<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-00139-A
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Nouveau International, Inc..
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(Exact name of registrant as specified in its charter)
Delaware 23-2932617
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
212 Phillips Road, Exton, PA 19341
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 524-8393
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X YES NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained herein, 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/
As of April 8 , 1996 the number of shares of Common Stock outstanding
was 11,249,988. The aggregate market value of the Company's Common
Stock held by non-affiliates of the registrant as of April 8 , 1996
was approximately $35,218,681 (based upon 6,124,988 shares at $5.75
per share).
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Certain exhibits are incorporated by reference to the Company's Form
8-K as listed in response to Item 13(a)(2) of Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
BACKGROUND
In January 1996, Health Management, Inc. ("HMI"), a Florida
corporation, which at the time had not engaged in any business activity for
over two years and had virtually no assets, reincorporated in the State of
Delaware and exchanged its common stock for all of the outstanding capital
stock of Nouveau International, Inc. ("Nouveau PA"), a Pennsylvania
corporation. Nouveau PA emerged from bankruptcy proceedings in December 1995.
HMI also changed its name to Nouveau International, Inc. following the
acquisition of Nouveau PA.. References herein to the Company's products,
business operations and financial condition refer to the products, business
operations and financial condition of Nouveau PA unless otherwise indicated.
BANKRUPTCY REORGANIZATION
In December 1995, Nouveau PA. emerged from protection under Chapter 11
of the United States Bankruptcy Code of 1986. Nouveau PA. believes that the
following unique confluence of circumstances, outside the control of Nouveau
PA., caused Nouveau PA. to seek bankruptcy protection in October 1994. In
1993, the business and reputation of Nouveau PA. was damaged due to a
fraudulent telemarketing operation owned and operated by a private label
customer reselling vending machines. As part of the telemarketing operation,
the private label customer accepted deposits for machines and delivered only
a portion of the orders and deposits he received for such machines to
Nouveau PA.. Nouveau PA. had no contractual relationship with any third
party other than with the private label customer. Nouveau PA. was never
implicated with any wrongdoing with respect to the telemarketing fraud and,
in fact, requested and cooperated with a federal investigation of the private
label customer.
The private label customers aggressive sales techniques caused
order rates to increase at a rate well beyond Nouveau PA.'s
manufacturing capacity, which caused Nouveau PA. to have to rely on
a third-party manufacturer, Rowe, Inc. ("Rowe"), to produce machines
for customers of the distributor. Rowe failed to timely produce
machines that had been ordered, and had failed to adhere to the
specifications established by Nouveau PA. in the manufacture of the
vending machines, the result of which was problems with the
refrigeration unit and the microprocessor controller. Business was
adversely affected both as a result of cancellations due to the taint
of the telemarketing fraud, as well as Nouveau PA.'s inability to
manufacture an adequate supply of machines and improperly manufactured
machines.
By December 1992, Nouveau PA. had received approximately $4.15
million of financing and services from Teleflex, Inc. ("Teleflex").
In the wake of the telemarketing fraud and the problems caused by
Rowe, Teleflex, which was Nouveau PA.'s principal source of financing,
withdrew its funding and foreclosed on the assets of the business,
including the proprietary technology of the business serving as
collateral for the loans made by Teleflex to Nouveau PA. The
foreclosure and withdrawal of funding led Nouveau PA. to seek
bankruptcy protection.
By order entered June 7, 1995, the Bankruptcy Court approved
the Settlement Agreement between Nouveau and Rowe, which provided a
resolution of Nouveau PA.'s dispute with Rowe regarding the faulty
manufacture of vending machines by Rowe. The terms of the settlement
include the following: (i) cash payments to Nouveau PA of $4 million;
(ii) the return of 450 completed machines and the parts for an
additional 450 machines to Nouveau PA.; and (iii) the withdrawal of
Rowe's proof of claim in Nouveau PA.'s bankruptcy proceeding in the
aggregate amount of $884,000.
The major portion of the cash part of the settlement has been
used for payments to creditors in Nouveau PA.'s bankruptcy proceeding,
including Teleflex.
The Reorganization Plan, was approved by the Bankruptcy Court
on or about December 8, 1995, and such approval became a final order
on December 18, 1995.
<PAGE> 3
Under the Reorganization Plan, the claims of the principal creditors
of Nouveau PA. will be satisfied as follows:
(i) The Reorganization Plan provides for cash payments to
Teleflex totaling $3,444,708. Of this amount, in June 1995,
Nouveau PA. paid Teleflex $1.2 million. Teleflex has an
allowed unsecured claim of approximately $937,000, of which it
will be paid 5% on the first anniversary of the final order,
and 5% on the second anniversary of the final order;
(ii) National Penn Bank, which has already received
payment of $175,000 out of proceeds from the settlement with
Rowe, will receive $5,000 to discharge its secured claim; and
(iii) Unsecured creditors will receive 10% of the amount of
their allowed claims, payable 5% on each of December 18, 1996
and December 18, 1997. The amount of unsecured debt at the
time of approval of the Reorganization Plan was approximately
$1,100,000, and will include the aforementioned Teleflex
unsecured debt in the amount of $937,000.
In the first quarter of 1996 the Company paid the remaining balance
owed to Teleflex.
THE COMPANY
The Company has developed a series of vending machines which are
capable of storing, cooking, and serving specialty foods using
proprietary formulations and packaging. The combination of vending
machines, specialty food formulations and unique food packaging offer
a complete system for automated hot food vending. The combination of
technologies developed by the Company which comprise the Food System
currently consists of:
(1) a patented fully-robotic, coin-operated hot food vending
machine;
(2) a patented and proprietary, cost-effective packaging system
utilizing a unique shape and construction that protects a
frozen food product from freezer degradation, but allows the
products stored in it to be microwave, infrared, or
impingement heated/cooked without being opened or removed
from the box;
(3) a patent pending proprietary formulation for dough-based
products which have unique features that allow the products
made from these formulations such as pizzas and breads to be
baked, frozen, stored frozen, and rapidly reheated by
microwave, infrared, or impingement hot air, without adversely
affecting the taste, consistency, or desired features of the
dough-based food product; and
(4) a microwave oven which is modified to proprietary
specifications which allows for complete and consistent
cooking throughout the food item.
