votes
cast opposing the action, unless a greater or lesser number of
affirmative votes is required by the Articles of Incorporation or
by law.
1.16 Voting for Directors
Unless otherwise provided in the Articles of Incorporation,
directors will be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a
quorum is present.
ARTICLE 2
DIRECTORS
2.1 Function
All corporate powers shall be exercised by or under the
authority of and the business and affairs of the Corporation
shall be managed under the direction of this Board of Directors.
2.2 Qualification
Each director must be a natural person at least eighteen
(18) years of age, but need not be a resident of this state or a
shareholder of the Corporation.
2.3 Compensation
Each director may be paid the expenses, if any, of
attendance at each meeting of the Board of Directors, and may be
<PAGE>
paid a stated salary as a director or a fixed sum for attendance
at each meeting of the Board of Directors or both, as may from
time to time be determined by action of the Board of Directors.
No such payment shall preclude any director from serving the
Corporation in any other capacity an receiving compensation
therefore.
2.4 Duties of Directors
A director shall perform his duties as a director, including
his duties as a member of any committee of the Board upon which
he may serve, in good faith, in manner he reasonably believes to
be in the best interests of the Corporation, and with such care
as an ordinarily prudent person in a like position would use
under similar circumstances.
In performing his duties, a director shall be entitled to
rely on information, opinions, reports or statements, including
financial statements and other financial data, in each case
prepared by:
(a) One (1) or more officers or employees of the
Corporation whom the director reasonably believes to be reliable
and competent in the matters presented;
(b) Counsel, public accountants or other persons as to
matters which the director reasonably believes to be within that
person's professional or expert competence; or
(c) A committee of the Board upon which he does not
serve, duly designated in accordance with a provision of the
Articles of Incorporation or these By-laws, as to matters within
its designated authority, which committee the director reasonably
believes to merit confidence.
A director shall not be considered to be acting in good
faith if he has knowledge concerning the matter in question that
would cause that reliance described above to be unwarranted.
A person who performs his duties in compliance with this
section shall have no liability, by reason of being or having
been a director of the Corporation.
2.5 Presumption of Assent
A director of the Corporation who is present at a meeting of
the Board of Directors or a committee of the Board when corporate
action is taken shall be presumed to have assented to the action
taken, unless he or she objects at the beginning of the meeting,
or promptly upon arrival, to holding the meeting or transacting
specific business at the meeting, or he or she votes against or
<PAGE>
abstain from the action taken.
2.6 Number
The Board of Directors of the Corporation shall consist of
not less than three (3) nor more than eleven (11) members, the
exact number of which shall be, determined from time to time by
the Board of Directors or the shareholders. No decrease in the
number of the directors shall have the effect of shortening the
terms of any incumbent directors.
2.7 Term
Each member of the Board of Directors shall hold office
until a successor shall have been elected and qualified, or until
his earlier resignation, removal from office or death.
2.8 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 remaining directors, though less than a quorum the Board of
Directors. A directed elected to fill a vacancy shall hold
office on until the next election of directors by the
shareholders.
2.9 Resignation of Directors
Any director may resign at any time by giving written notice
to the Corporation, the Board of Directors, or the Chairman of
the Board of Directors. The resignation of any director shall
take effect when the notice is delivered unless the notice
specifies a later effective date, in which even the Board of
Directors may I the pending vacancy before the effective date if
they provide that the successor does not take office until the
effective date.
2.10 Removal of Directors
Unless otherwise provided in the Articles of Incorporation,
any director, or entire Board of Directors, may be removed, with
or without cause, by action of the shareholders, except that a
director may not be removed if the number of votes sufficient to
elect him under cumulative voting is voted against his removal.
If a director was elected by a voting group of shareholders. only
the shareholders of voting group may participate in the vote to
remove that director. That notice of the meeting at which a vote
is taken to remove a director must state that the purpose one of
the purposes of the meeting is the removal of the director or
<PAGE>
directors.
2.11 Quorum and Voting
A majority of the number of directors fixed by these Bylaws
shall constitute quorum for the transaction of business;
provided, however, that whenever, for any reason, a vacancy
occurs in the Board of Directors, a quorum shall consist of a
majority of the remaining directors until the vacancy has been
fined.
The act of a majority of the directors present at a meeting
at which a quorum is present when the vote is taken shall be the
act of the Board of Directors.
2.12 Director of Conflicts of Interest
No contract or other transaction between the Corporation and
one (1) or more of its directors or any other corporation, firm,
association or entity in which one (1) or more of its directors
are directors or officers or are financially interested, shall
either void or voidable because of such relationship or interest,
because such director or directors are present at the meeting of
the Board of Directors or a committee thereof which authorizes,
approves or ratifies the contract or transaction or because his
or their votes are counted for that purpose, if:
(a) The fact of such relationship or interest is
disclosed or known to the Board of Directors or committee which
authorizes, approves or ratifies the contract or transaction by a
vote or consent sufficient for the purpose without counting the
votes or consents of the interested directors; or
(b) The fact of that relationship or interest is
disclosed or known to the shareholders entitled to vote and they
authorize, approve or ratify such contract o transaction by vote
or written consent; or
(c) The contract or transaction is fair and reasonable
as to the Corporation at the time it is authorized by the Board,
a committee or the shareholders.
Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors
or a committee of it that authorizes, approves or ratifies such
contract or transaction.
2.13 Executive and Other Committees
The Board of Directors, by resolution adopted by a majority
<PAGE>
of the full Board of Directors, may designate from among its
members an executive committee and one (1) or more other
committees, each of which, to the extent provided in the
resolution, shall have and may exercise all the authority of the
Board of Directors, except as prohibited by Section 607.0825(l),
Florida Statutes.
2.14 Time, Place, Notice and Call of Meetings
An annual regular meeting of the Board of Directors shall be
held without notice immediately after, and at the same place as,
the annual meeting of the shareholders and at such other time and
places as may be determined by the Board of Directors. The Board
of Directors may, at any time and from time to time, provide
resolution the time and place, either within or without the State
of Florida, for the holding of the annual regular meeting or
additional regular meetings of the Board Directors without other
notice than the resolution.
Special meetings of the Board of Directors may be called by
the Chairman of the Boar( of Directors, the President, or any
director.
The person or persons authorized to call special meetings of
the Board of Directors may designate any place, either within or
without the State of Florida, as the place for holding any
special meeting of the Board of Directors called by them. If no
designation is made, the place of the meeting shall be the
principal place of business of the Corporation.
Notice of any special meeting of the Board of Directors may
be given by any reasonable means, oral or written, and at any
reasonable time before the meeting. The reasonableness c notice
given in connection with any special meeting of the Board of
Directors shall b determined in light of all pertinent
circumstances. It shall be presumed that notice of any special
meeting given at least two (2) days before the meeting either
orally (by telephone or in person,) or by written notice
delivered personally or mailed to each director at his or her
business c residence address, is reasonable. If mailed, the
notice of any special meeting shall be deemed to be delivered on
the second day after it is deposited in the United States mail,
so addressed, with postage prepaid. Neither the business to be
transacted at, nor the purpose or purposes or any special meeting
need be specified in the notice or in any written waiver of
notice of the meeting.
Members of the Board of Directors may participate in a
meeting of the Board by means of a conference telephone call or
similar communications equipment by means of which E persons
<PAGE>
participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in
person at a meeting.
2.15 Waiver of Notice
Notice of a meeting of the Board of Directors need not be
given to any director who signs a written waiver of notice
before, during, or after the meeting. Attendance of a direct, at
a meeting shall constitute a waiver of notice of the meeting and
a waiver of any and objections to the place of the meeting, the
time of the meeting, and the manner in which it has been called
or convened, except when a director states, at the beginning of
the meeting or promptly upon arrival at the meeting, any
objection to the transaction of business because the meeting is
not lawfully called or convened.
2.16 Action Without a Meeting
Any action required or permitted to be taken at a meeting of
the Board of Directors or a committee of it may be taken without
a meeting if a consent in writing stating the action so taken
without a meeting if a consent in writing, stating the action so
taken, is signed by all the directors. Action taken under this
section is effective when the last director signs the consent,
unless the consent specifies a different effective date. A
consent signed under this section shall have the effect of a
meeting vote and may be described as such in any document.
2.17 Indemnification
The Corporation shall have the power to and shall indemnify
any person who was or is a party to any proceeding from any
liability or expenses incurred by reason of the fact that such
person is or was a director of the Corporation, to the full
extent allowed under the laws of the State of Florida.
ARTICLE 3
OFFICERS
3.1 Officers
The officers of the Corporation shall consist of a
President, Secretary and Treasurer. The Board of Directors, in
its discretion, may also choose a Chairman of the Board of
Directors (who must be a director) and such other officers as may
be deemed necessary or advisable to carry on the business of the
Corporation. Each officer shall be elected by the Board of
Directors at the first meeting of directors immediately following
the annual meeting of shareholders of the Corporation, and shall
<PAGE>
serve until their successors are chosen and qualified. The other
officers, assistant officers and agents as may be deemed
necessary may be elected or appointed by the Board of Directors
from time to time. Any two (2) or more offices may be held by
the same person. The failure to elect a President, Secretary or
Treasurer shall not affect the existence of the Corporation.
3.2 Duties
The officers of the Corporation shall have the following
duties:
3.2.1 Chairman of the Board of Directors
The Chairman of the Board of Directors, if there
be one, shall preside at all meetings of the shareholders and of
the Board of Directors. He shall be the Chief Executive Officer
of the Corporation, and except where by law the signature the
President is required, the Chairman of the Board of Directors
shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation
which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board
of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors
shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these
Bylaws by the Board of Directors.