The Company markets its pizza products under the registered trademark
"Pizza Chef(R)" and markets various other products using the technologies
described above under non-registered marks.
In addition to the fully-automated vending machines which both store
and cook the food product, the Company also offers semi-robotic and non-robotic
machines. The semi-robotic machines store frozen food in the Company's food
packaging system and take money automatically, but require the user to manually
deliver the frozen product to the machines' microwave. The non-robotic
machines, which were designed for use mainly in convenience stores, store food
in the Company's food packaging, but do not cook or serve food or take money
automatically.
The Company's products are unique in the following two respects: (i)
the packaging system and
<PAGE> 4
dough formulation allow dough-based products to be microwave cooked without
damaging the taste and quality of such products and (ii) the vending machine
operates as a turn-key system which takes money, cooks, and serves hot food
products in times as short as 60 seconds. Thus, management believes that it
can take advantage of a relatively unpenetrated niche of the market for vended
products.
The Company's operating strategy is to (i) secure strategic licensing
and distribution agreements for the manufacture and distribution of its vending
machine products on a global basis and (ii) develop a network of licensees and
distributors for the supply of food products to owner/operators of the vending
machines.
The Company licenses its technology to third-party manufacturers and to
third-party distributors outside the United States for the assembly and
distribution of the vending machines. Currently, the Company has, among other
agreements: (i) a technology license and distribution agreement with a
distributor in the Pacific Rim which has, with the Company's approval,
sublicensed the manufacture of the fully-robotic vending machine to Daewoo,
Inc. a major Korean manufacturing company and most recently with Garyo;
(ii) a joint venture agreement for European distribution of machines and food
products; and (iii) a memorandum of understanding for a license to manufacture
and/or joint venture in the Czech Republic to be formed for the manufacture and
distribution of vending machines and the distribution of food products.
Recently the Company has signed Master Distributor Agreements and contracts in
Russia, Germany and Italy and Memorandum of Understandings signed in France,
Spain and Portugal.
The Company has a co-pack agreement with Crestar Foods, Inc. who
prepares a portion of the food products on behalf of the Company using the
Company's proprietary formulations. The food products are then sold by the
Company to customers both directly and through third-party distributors. The
Company plans to license the production of its food products on a global basis.
The Company owns its own baking equipment and operated its own bakeries until
October 1994, however, it was decided to discontinue baking operations as a
result of its bankruptcy filing in October 1994, and presently such equipment
is not in use and the Company has not yet recommenced baking operations on its
own. In February 1996, the Company entered into an agreement to purchase a
facility that is capable of housing the Company's baking equipment and which
will allow the Company to embark on its own food preparation and development
operations. The Company is presently leasing the facility. Closing on the
agreement is scheduled for August 1996 subject to the Company obtaining
sufficient financing. The Company estimates that approximately 600 robotic
machines have been delivered through December 31, 1995. The Company shipped
approximately 24 machines in 1995 as it essentialy suspend operations during
the period of time it was in bankruptcy proceedings. While the Company
continues to supply food products to some purchasers of these machines it
cannot determine how many machines are in actual use. Since December 31, 1995
through March 31, 1996 the Company has shipped 38 robotic machines which vend
pizzas.
The Company currently has commitments from distributors to place orders
pursuant to the various distribution agreements for 1,637 vending machines,
during 1996. No assurance can be given that such distributors will place
orders as required under their respective agreements. Presently, all of the
distributors are located in foreign jurisdictions. In the event the Company
would be required to seek legal redress against any of the distributors it may
be difficult to obtain jurisdiction and/or collect any judgments.
THE VENDING MARKET
Management believes that a sizable and untapped global market
opportunity exists for a company able to develop and reliably deliver machines
which address hot food vending.
In addition to the domestic market, there is also a mature vending
market in Japan. In addition to the large number of vending machines, the
cultural habits of the Japanese support higher value vended products such as
those offered by the Company. Vending is also beginning to emerge as a growth
industry in countries such as the United Kingdom, Germany, France, Italy,
Spain, Russia, Korea, and Australia.
Much of Europe does not have an established vending machine market.
Management views this
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as an opportunity to enter into a relatively untapped market; however,
there can be no assurance that such market will in fact develop.
MANUFACTURING AND DISTRIBUTION
The Company plans to achieve its manufacturing goals through a system
of joint ventures and licensing of its technology to manufacturers located in
strategic geographical areas. In a typical licensing agreement, the licensee
will agree to incur all costs related to obtaining sufficient equipment so that
the machines can be manufactured in accordance with the specifications and
technology transferred by the Company. In order to maintain a license, the
licensees will be required to meet the quality control and production
standards of the Company. The Company plans to have a representative present
at each licensee on a regular basis to monitor quality control with reporting
documentation. Each licensee is generally required to produce a predetermined
minimum number of machines. Manufacturing licenses are often signed in
connection with master distribution agreements, so that the licensees may also
act as exclusive distributors in designated regions.
Distribution will be accomplished through a system of designating
master distributors who will have the exclusive right to distribute products
and machines in specified regions. Such master distributors may contract with
sub-distributors upon approval by the Company. Each master distributor will be
required to purchase minimum quantities of products or lose their exclusivity.
The Company's manufacturing strategy provides five primary
manufacturing areas which will supply economic trade regions that are, or will
be, encompassed by specific distribution agreements. They are expected to be
organized as follows:
<TABLE>
<CAPTION>
Manufacturing Principal Areas of Distribution
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<S> <C>
Czech Republic Northern, Western & Eastern Europe & USA backup
Mexico North America, Central America and South America
Italy Southern Europe
Korea/Malaysia Pacific Rim (except Australia)
South Africa Africa and certain Middle Eastern Countries
</TABLE>
It is the intention of the Company to manufacture certain of its
proprietary specialty vending machines primarily through offshore outsourcing
agreements. These licensing agreements, together with the Company's on-site
representatives, will be designed to allow the Company to maintain satisfactory
production standards and effectively ship its product in an efficient,
cost-effective manner. The Company intends to establish manufacturing
operations in the United States in the future for certain of its products,
however, there can no assurance thereof.
LICENSE AGREEMENTS
In October 1993, the Company signed an exclusive, five-year technology
licensing and distribution agreement in the Pacific Rim region with Woneel
Mercantile, Ltd., a manufacturer of consumer products. Subsequently, the
Company and Woneel contracted with Garyo Daewoo, Ltd., a major Korean
manufacturing company and most recently with Garyo, to manufacture the
Company's machines at a fixed priced to the Company, which Woneel will purchase
from the Company for distribution. In order to maintain its exclusive rights,
the agreement calls for minimum purchases by Woneel of 1,000 machines per year
over the first 5 years of the licensing agreement all of which will be used in
Korea. This program is just beginning for delivery of production quantities of
machines in April/May 1996. During the time the Company was in bankruptcy
proceedings the parties to the agreement informally suspended any performance.
In December 1994, the Company formed a joint venture in Italy. The
joint venture company,
<PAGE> 6
called Nouveau Cordon Bleu and incorporated as an Irish company, is the
European licensee for the Company. The Company provided the license to its
proprietary technology and other parties provided capital and ongoing
management with each becoming a 50% owner of the joint venture. The license
agreement provides that Nouveau Cordon Bleu will purchase a minimum of 1,000
machines per year. As the European licensee, Nouveau Cordon Bleu also assisted
the Company in selling master distributorships, each of which will act as the
exclusive distributor of the Company's products in their respective designated
regions. The distributors will be required to purchase a minimum number of
machines annually in order to maintain regional exclusivity. In June 1996, the
Company and its joint venture partner mutually agreed to dissolve this joint
venture.
In February 1996, the Company entered into two agreements with
CONTITRADE GmbH of Munich, Germany establishing CONTITRADE as a Master
Distributor of the Company's proprietary hot food vending machines and
specialty ready-to-eat food products.
Under the terms of the first agreement, CONTITRADE will be granted the
exclusive marketing, distribution and equipment service rights covering Munich
as a separate territory. The second agreement provides the same exclusivity
for the rest of Germany.
In order to maintain its exclusive distributor rights for Munich,
CONTITRADE must purchase from the Company a minimum of 600 vending machines per
year for five years. Additionally, it is committed to purchase 2,000 machines
per year for five years in order to maintain its exclusivity for the rest of
the German market.
In December 1995, the Company entered into an agreement with
Zernostandart, a Russian corporation headquartered in Moscow which established
Zernostandart as a Master Distributor for all of Russia. In order to maintain
its exclusive rights for Russia, Zernostandart must purchase 26 units a month
over the next year.
In November of 1995, the Company entered into an agreement with Kwang
Hap Siang (S) Pte Ltd., a Singapore corporation. In order to maintain it's
exclusive rights, the agreement calls for Kwang Hap Siang to purchase a minimum
of 650 units over five years. The distributor also has first rights of refusal
for Malaysia and Indonesia for a period of 12 months from receipt of first
containers in Singapore. The agreement may be terminated by Kwang Hap Siang
(S) Pte Ltd. upon ninety days notice.
MACHINE PRODUCT LINE
The Company's current product line includes machines dedicated to
pizza, sandwiches and other types of foods. The machines are available in
various technological categories, including fully-robotic machines (the "200
series"), semi-robotic machines (the "100 series") and non-robotic machines
(the "80 series").
The robotic machines are fully-automatic in all respects. They are
able to store, cook and serve food, as well as take money, in a fully-automated
fashion. The three fully-robotic machines include the following:
PVM-220: a pizza vending machine capable of storing up to 220 pizzas
SVM-110: a sandwich vending machine capable of storing up to 110
sandwiches.
MVM-110: a multi-food vending machine capable of storing up to 110
items.
The semi-robotic machines are able to store food and take money
automatically, but a user will have to deliver the frozen product manually to
the machine's microwave. The semi-robotic machines include:
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PEM-120: a pizza vending machine capable of storing up to 120 pizzas.
SEM-60: a sandwich vending machine capable of storing up to 60
sandwiches.
MEM-60: a multi-food vending machine capable of storing up to 60
items.
The non-robotic machines are automatic only in their ability to store
food properly. They are unable to cook, serve or take money automatically,
thus a user will have to deliver the frozen product manually to the machine's
exclusive microwave and pay a cashier. Accordingly, they are designed
primarily for use in convenience stores, of which there are estimated to be
140,000 nationwide. The three non-robotic machines include the following:
PME-80: a pizza vending machine capable of storing up to 80 pizzas
SME-40: a sandwich vending machine capable of storing up to 40
sandwiches.
MME-40: a multi-food vending machine capable of storing up to 40
items.
Management believes that the product which offers the largest
potential for unit sales in the United States and Canada, both of which
management views as mature markets, is its multi-food machine. The multi-food
machine offers up to seven different selections within the machine at a given
time. These seven selections can be changed using a variety of product mixes
and cuisine which range from simple finger food to hot snacks and full meals.
The multi-food machine, which is not yet available for sale, will be
for use with other food companies' food formulas and combinations, although
they will still be required to utilize the Company's patented box/packaging
system. Accordingly, the Company will participate in the vend unit sale
through the value offered by this technology. This arrangement will require
strategic alliances with prime food/meal producers.
The multi-food machine is the same size as the specialty product
machines built by the Company (Pizza Chef(R), Nouveau Hot Sandwiches and Pasta
Chef) and differs only in its selector and cooking device. Although the
multi-food machine will sell food products other than those manufactured by the
Company, the Company will still provide the pizzas, sandwiches, and pasta where
the owner/operator wants those items in the machine. The Company will control
this by signing agreements with other food producers who have no pizza,
sandwiches and pasta that can compete with the Company's technology and
therefore, present no conflicts.
Management expects that while the mature markets of the United States
and Canada both represent opportunities for immediate unit sales, global
penetration for the multi-food machine will require a longer lead time. The
international vending machine market, as a whole, is considered to be an
emerging market and, accordingly, rapid penetration would not be expected.
However, management believes that the increasing global awareness of vending
machines will afford the Company an excellent opportunity for a well-planned,
phased program.