3.2.2 Chief Operating Officer
The Chief Operating Officer shall, subject to the
control of the Board of Directors and, if there be one, the
Chairman of the Board of Directors, having general supervision
over the daily business of the Corporation and shall see that all
orders of the Board of Directors are carried out. The Chief
Operating Officer shall also perform such other duties and may
exercise such other powers as from time to time may be assigned
to him by these By-Laws, or by the Board of Directors, or by the
Chairman of the Board, if there is one.
3.2.3 President
The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of
the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He shall execute
all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation,
<PAGE>
except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by
these By-laws, or the Board of Directors, or the Chairman of the
Board, if there be one, or the President. In the absence or
disability of the Chairman of the Board of Directors,
or if there be none, the President shall preside at all meetings
of the shareholders a the Board of Directors. If there be no
Chairman of the Board of Directors, the President shall be the
Chief Executive Officer of the Corporation. The President shall
also perform such other duties and may exercise such other powers
as from time to time may be assigned to him by these By-laws, or
by the Board of Director or by the Chairman of the Board, if
there be one.
3.2.3 Secretary
The Secretary shall have custody of and maintain,
all of the corporate records except the financial records; shall
record the minutes of all meetings of the, shareholders and Board
of Directors, send out all notices of meetings and perform such
other duties as may be prescribed by the Board of Directors, or
the Chairman of the Board of Directors, if there be one, or the
President.
3.2.4 Treasurer
The Treasurer shall have custody of all corporate
funds and financial records, shall keep full and accurate
accounts of receipts and disbursements and render accounts at the
annual meetings of shareholders and whenever else required by the
Board of Directors or the President, and shall perform such other
duties as may be prescribed by the Board of Directors, or the
Chairman of the Board of Directors, if there be one, or the
President.
3.3 Removal of Officers
Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors with or
without cause whenever, in its judgment the best interests of the
Corporation will be served by such removal.
Any vacancy, however occurring, in any office may be filled
by the Board of Directors unless these ByLaws shall have
expressly reserved that power to the shareholders.
Removal of any office shall be without prejudice to the
contract rights, if any of the person so removed; however,
election or appointment of an officer or agent shall not of
<PAGE>
itself create contract rights.
3.4 Indemnification
The Corporation shall have the power to and shall indemnify
any person who was or is a party to any proceeding from any
liability or expenses incurred by reason of the fact that such
person is or was an officer of the Corporation, to the f extent
allowed under the laws of the State of Florida.
ARTICLE 4
STOCK CERTIFICATES
4.1 Issuance
Every holder of shares in the Corporation shall be entitled
to have a certificate representing all shares to which he is
entitled. No certificate shall be issued for an share until the
share is fully paid.
4.2 Form
Certificates representing shares in the Corporation shall be
signed by the Chairman of the Board of Directors, the President
or the Vice President and the Secretary or an Assistant
Secretary, and may be sealed with the seal of the Corporation or
a facsimile of it. The signatures of the Chairman of the Board
of Directors, the President or Vice President and the Secretary
or Assistant Secretary may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or registrar other
than the Corporation itself, or an employee of the Corporation.
In case any officer who signed or whose facsimile signature has
been placed upon the certificate shall have ceased to be that
officer before the certificate is issued, it may be issued by the
Corporation with the same effect as if he were that officer at
the date of its issuance.
Every certificate representing shares issued by the
Corporation shall set forth or fairly summarize upon the face or
back of the certificate, or shall state that the Corporation will
furnish to any shareholder upon request and without charge, a
full statement of the designations, preferences, limitations and
relative rights of the shares of each class or series authorized
to be issued and the variations in the relative rights and
preferences between the shares of each series as far as have been
fixed and determined, and the authority of the Board of Directors
to fix and determine the relative rights and preferences of
subsequent series.
Every certificate representing shares that are restricted as
<PAGE>
to the sale, disposition or other transfer of the shares, shall
state that the shares are restricted as to transfer and shall set
forth or fairly summarize upon that certificate, or shall state
that the Corporation win furnish to any shareholder, on request
and without charge, a full statement of the restrictions.
Each certificate representing shares shall state upon its face:
(a) The name of the Corporation;
(b) That the Corporation is organized under the laws of the
State of Florida;
(c) The name of the person or persons to whom issued;
(d) The number and class of shares and the designation of
the series, if any, that the certificate represents; and
(e) The par value of each share represented by the
certificate, or a statement that the shares are without par
value.
4.3 Transfer of Stock
Transfers of shares of stock of the Corporation shall be
only on the stock transfer books of the Corporation, and only
after the surrender to the Corporation of the certificates
representing such shares. Except as provided by Section
607.0721, Florida Statutes, the person in whose name shares stand
on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes and the
Corporation shall not be bound to recognize any equitable or
other claim to, or interest in, such shares on the part of any
other person, whether or not shall have express or other notice
thereof.