The Company currently offers the Series 220, 110 and 80 machines and
anticipates that these machines will comprise its machine sales during 1996.
FOOD PRODUCT LINE
The Company has developed a proprietary formulation that allows dough
to be cooked or reheated in a high-energy microwave oven without negatively
impacting its constitution. As a result, the Company has developed a complete
line of product offerings consisting of its proprietary dough formulations
coupled with natural ingredients. The offerings will fall into four primary
categories: Pizza Chef Pizzas, Pasta Chef products, Li'l Bite Sandwiches
(which come three to a pack) and Pocket Snacks. The Company expects that its
food product offerings will consist primarily of its Pizza Chef(R) pizza
product line through 1996 with aggressive marketing beginning in June of 1996
for its sandwich line.
In August 1994, the Company established a five year co-packer supply
agreement with Crestar Foods Products, Inc. ,a division of H.J. Heinz,
pursuant to which Crestar produces pizzas for the Company at a fixed price
adjusted annually on an exclusive basis, thereby providing the Company with
predictable
<PAGE> 8
product costs on an annual basis. The supply agreement may be terminated by
Crestar Food Products, Inc. at any time upon ninety days notice.
GOVERNMENT REGULATIONS
The Company is required to comply with certain rules and regulations
of the U.S. Food and Drug Administration. Compliance is mandated because the
Company's vending machines contain a robotically operated microwave oven. The
Company is in compliance with all applicable FDA rules and regulations.
The Company's vending machines to be used in the United States must
also be in compliance with Underwriters Laboratories standards.
The Company's products are also subject to local foreign regulations
where such products are in use.
The Company is also in voluntary compliance with the manufacturing
standards as outline by the National Automatic Merchandising Association.
PATENTS, TRADEMARKS AND PROPRIETARY PROTECTION
The Company holds design and utility patents on the delivery system
for its vending machines and its packaging system. The Company also holds
patents for the food formulation for its dough based products and for its pizza
box and coating. The company has been granted patents on the packaging system
in Japan, Israel, United Kingdom, Korea, Italy and France. The Company has
been granted patents on the delivery system in Israel, United Kingdom and
Korea. The Company has applied for patents in other select foreign
jurisdictions.
The Company has registered the "Pizza Chef(R)" name and logo and has
applied for registration with the Patent and Trademark Office for "Nouveau
Chef". The Company is aware that a number of concerns may be using the Pizza
Chef(R) name in their businesses. The Company has retained special trademark
counsel to prosecute any party that is using the Pizza Chef(R) name in
violation of the Company's registration.
The Company enters into confidentially agreements with all persons and
entities who or which may have access to its technology. However, no assurance
can be given that such agreements, the patents or any additional patents which
may be issued to the Company will prevent third parties from developing similar
or competitive technologies.
There can be no assurance that the patents will provide the Company
with any significant competitive advantages, or that challenges will not be
instituted against the validity or enforceability of its patents, or if
instituted that any such challenges will not be successful. The cost of
litigation to uphold the validity and prevent infringement can be substantial.
In addition, no assurance can be given that the Company will have sufficient
resources to either institute or defend any action, suit or other proceeding by
or against the Company will respect to any claimed infringement of patent or
other proprietary rights.
COMPETITION
The Company's unique systems approach combines the custom designed
food, package, and oven into a fully-robotic self-contained vending machine.
Each machine features an on-board computer/microprocessor, self-diagnostic
controller, storage freezer, product selector and transporter and high-energy
directional microwave, all of which provides a system that serves the customer
a fresh, ready-to-eat hot meal in approximately two minutes.
To date, to the knowledge of the Company, there are no commercially
available machines that have successfully demonstrated the ability to reliably
deliver a food product from frozen storage to a cooked, ready-to-eat state
entirely within the confines of a single machine, and without user interface.
Thus, to the knowledge of management, there are no direct comparisons
available.
<PAGE> 9
Management is aware of a number of attempts to design and build
machines which mimic, and would compete with, Pizza Chef(R). Some of the more
notable efforts have been made by the American Pizza Company (Vancouver, B.C.),
Cafe Quik, (Dallas, TX) and Edgewater Foods/Presto Pizzeria (Washington D.C.).
The failure of competitors to successfully address this market demonstrates the
technological barriers to entry which exist. There can be no assurance that
additional entrants into the hot food vending machine industry will not be
forthcoming nor can the Company know all of the developments being made by
others.
Some similar, although less-advanced, competitive offerings do exist.
Little Charlie's' as well as other pizza brands sell a pizza product from
refrigerated machines its pizza offering is smaller both in weight and
diameter, is built upon a pastry crust and must be manually transferred to a
cooking device and removed from its package before cooking. Vend prices for
this product generally exceed $2.50. Company officials report sales in excess
of three million units per year.
Toppers has produced machines which resemble automated production
lines, with a pre-prepared crust, indexing from one station (sauce, cheese,
toppings, etc.) to the next and , finally, into a cooking unit. However, the
machine differs from Pizza Chef (R) insofar as it has a greater cycle time
(five minutes versus Pizza Chef(R)' s approximately two minutes), requires
personnel to be present for operation and is very large and expensive. To
date, they have found a market only in Japan on a limited basis and do not
resemble vending machines.
Neither franchised nor individually owned pizza outlets can
effectively compete for several reasons. While a pizzeria may provide a cost
competitive offering (on a cost/serving basis), delivery times often approach a
full half-hour and availability in remote locations may be limited. At lease
one major food service company, PepsiCo's Pizza Hut unit, has attempted to
match the portability of the distribution site which is fundamental to vending
machines in general, by experimenting with mobile carts and small kiosks, both
of which require greater capital expenditure and still require attended service
and tend to experiences food spoilage loses.
The domestic vending industry is dominated by a handful of large
national firms such ARAMARK, Service America and Canteen, who are able to exert
buying power from the machine and product manufacturers and placing power with
the location owners. If such large firms decided to enter the hot food vending
machine market, they would enjoy the advantage of "owning" many prime locations
through exclusive contractual arrangements. For example, a firm might contract
with a large hospitality chain, whereby they will retain exclusive access to
locations at the chain's facilities. In addition, the necessity of a well
trained, readily available service network and other capital intensive
infrastructure requirements also tend to work in favor of larger, more
sophisticated and better capitalized firms.