4.4 Lost, Stolen or Destroyed Certificates
The Corporation shall issue a new stock certificate in the
place of any certificate previously issued, if the holder of
record of the certificates:
(a) Makes proof in affidavit form that it has been lost,
destroyed or wrongfully taken;
(b) Requests the issue of a new certificate before the
Corporation has notice that the certificate has been acquired by
a purchaser for value in good faith and without notice of any
adverse claim;
<PAGE>
(c) At the discretion of the Board of Directors, gives bond
in such form as the Corporation may direct, to indemnify the
Corporation, the transfer agent and registrar against any claim
that may be made on account of the alleged loss, destruction or
theft of a certificate; and
(d) Satisfies any other reasonable requirements imposed by
the Corporation.
ARTICLE 5
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of
its shareholders, Board of Directors and committees of directors.
The Corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and
addresses of all shareholders and the number, class and series,
if any, of the shares held by each.
Any books, records and minutes may be in written form or in
any other form capable of being converted into written form
within a reasonable time.
ARTICLE 6
CORPORATE SEAL
The corporate seal of the Corporation shall be a circular
seal with the name of the Corporation around the border and the
year of organization in the center.
ARTICLE 7
AMENDMENT
These Bylaws may be altered, repealed or amended and new
Bylaws may be adopted, by action of the Board of Directors,
subject to the limitations of Section 607.1020(l), Florida
Statutes.
ARTICLE 8
INDEMNIFICATION
The Corporation shall have the power to and shall indemnify
any person who was or is a party to any proceeding from any
liability or expenses incurred by reason of the fact that such
person is or was an employee or agent of the Corporation, to the
full extent allowed under the laws of the State of Florida.
<PAGE>
PMSI OMNIBUS STOCK PLAN - 1995
ARTICLE I
NAME, PURPOSE AND DEFINITIONS
Section 1.1. Name. The Plan shall be known as the "PMSI Stock Plan."
Section 1.2. Definitions. Whenever used in the Plan, unless the
context clearly indicates otherwise the following terms shall have the
following meanings:
(a) "Award" means an award granted pursuant to Article V.
(b) "Award Agreement" means an agreement described in Article V
hereof entered into between the Company and a Participant setting forth the
terms, conditions and limitations applicable to the award granted to the
Participant.
(c) "Code" means IRS Code of 1986 as amended.
(d) "Committee" means the Committee appointed by the Board from among
its members and shall be comprised of not less than two (2) persons. The
Committee may be a standing committee of the Board, such as the compensation
committee, if the members of that committee satisfy the requirements of the
following sentence. A member of the Committee may be an Employee and shall not
be disqualified as a member of the Committee because he or she shall have
received an Award; provided, however, that should the participation of a member
of the Committee (i) who is an Employee or (ii) has previously received an Award
or (iii) who shall receive an Award pursuant to a Committee determination in
which he or she shall participate, constitute a disqualifying condition
precedent to the grant of an Incentive Stock Option (as defined in Section ),
then such person shall not participate in the award of that Incentive Stock
Option.
(e) "Company" shall mean PMSI
(f) "Director" means any individual who is a member of the
Company's Board.
(g) "Disability" means the inability, in the opinion of the Company's
group health insurance carrier (or claims processor, if applicable), of a
Participant, because of injury or sickness, to work at a reasonable occupation
which is available with the Company or at any gainful occupation for which the
Participant is or may become fitted.
(h) "Employee" means any individual who is a full time salaried
employee of the Company, whether or not he is an Officer or Director.
(i) "Fair Market Value". In reference to the Shares of the
Company means:
(i) the bid price per share last reported by the National
Association of Securities Dealers, Inc., for the over-the-counter market on the
relevant date, or in the absence of any bid price on that date, the bid price
per Share quoted on the next preceding day for which there is such quotation; or
(ii) if the Shares are not traded on the National Market
System or listed on a national securities exchange, and quotations for the
Shares are not reported by the National Association of Securities Dealers, Inc.,
the fair market value determined by the Committee on the basis of available
prices for the Shares or in such manner as the Committee shall agree.
The Committee shall determine the fair market value of any
security that is not publicly traded, using such criteria as it may determine,
in its sole discretion, to be appropriate for such valuation.
(j) "Insider" shall mean any person who is subject to Section 16
of the Securities Exchange Act of 1934.
(k) "Officer" means a duly-elected officer of the Company.
(l) "Optionee" means a person granted an Option.
(m) "Participant" means an Employee, Officer or Director
designated by the Committee to be eligible for an Award pursuant to this Plan.
(n) "Plan" shall mean the PMSI Omnibus Stock Plan - 1995
Non-Qualified Stock Plan adopted by the Board of Directors at its meeting
held on May 11, 1995, and as from time-to-time amended or supplemented as
herein provided.
(o) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities
and Exchange Commission as now in force or as such regulation or successor
regulation shall be hereafter amended.
(p) "Section 16" means Section 16 of the Exchange Act or any
successor provision and any rules promulgated thereunder as they may be amended
from time-to-time.
(q) "Shares" shall mean Common Stock, $.001 par value, as
constituted on May 11, 1995.
(r) "Stock Appreciation Right" means a right, the value of which
is determined relative to the appreciation in value in shares, which may be
issued under Section 5.3.
(s) "Stock Option" means a right to purchase Shares granted
pursuant to Section 5.2 and includes Incentive Stock Options and Non-Qualified
Stock Options as defined in Section 5.2(a).
Section 1.3. Purpose. The purpose of this Plan is to aid the Company in
attracting and retaining Employees, Officers, Directors, and Advisors and to
secure for the Company the benefits of the incentive inherent in equity
ownership by Employees, Officers Directors and Advisors who are responsible for
the continuing growth and success of the Company. Specifically, the Plan
provides a means whereby such Employees, Officers, Directors and Advisors may be
given an opportunity, as an incentive to service or to continued service, to
purchase or otherwise receive stock of the Company.
Section 1.4. Term. The Plan shall commence as of May 11, 1995. No
Award shall be granted under the Plan after June 30, 2005.
ARTICLE II
SHARES OF STOCK SUBJECT TO THE PLAN
Except as otherwise provided in Article VII, the number of Shares which
may be issued under the Plan shall be determined from time-to-time by the Board
of Directors, voting as a whole; provided, however, that the number of Shares
reserved may not be in excess of 15% of the total number of Shares issued at any
time and from time-to-time. Shares may be issued pursuant to the Plan from the
Company's authorized but unissued stock. Should any Options granted hereunder
not be exercised in the time allowed for such exercise, the Shares relating to
such lapsed Options shall be available for issuance under the Plan.
ARTICLE III
ADMINISTRATION
Section 3.1 General. The Plan shall be administered by the Committee.
The Committee shall have full power to construe the Plan and the respective
Awards under the Plan, and to establish and amend rules and regulations for its
administration. The Plan and all Awards pursuant thereto shall be administered
by the Committee so as to permit the Plan to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). A majority of
the members of the Committee shall constitute a quorum. The vote of a majority
of a quorum shall constitute action by the Committee. The determination of the
Committee with respect to any matter under the Plan to be acted upon by the
Committee shall be conclusive and binding.
Section 3.2. Duties. The Committee shall have the duty to
administer the Plan, and to determine periodically the eligible persons
under the Plan and the nature, amount, pricing, timing, and other terms of
Awards to be made to such individuals.
------
Section 3.3. Powers. The Committee shall have all powers necessary to
enable it to carry out its duties under the Plan properly, including without
limitation the power to interpret and administer the Plan. All questions of
interpretation with respect to the Plan, the number of Shares and the terms of
any Award Agreements, shall be determined by the Committee, and its
determination shall be final and conclusive upon all parties in interest. In the
event of any conflict between an Award Agreement and the Plan, the terms of the
Plan shall govern. In addition, the Committee may delegate to the Officers or
Employees of the Company the authority to execute and deliver such instruments
and documents, to do all such acts and things, and to take all such other steps
deemed necessary, advisable or convenient for the effective administration of
the Plan in accordance with its terms and purpose, except that the Committee may
not delegate any discretionary authority with respect to substantive decisions
or functions regarding the Plan, nor as to Awards thereunder as those relate to
Insiders, including but not limited to decisions regarding the timing,
eligibility, pricing, amount or other material term of such Awards.
Section 3.4. Intent to Avoid Insider Trading. It is the intent of the
Company that the Plan and Awards hereunder satisfy and be interpreted in a
manner that, in the case of Participants who are or may be Insiders, satisfies
the applicable requirements of Rule 16b-3, so that such persons will be entitled
to the benefits of Rule 16b-3 or other exemptive rules under Section 16 and will
not be subjected to avoidable liability thereunder. If any provision of the Plan
or Award would otherwise frustrate or conflict with the intent expressed in this
Section 3.4, that provision to the extent possible shall be interpreted and
deemed amended so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, the provision shall be deemed void as
applicable to Insiders.
ARTICLE IV
ELIGIBILITY AND SELECTION
Only Employees, Officers, Directors and selected advisors of the
Company and its subsidiaries are eligible to receive Options and Awards under
the Plan, and will be referred to herein as "eligible persons." A member of
the Committee shall be eligible to participate in the Plan. The
Committee shall from time-to-time determine which of the eligible persons shall
be granted Options or Awards under the Plan and the number of shares subject to
each.
ARTICLE V
AWARDS
Section 5.1. General. Awards may include, but are not limited to, those
described in this Article V, including its sections. The Committee may grant
Awards singly, in tandem, or in combination with other Awards, as the Committee
may in its sole discretion determine. Subject to the other provisions of this
Plan, Awards also may be granted in combination or in tandem with, in
replacement of, or as alternatives to, grants or rights under this Plan and any
other employee plan of the company.
Section 5.2. Stock Options. A Stock Option is a right to purchase a
specified number of shares of Stock at a specified price during such specified
time as the Committee shall determine, subject to the following:
-------------
(a) An option granted may be either of a type that
complies with the requirements of incentive stock options as defined in
Section 422 of the Code ("Incentive Stock Option") or of a type that does not
comply with such requirement ("Non-Qualified Option"). The Incentive
Stock Option is available only to employees of the company or one of its
subsidiaries.