EMPLOYEES
The Company currently has twenty-five employees and considers its
relations with its employees to be good. It is currently in the
process of hiring additional employees in key areas of management and
production.
CONSOLIDATED SELECTED FINANCIAL DATA
Set forth below is selected financial data derived from the Company's
consolidated financial statements, some of which appear elsewhere in
this report. This data should be read in conjunction with the
consolidated financial statements, some of which are included
elsewhere in this report. The financial data presented below is that
of Nouveau PA and its subsidiaries and does not reflect the merger
with HMI and the attendent financing. See "Pro Forme Consolidated
Balance Sheet"
<PAGE> 10
<TABLE>
<CAPTION>
YEAR ENDED
31-DEC-95
<S> <C>
Operations Revenue $ 245,313
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Net Income $ 7,593,984
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Net Income (Loss) per Share
of Common Stock $ .68
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Balance Sheet Data
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Working Capital (deficit) $ 2,124,713
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Total Assets $ 4,595,560
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Total Liabilities $ 3,210,690
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Stockholder's equity
(deficiency) $ 1,384,870
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</TABLE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company pursuant to a sub-lease agreement leases approximately
15,000 square feet in Exton, Pennsylvania where it currently maintains its
corporate offices, limited warehouse and assembly facility. The term of the
sub-lease agreement is three years ending in October 1998. The current base
rent is $67,792. Other annual operating expenses under the sub-lease agreement
are currently $11,600.
The Company lease approximately 3,000 square feet of warehouse space
in Royersford, Pennsylvania on a month to month basis. The monthly rent is
$600.00. The Company also leases approximately 5,000 square feet of warehouse
space in Folcroft, Pennsylvania on a month to month basis. The monthly rent is
$500.00.
In April, 1996 the Company leased approximately 16,400 square feet in
Exton, Pennsylvania across the street from its other 15,000 square feet Exton
plant. The term of the lease is three years. The current annual rent is
$65,600. The Company intends to consolidate the operation in Folcroft and
Royersford into this facility and to also assemble vending machines therein.
In February 1996, the Company entered into an agreement to purchase a
manufacturing facility in West Chester, Pennsylvania. The facility is
approximately 36,000 square feet of which approximately 26,000 square feet is
designed for USDA food manufacturing. The property consists of approximately
twenty developable acres. The purchase price is $1,360,000 of which $40,000
has been paid. Closing on the sale is expected to take place in August 1996
subject to the Company obtaining sufficient funds to complete the purchase.
The Company is currently leasing the facility. It is the Company's intention
to use the facility as its corporate office and food production operation
beginning in August 1996.
ITEM 3. LEGAL PROCEEDINGS. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market for the Company's Common Stock is the National
Association of Securities Dealers, Inc. over-the-counter market, on the
Electronic Bulletin Board. The trading symbol for the Common Stock is
"VEND.U".
Prior to January 18, 1996, the Company's Common Stock was
traded under the symbol "HEMI". For the years 1994 and 1995 the high
and low bid price of its Common Stock was 1/4. On January 18, 1996
the Company acquired all of the capital stock of Nouveau PA.. For the
quarter ending March 31, 1996, the high and low bid price of the
Company's Common Stock was 1/4 to 5 3/4. The prices represent prices
between dealers, do not include retail mark-ups, mark downs or
commissions and may not represent actual transactions.
HOLDERS
As of April 8, 1996, the number of stockholders of record was 155,
not including beneficial owners whose shares are held by banks,
brokers and other nominees.
DIVIDENDS
The company has paid no dividends since its inception and does not
anticipate or contemplate paying cash dividends in the foreseeable
future.
Pursuant to the terms of the Company's Series A Preferred Stock, a 4%
annual dividend is due and payable upon redemption. The dividend is
currently being accrued. As of March 31, 1996, the unpaid cumulative
dividends totaled approximately $28,689.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FISCAL YEARS 1994 AND 1995
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company has working capital of $2,124,713
compared with a working capital deficiency of $4,668,013 at December 31, 1994.
The major reason for the increase in working capital was a $3,920,000 reduction
in liabilities as a result from confirmation of the Company's Plan of
Reorganization and settlement of a lawsuit with Rowe totaling $5,979,000 which
consisted of $3,938,000 in cash (present value $3,751,000), inventory valued at
$2,592,000 and cancellation of accounts payable of $884,000, less fees payable
to the litigating attorneys of $1,250,000. The settlement was reached in June
1995.
In March 1996, the Company received an installment of $300,000 due as
part of the settlement. The remaining balance is due in installments of
$100,000 in June 1996 and $500,000 in June 1997.
During the period ending December 31, 1995 the Company received
$183,000 in advances from an officer of the Company. In January 1996, the
Company received an additional advance of $30,000 from the same officer.
In January 1996, the Company received approximately $3,045,000 in net
proceeds from the sale of its
<PAGE> 12
convertible preferred stock in a private placement and paid Teleflex $2,200,000
from the proceeds.
In February 1996, the Company entered into an agreement to purchase a
facility capable of manufacturing the Company's food products. The Company
paid $40,000 to lease the facility until the closing on the sale which is
scheduled for August 1996. At closing the Company will be required to pay
$1,320,000 to purchase the facility. Management presently estimates that it
will cost approximately $700,000 to renovate the facility so that the Company
can begin food manufacturing operations. The Company will need to obtain
financing to purchase the facility and renovate it. The Company is currently
in negotiation with a commercial bank to secure the financing for the purchases
and renovations. The Company will also need additional funds to finance the
manufacturing of its vending machines. The amount of funds will be determined
by the number of vending machines that are ordered. Currently, the Company has
distribution agreements that require that 1,673 machines be delivered in 1996.
The Company's current inventory can supply approximately 810 machines provided
that additional parts are ordered.
The Company will require additional funding to fund its food
production operation and to purchase vending machines. The Company is
currently in the process of attempting to raise additional financing through a
private placement of its securities to meet its short term capital needs. The
Company is also seeking additional sources of financing to meet its longer term
needs. No assurance can be given that the Company will be able to obtain any
additional financing.