(b) The exercise price per share of any Incentive Stock Option
shall be no less than Fair Market Value per share of the Stock subject to the
option on the date such a Stock Option is granted. The exercise price per share
of any Non-Qualified Option shall be determined by the Committee. In the event
an employee of the company who owns more than 10% of the company receives any
Incentive Stock Options, the exercise price for those options will be 110% of
the Fair Market Value per share of the Stock subject to the option on the date
such a Stock Option is granted.
(c) An Incentive Stock Option may not be exercisable
after the expiration of ten (10) years.
(d) A Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Company specifying the number
of Shares to be purchased. There is a $100,000 limit on the amount of
Incentive Stock Options to be exercised per year. The $100,000
limitation is calculated based upon the Fair Market Value at the date of grant.
The value of any options in excess of the $100,000 annual limit will be
treated as non-qualified options.
(e) The exercise price of the Shares subject to the Stock
Option may be paid in cash, or at the discretion of the Committee, may also be
paid by the tender of Shares already owned by the Participant, or through a
combination of cash and Shares, or through such other means that the Committee
determines are consistent with the plan's purpose and applicable law. No
fractional Shares will be issued or accepted.
Section 5.3. Stock Appreciation Rights. A Stock Appreciation Right
is a right to receive, upon surrender of the right, but without payment, an
amount payable in cash and/or shares of Stock under such terms and conditions
as the Committee shall determine, subject to the following:
-------------------------
(a) A Stock Appreciation Right may be granted in tandem
with part or all of, in addition to, or completely independent of a Stock
Option or any other Award under this Plan. A Stock Appreciation Right issued
in tandem with a Stock Option may be granted at the time of grant
of the related Stock Option or at any time thereafter during the term of the
Stock Option.
(b) The amount payable in cash and/or Shares with
respect to each right shall be equal in value to a percent, to be determined
by the Committee, of the amount by which the Fair Market Value per Share on
the exercise date exceeds the exercise price of the Stock Appreciation
Right. The amount payable in Shares, if any, is determined with reference to
the Fair Market Value on the date of exercise.
(c) Stock Appreciation Rights issued in tandem with
Stock Options shall be exercisable only to the extent that the Stock Options
to which they relate are exercisable. Upon the exercise of the Stock
Appreciation Right, the Participant shall surrender to the Company the
underlying Stock Option. Stock Appreciation Rights issued in tandem with
Stock Options shall automatically terminate upon the exercise of such Stock
Options.
Section 5.4. Restricted Stock. Restricted Stock is Shares that are
issued to a Participant and are subject to such terms, conditions, and
restrictions as the Committee deems appropriate, which may include, but are not
limited to, restrictions upon the sale, assignment, transfer, or other
disposition of the Restricted Stock and the requirement of forfeiture of the
Restricted Stock upon termination of employment under certain specified
conditions. The Committee may provide for the lapse of any such term or
condition or waive any term or condition based on such factors or criteria as
the Committee may determine. The Participant shall have, with respect to awards
of Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the Restricted Stock, all of the rights of a
shareholder of the Company, including the right to vote the Restricted Stock and
the right to receive any cash or stock dividends on such Stock, unless otherwise
restricted by the Committee..
Section 5.5. Performance Awards. Performance Awards may be granted
under this Plan from time-to-time based on such terms and conditions as the
Committee deems appropriate provided that such Awards shall not be inconsistent
with the terms and purposes of this Plan. Performance Awards are Awards which
are contingent upon the performance of all or a portion of the Company or which
are contingent upon the individual performance of the Participant. Performance
Awards may be in the form of performance units, performance shares, and such
other forms of performance Awards which the Committee shall determine. The
Committee shall determine the performance measurements and criteria for such
performance awards.
Section 5.6. Other Awards. The Committee may from time-to-time grant
other stock and stock-based Awards under the Plan, including without limitation,
Awards issued as bonuses or other compensation for services, those Awards
pursuant to which Shares are or may in the future be acquired, Awards
denominated in Stock units, securities convertible into Shares, and dividend
equivalents. The Committee shall determine the terms and conditions of such
other stock and stock-based Awards provided that such Awards shall not be
inconsistent with the terms and purposes of this Plan.
Section 5.7. Fractional Shares. No fractional Shares shall be issued
upon the exercise of an Option, nor shall any scrip certificates in lieu thereof
be issuable at any time. Accordingly, if as a result of any adjustment under the
provisions of this Plan or any Option granted pursuant to the Plan, an Optionee
would become entitled to a fractional Share, he shall have the right to purchase
only the next lower whole number of Shares and no payment or other adjustment
will be made with respect to any fractional interest.
ARTICLE VI
AWARD AGREEMENTS
Section 6.1. General. Each Award under this Plan shall be evidenced
by an Award Agreement setting forth the number of Shares or other security,
Stock Appreciation Rights, or units subject to the Award and such other terms
and conditions applicable to the Award as are determined by the
-------
Committee.