RESULTS OF OPERATIONS
For the year ended December 31, 1995 the Company had net sales of
$245,313 compared to net sales of $943,345 at December 31, 1994. The decrease
was as the result of lower pizza sales, machine sales and no license fees paid
in 1995 as the Company had essentially suspended operations during the period
it was in bankruptcy proceedings. In October 1994, the Company sought
protection under Chapter 11 of the bankruptcy code. The Company emerged from
bankruptcy proceedings in December 1995. During the period it was in
bankruptcy the Company's operation were greatly reduced on account of limited
funds. Approximately fifty percent of the Company's sales in 1995 were derived
from one customer, AMTRAK, and consisted of bulk sales of pizzas. The Company
does not expect that it will realize any significant sales to this customer in
the future. The Company currently has agreements from various distributots
that call for orders from such distributors for 1,673 vending machines during
1996. As the Company is only now beginning to commence operations and because
it has no prior experience with the various distributors no assurance can be
given as to how many actual purchase orders will be received pursuant to the
various agreement.
The Company anticipates that it will enter into additional
distribution agreements during 1996. The current distribution agreements are
for sales outside the United States. During 1996, the Company intends to
expand its marketing effort to the domestic marketplace.
General and administrative expenses total $618,398 during 1995. Of
this amount approximately $245,000 was for salaries and approximately $132,00
for rent. General and administrative expenses in 1994 were $935,846.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements required to be filed pursuant to
this Item 7 begins on page F-1 of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. Non applicable.
<PAGE> 13
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gary W. Black, Sr. 56 Chief Executive Officer, Chief Financial Officer and,
Chairman of the Board of Directors
Robert J. Brock, Sr. 54 Chief Operating Officer, and Director
Frederick W. Johnson 57 Production Manager, Secretary and Director
</TABLE>
Mr. Black founded Nouveau PA in 1989 and brings thirty years of
experience in the fields of materials engineering, actuation and
mechanism design and systems analysis to the Company. His background
covers sub-systems design for numerous aerospace and space hardware,
commercial and military aircraft, weapons systems and automotive
engine combustion. Mr. Black holds numerous patents on exotic
materials, chemical formulations, weapons delivery systems, packaging,
electro-mechanical actuation devices and most recently, in food
formulation and robotic vending equipment. Prior to founding and
becoming Chief Executive Officer of Nouveau PA, Mr. Black held
positions as founder and Chief Scientist of Turbo-Technologies, a
materials research and product manufacturing company; owner and Chief
Executive Officer of Penn Precision Manufacturing ("Penn Precision"),
a defense product manufacturing company; owner and Chief Executive
Officer of Applied Manufacturing Sciences, a defense product
manufacturing company; founder and President of MATRA Defense Systems,
a defense product manufacturing company; and a Vice President of
Teleflex Incorporated.
Mr. Brock also brings over thirty years of manufacturing experience to
the Company, has an extensive background in manufacturing,
particularly within the scope of military equipment and has held
leadership positions related to plant management, production
operations, and personnel management. Mr. Brock began his career with
George E. Ellis Company, a manufacturer of specialty containers for
the military, where he held positions as Time Study Engineer,
Personnel Manager and Manufacturing Manager over a ten year period.
He then worked for thirteen years at Ametek, a manufacturer of
aircraft and automotive instruments, where he held managerial
positions related to manufacturing, personnel, production, materials
and plant and production management. Mr. Brock held similar positions
at Action Manufacturing. Mr. Brock was General Manager for Penn
Precision. Mr. Brock is Chief Operating Officer, has responsibility
for Human Resources, Operations Management and reports to the
Company's Chief Executive Officer. He has been employed by the
Company for over five years.
Mr. Johnson brings almost thirty years of experience in industrial
management to the Company. Mr. Johnson received a degree in Business
Administration with a major in Industrial Management. Mr. Johnson
held management positions with Handy & Harmon Tube, Speeline Inc.,
Commodore Optoelectronics and Franke over a twenty year period. Mr.
Johnson joined the Company as Production Manager and has held this
position for over five years. His responsibilities include oversight
of production of vending machines, shift management, labor relations,
quality control and production control. Mr. Johnson reports directly
to the Chief Operating Officer. He is an active member of both the
Chamber of Commerce and the American Manufacturing Association.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation earned or paid to the
named executive officer by the Company for the fiscal year ended December 31,
1995
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------
AWARDS
============================================================================================================================
OTHER RESTRICTED SECURITIES
Year Salary($) Bonus($) ANNUAL STOCK UNDERLYING
COMPENSATION AWARDS OPTIONS/SAR'S(#)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gary W. Black, Sr. 1995 $32,500 $9,000
<CAPTION>
LONG TERM
COMPENSATION
---------------
PAYOUT
==================================
LTIP ALL OTHER
PAYOUTS COMPENSATION
($) ($)
- --------------------------------------------------------
<S> <C>
Gary W. Black, Sr.
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the outstanding shares of the Company's
<PAGE> 14
Common Stock, each director, and all executive officers and directors of the
Company as a group, as of April 8, 1996, and their percentage ownership of
Common Stock and their percentage voting power.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Ownership
- ---------------- ----------------------------- ---------
<S> <C> <C>
Gary W. Black, Sr. 3,000,000 26%
212 Phillips Road
Exton, PA 19341
Glengarry Family Investments, L.P. 2,000,000 17%
1120 Pine Street
Norristown, PA 19401 (2)
Robert J. Brock, Sr. 100,000 *
Frederick W. Johnson 25,000 *
ALL executive officers and directors as a
group (3 persons) 3,125,000 27.0%
</TABLE>
- ------------------------
* Less than 1%
(1) Except as otherwise indicated, all of the shares are owned beneficially
and of record. Beneficial ownership has been determined in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended.
(2) A Delaware Limited Partnership whose sole limited partner is a
corporation owned by the spouse of Mr. Gary W. Black, Sr. Mr. Black,
Sr. disclaims any beneficial ownership in these shares.
By virtue of his stock ownership and position with the Company Mr.
Black may be deemed to "control" the Company.