Section 6.2. Required Terms. In any event, Award Agreements shall
include, at a minimum, explicitly or by reference, the following terms:
(a) Non-Assignability. A provision that the Awards under the
Plan shall not be assigned, pledged, or otherwise transferred except by will or
by the laws of descent and distribution and that, during the lifetime of a
Participant, the Award shall be exercised only by such Participant or by the
Participant's guardian or legal representative.
(b) Termination of Employment. A provision describing the
treatment of an Award in the event of the retirement, Disability, death, or
other termination of a Participant's employment as an Employee or service as an
Officer or Director, including but not limited to terms relating to the vesting,
time for exercise, forfeiture, or cancellation of an Award in such
circumstances.
(c) Rights of Shareholder. A provision that a Participant
shall have no rights as a shareholder with respect to any securities covered by
an Award until the date the Participant becomes the holder of record. Except as
provided in Article VII, no adjustment shall be made for dividends or other
rights unless the Award Agreement specifically requires such adjustment, in
which case grants of dividend equivalents or similar rights shall not be
considered to be a grant of any other shareholder right.
(d) Withholding. In the case of an Award paid in cash, the
withholding obligation shall be satisfied by withholding the applicable amount
and paying the net amount in cash to the Participant. In the case of Awards paid
in Shares or other securities of the Company, a Participant may satisfy the
withholding obligation by paying the amount of any taxes in cash or, with the
approval of the Committee, Shares or other securities may be deducted from the
payment to satisfy the obligation in full or in part as long as such withholding
of Shares does not violate any applicable laws, rules or regulations of federal,
state, or local authorities. The number of shares to be deducted shall be
determined by reference to the Fair Market Value of such Shares on the
applicable date.
(e) Holding Period. In the case of an Award to an
Insider:
(i) of an equity security, a provision stating
(or the effect of which is to require) that such security must be held for at
least six months (or such longer period as the Committee in its discretion
specifies) from the date of acquisition; or
(ii) of a derivative security with a fixed
exercise price within the meaning of Section 16, a provision stating (or the
effect of which is to require) that at least six months (or such longer period
as the Committee in its discretion specifies) must elapse from the
date of acquisition of the derivative security to the date of disposition of the
derivative security (other than upon exercise or conversion) or its underlying
equity security; or
(iii) of a derivative security without a fixed
exercise price within the meaning of Section 16, a provision stating (or the
effect of which is to require) that at least six months (or such longer period
as the Committee in its discretion specifies) must elapse from the
date upon which such price is fixed to the date of disposition of the derivative
security (other than by exercise or conversion) or its underlying equity
security.
Section 6.3. Optional Terms. Award Agreements may include the
following terms:
(a) Replacement and Substitution. Any provisions
(i) permitting the surrender of outstanding
Awards or securities held by the Participant in order to exercise or realize
rights under other Awards, under similar or different terms, or
(ii) requiring holders of Awards to surrender
outstanding Awards as a condition precedent to the grant of new Awards under the
Plan.
(b) Other Terms. Such other terms as are necessary and
appropriate to effect an Award to the Participant including but not limited to
the term of the Award, vesting provisions, deferrals, any requirements for
continued employment with the Company, any other restrictions or conditions
(including performance requirements) on the Award and the method by which
restrictions or conditions lapse, or the price, amount, or value of Awards.
ARTICLE VII
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of a reorganization, recapitalization, Share split, Share
dividend, exchange of Shares, combination of Shares, merger, consolidation or
any other change in corporate structure of the Company affecting the Shares, or
in the event of a sale by the Company of all or a significant part of its
assets, or any distribution to its shareholders other than a normal cash
dividend, the Committee may make appropriate adjustment in the number, kind,
price and value of Shares authorized by this Plan and any adjustments to
outstanding Awards as it determines appropriate so as to prevent dilution or
enlargement of rights.
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1. Amendment of Plan. The Company expressly reserves the
right, at any time and from time-to-time, to amend in whole or in part any of
the terms and provisions of the Plan and any or all Award Agreements under the
Plan to the extent permitted by law for whatever reason(s) the Company may deem
appropriate; provided, however, no amendment may be effective without the
approval of the shareholders of the Company if approval of such amendment is
required in order that transactions in Company securities under the Plan be
exempt from the operation of Section 16(b) of the Exchange Act and if such
amendment
(a) increases the number of Shares which may be issued under the
Plan;
(b) materially modifies the requirements as to eligibility for
participation;
(c) materially increases the benefits accruing to Participants
under the Plan; or
(d) extends the duration beyond the date approved by the
shareholders.
Section 8.2. Termination of the Plan. The Company expressly reserves
the right, at any time, to suspend or terminate the Plan and any or all Options
and Award Agreements under the Plan to the extent permitted by law for whatever
reason(s) the Company may deem appropriate, including, without limitation,
suspension or termination as to any Participant.