OMNIBUS STOCK PLAN
The Company has adopted a Omnibus stock plan (the "Plan") covering
500,000 shares of the Company's Common Stock, $.001 par value,
pursuant to which officers, directors, key employees and consultants
of the Company are eligible to receive incentive as well as non-
qualified stock options Stock Awards and Stock Appreciation Rights
("SAR'S"). The Plan, which expires in June 2006, is administered by
the Board of Directors. Incentive stock options granted under the
Plan are exercisable for a period of up to 10 years from the date of
grant and at an exercise price which is not less than the fair market
value of the Common Stock on the date of the grant, except that the
term of an incentive stock option granted under the Plan to a stock-
holder owning more than 10% of the outstanding Common Stock may not
exceed five years and the exercise price of an incentive stock option
granted to such a stockholder may not be less than 110% of the fair
market value of the Common Stock on the date of the grant. Non-
qualified stock options may be granted on terms determined by the
Board of Directors. SAR's which give the holder the privilege of
surrendering such rights for the appreciation in the Company's
Common Stock between the time of grant and the surrender, may be
granted on any terms determined by the Board of Directors. No SAR's
have been granted. Stock Awards may be denominated in common stock
or stock equivalent units ("phantom stock") and may be paid in Common
Stock, in cash or a combination thereof. No Stock Awards have been
granted.
To date, no options are currently in effect.
MANAGEMENT INCENTIVE PLAN
The Company has adopted a Management Incentive Plan ("MIP") which
provides that key employees be entitled to an incentive bonus pool.
The bonus pool is set at five (5%) percent of the Company's pretax
profits. Any bonus will be distributed, subject to Board of
Directors approval, within sixty (60) days of the end of the
Company's fiscal year. The MIP provides that Mr. Gary W. Black, Sr.
is entitled to fifty (50%) percent of the bonus pool up to a maximum
of $150,000. Mr. Robert J. Brock, Sr. is entitled to twenty-five (25%)
percent of the bonus pool up to a maximum of $80,000. Mr. Gary W.
Black, Jr. is entitled to twelve and one-half (12.5%) percent up to a
maximum of $72,000. Mr. Brett A. Black is entitled to twelve and
one-half (12.5%) percent up to a maximum of $60,000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into employment agreements with Mr. Gary W.
Black, Sr., Mr. Robert J. Brock, Sr., Mr. Gary W. Black, Jr., Mr. Frederick W.
Johnson and Mr. Brett A. Black.
The agreement with Mr. Gary W. Black, Sr. is for four years ending in
June 2000. Mr. Black's annual compensation is $150,000 for the first year with
annual increases based upon the Consumer Price Index for the Philadelphia,
Pennsylvania area. Mr. Black also receives an automobile allowance at $750.00
per month. The agreement also provides that Mr. Black participates in the
Company's Management Incentive Plan. The plan provides that Mr. Black is
eligible to receive an annual bonus equal to fifty percent of the amount
available under the plan up to $150,000. The agreement also provides that
Mr. Black devote such time to the affairs of the Company as he deems necessary.
Mr. Black's spouse and three sons also are employed by the Company.
The agreement with Mr. Brock is for four years ending in June 2000.
Mr. Brock's annual compensation is $80,000 for the first year with annual
increases based upon the Consumer Price Index for the Philadelphia,
Pennsylvania area. Mr. Brock is also entitled to a leased automobile. The
agreement also provides that Mr. Brock participates in the Company's Management
Incentive Plan. The plan provides that Mr. Brock is eligible to receive an
annual bonus equal to twelve and a half percent of the amount available under
the plan up to $80,000.
The agreement with Mr. Black, Jr. is for four years ending in June
2000. Mr. Black Jr.'s annual compensation is $72,000 for the first year with
annual increases based upon the Consumer Price Index for the Philadelphia,
Pennsylvania area. Mr. Black is also entitled to a leased automobile. The
agreement also provides that Mr. Black participates in the Company's Management
Incentive Plan. The plan provides that Mr. Black is eligible to receive an
annual bonus equal to twelve and a half percent of the amount available under
the plan up to $72,000.
The agreement with Mr. Johnson is for four years ending in June 2000.
Mr. Johnson's annual compensation is $60,000 for the first year with annual
increases based upon the Consumer Price Index for the Philadelphia,
Pennsylvania area. Mr. Johnson is also entitled to a leased automobile.
The agreement with Mr. Brett Black is for four years ending in June
2000. Mr. Black's annual compensation is $60,000 for the first year with
annual increases based upon the Consumer Price Index for the Philadelphia,
Pennsylvania area. Mr. Black is also entitled to a leased automobile. The
agreement also provides that Mr. Black participates in the Company's Management
Incentive Plan. The plan provides that Mr. Black is eligible to receive an
annual bonus equal to twenty-five percent of the amount available under the
plan up to $60,000.
<PAGE> 15
The Company leases automobiles for Messrs. Brock, Johnson and Gary W.
Black, Jr. and Brett A. Black, the General Manager of the Company's Food
Division who is a son of Mr. Gary W. Black, Sr. The terms of the leases are
for three years ending in February 1999. The total lease payment is $1,500 per
month. The automobiles are leased from a company owned by a stockholder of the
Company. This stockholder also performs legal services for the Company. The
Company considers the terms of the leases to be no less favorable then could
have been obtained from a third party and multiple bids were received prior to
effecting the subject leases.
In February, the Company advanced Mr. Gary W. Black, Sr.
$200,000. In April, $100,000 was repaid with interest.
ITEM 13. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
A. The following documents are filed as part of this report:
1. The consolidated financial statements filed as part
of this report are listed under the caption "Index to
Financial Statements and Schedules", appearing
elsewhere in this report.
2. The following Exhibits are filed herein:
<TABLE>
<CAPTION>
Exhibit
Number Description
-------------------
<S> <C>
** 3.1(a) Certificate of Incorporation and By Laws
** 3.2(b) Form of Certificate of Designation - Series A Convertible Preferred Stock
** 4.1(a) Form of Warrant
*10.0 Agreement and Plan of Merger By and Among Health
Management, Inc. and Nouveau International, Inc.
dated January 18, 1996.