Section 8.3. Effective Date and Procedure for Amendment to
Termination. Any amendment to the Plan or termination of the Plan may be
retroactive to the extent not prohibited by applicable law. Any amendment to
the Plan or termination of the Plan shall be made by the Company by
---------------------------------------------------------
resolution of the Board and shall not require the approval or consent of any
Participant or beneficiary in order to be effective to the extent permitted
by law.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Rights of Employees. Status as an eligible Employee,
Officer or Director shall not be construed as a commitment that any Award will
be made under the Plan to such eligible Employee, officer or Director or to
eligible Employees, officers and Directors generally. Nothing contained in the
Plan (or in any other documents related to this Plan or to any Award) shall
confer upon any Employee, officer or Director any right to continue in the
employ or other service of the Company or constitute any contract or limit in
any way the right of the Company to change such persons' compensation or other
benefits or to terminate the employment or service of such person with or
without cause.
Section 9.2. Compliance with Law. No certificate for Shares
distributable pursuant to this Plan shall be issued and delivered unless the
issuance of such certificate complies with all applicable legal requirements
including, without limitation, compliance with the provisions of applicable
state securities laws, the Securities Act of 1933, as amended from time-to-time,
or any successor statute, the Securities Exchange Act of 1934, as amended from
time-to-time, and the requirements of the market systems or exchanges on which
the Company's Shares may, at the time, be traded or listed.
Section 9.3. Unfunded Status. The Plan shall be unfunded. Neither
the Company, nor the Board shall be required to segregate any assets that may
at any time be represented by Awards made pursuant to the Plan. Neither the
Company, the Committee, nor the Board shall be deemed to be a
---------------
trustee of any amounts to be paid under the Plan.
Section 9.4. Limits on Liability. Any liability of the Company to any
Participant with respect to an Award shall be based solely upon contractual
obligations created by the Plan and the Award Agreement. Neither the Company nor
any Subsidiary nor any member of the Board or the Committee, nor any other
person participating in any determination of any question under the Plan, or in
the interpretation, administration or application of the Plan, shall have any
liability to any party for any action taken or not taken, in good faith under
the Plan. To the extent permitted by applicable law, the Company shall indemnify
and hold harmless each member of the Board and the Committee from and against
any and all liability, claims, demands, costs, and expenses (including the costs
and expenses of attorneys incurred in connection with the investigation or
defense of claims) in any manner connected with or arising out of any actions or
inactions in connection with the administration of the Plan except for such
actions or inactions which are not in good faith or which constitute willful
misconduct.
Section 9.5. Section References. All references in this Plan to
sections or articles shall refer to sections and articles of this Plan unless
specifically noted otherwise.
------------------
Section 9.6. Effective Date of Plan. This Plan shall become
effective on the date of adoption of the Plan by the Board; provided, however,
that the effectiveness of this Plan is subject to its approval and ratification
by the shareholders of the Company within one year from the date of
----------------------
adoption hereof by the Company.
<PAGE>
1
COMMON STOCK
PAR VALUE $.001
SHARES
SEE REVERSE FOR CERTAIN
DEFINITIONS AND LIMITATIONS CUSIP 696435 10 6
PALLET MANAGEMENT SYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, OF
PALLET MANAGEMENT SYSTEMS, INC.
(hereinafter called the Corporation) transferable on the books of
the Corporation or by the holder hereof, in person or by duly
authorized Attorney, upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
Countersigned and Registered:
JERSEY TRANSFER AND TRUST COMPANY
Transfer Agent and Registrar
AUTHORIZED SIGNATURE
CHAIRMAN OF THE BOARD
PRESIDENT
The following abbreviations, when used in the inscription on the
face of this certificate, shall be constured as though they were
written out in full according to applicable laws or regulations:
<PAGE>
TEN COM - as tentnants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - Custodian
(Cust) (Minor)
Under Uniform Gifts to Minor Act
(State)
Addtional abbreviations may also be used though not in the above
list.
For Value received hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
Shares
of the Common Stock represented by the within Certificate and do
hereby irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
<PAGE>
Dated
SIGNATURE
Signature(s) Guaranteed
By
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations
and Credit Unions WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-1 5.
NOTICE: The signature of this assignment must correspond with
name(s) as written upon the face of the certificate in every
particular without alteration or enlargement or any change
whatever.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM 10KSB AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,181,068
<ALLOWANCES> 62,000
<INVENTORY> 1,020,243
<CURRENT-ASSETS> 2,880,170
<PP&E> 2,877,809
<DEPRECIATION> 384,077
<TOTAL-ASSETS> 5,905,356
<CURRENT-LIABILITIES> 3,789,071
<BONDS> 0
0
0
<COMMON> 4,243,216
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,905,356
<SALES> 16,847,597
<TOTAL-REVENUES> 16,847,597
<CGS> 15,980,771
<TOTAL-COSTS> 18,796,816
<OTHER-EXPENSES> 318,035
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 400,773
<INCOME-PRETAX> (2,267,254)
<INCOME-TAX> (489,049)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,778,205)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