10.1 Form of Master Distributorship Agreement
10.2 Omnibus Stock Plan
10.3 Management Incentive Plan
**21.0(d) Subsidiaries of the registrant
27.0(d) Financial Data Schedule
</TABLE>
B. Reports on Form 8-K filed January 30, 1996: (i) to report an event under
Item 2 regarding the registrants' acquisition of all of the issued and
outstanding capital stock of Nouveau International, Inc.and
<PAGE> 16
an event under item 4 to report a change in certifying accountants.
* Incorporated by reference from registrants' Current Report on
Form 8-K January 30, 1996.
** Previously filed.
<PAGE> 17
HEALTH MANAGEMENT, INC.
- I N D E X -
-------------
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
REPORT OF INDEPENDENT AUDITORS F-2
BALANCE SHEET F-3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF CHANGES IN CAPITAL
DEFICIENCY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7
PRO FORMA CONSOLIDATED BALANCE SHEET F-8
NOTES TO PRO FORMA CONSOLIDATED BALANCE
SHEET F-9
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS F-10
</TABLE>
F-1
<PAGE> 18
[RICHARD A. EISNER & COMPANY LETTERHEAD]
To the Directors
Health Management, Inc.
We have audited the balance sheet of Health Management, Inc. (a
Florida Corporation) as at December 31, 1995 and the related statement of
operations, changes in capital deficiency and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
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 our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Health Management,
Inc. as of December 31, 1995 and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
RICHARD A. EISNER & COMPANY, LLP
New York, New York
March 11, 1996
F-2
<PAGE> 19
HEALTH MANAGEMENT, INC.
BALANCE SHEET
AS AT DECEMBER 31, 1995
<TABLE>
<S> <C>
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - 0 -
==========
L I A B I L I T I E S
---------------------
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . $ 5,000
---------
CAPITAL DEFICIENCY
------------------
Common stock - authorized 10,000,000 shares of $.001 par
value; issued and outstanding 2,959,593 shares. . . . . . . 2,960
Additional paid-in capital . . . . . . . . . . . . . . . . . . 784,705
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . (792,665)
---------
Total capital deficiency . . . . . . . . . . . . . . (5,000)
---------
T O T A L. . . . . . . . . . . . . . . . . . . . . . $ - 0 -
=========
</TABLE>
The accompanying notes are an integral part hereof.
F-3
<PAGE> 20
HEALTH MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
December 31,
----------------------------
1995 1994
-------- --------
<S> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . $ - 0 - $ - 0 -
Operating expenses:
General and administrative. . . . . . . . . . . (14,022) (24,054)
-------- --------
NET LOSS . . . . . . . . . . . . . . . . . . . . . $(14,022) $(24,054)
======== ========
Net loss per share . . . . . . . . . . . . . . . . $(.003) $(.005)
====== ======
Weighted average number of common
shares outstanding. . . . . . . . . . . . . . . 4,500,000 4,500,000
========= =========
</TABLE>
The accompanying notes are an integral part hereof.
F-4
<PAGE> 21
HEALTH MANAGEMENT, INC.
STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Capital
Stock Capital Deficit Deficiency
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance - January 1, 1994................... $2,960 $749,717 $(754,589) $ (1,912)
Net loss.................................... (24,054) (24,054)
Capital contributions....................... 25,444 25,444
------- --------- ---------- ---------
Balance - December 31, 1994................. 2,960 775,161 (778,643) (522)
Net loss.................................... (14,022) (14,022)
Capital contributions....................... 9,544 9,544
------- --------- ---------- ---------
BALANCE - DECEMBER 31, 1995................. $ 2,960 $ 784,705 $ (792,665) $ (5,000)
======= ========= ========== =========
</TABLE>
The accompanying notes are an integral part hereof.
F-5
<PAGE> 22
HEALTH MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . $(14,022) $(24,054)
Change in accrued expenses . . . . . . . . . . . 4,478 (1,610)
-------- --------
Net cash used in operating activities . . (9,544) (25,664)
Cash flows from financing activities:
Capital contribution . . . . . . . . . . . . . . 9,544 25,444
-------- --------
NET CHANGE IN CASH. . . . . . . . . . . . . . . . . - 0 - (220)
Cash - beginning of year. . . . . . . . . . . . . . - 0 - 220
-------- --------
CASH - END OF YEAR. . . . . . . . . . . . . . . . . $ - 0 - $ - 0 -
======== ========
</TABLE>
The accompanying notes are an integral part hereof.
F-6
<PAGE> 23
HEALTH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Organization and Business:
The Company was incorporated on March 19, 1981 and was engaged in
providing management and consulting services. The Company was inactive since
mid 1993.
(NOTE B) - Summary of Significant Accounting Policies:
Net loss per common share is based on the weighted average number of
shares outstanding during the period after giving effect to a stock split of
1.52 for 1 on January 6, 1996.
(NOTE C) - Subsequent Event:
In January 1996, Health Management, Inc. ("HMI") acquired all the
outstanding common stock of Nouveau International, Inc. in exchange for shares
representing 60% of HMI common stock. Concurrent with the transaction, HMI
sold 70 units in a private placement, each unit consisting of 1 share of 4%
cumulative redeemable preferred stock and 1,608 common stock purchase warrants,
for $3,500,000. HMI changed its name to Nouveau International, Inc.
The preferred stock is mandatorily redeemable at a price per share
which is equal to the original issuance price plus accrued dividends on the
earlier of the date of a public offering of its common stock for minimum gross
proceeds of $5,000,000 or January 4, 1997 which is the beginning of the 13th
month following the date of the sale of the preferred shares. If not redeemed
through the public offering, the Company may, at its option, convert the
preferred stock into 1,125,000 shares of common stock. The preferred stock has
a liquidation value equal to the redemption value.
Each common stock purchase warrant entitles the holder to purchase one
share of the new Company's common stock at an exercise price of $.50 per share.
The warrants expire in January 1996.
F-7
<PAGE> 24
PRO FORMA CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1995
(Unaudited)
The following pro forma consolidated balance sheet gives effect to (i)
the acquisition of Nouveau International, Inc., by Health Management, Inc. for
60% of the common stock of HMI. Since the stockholders of Nouveau have the
majority of the outstanding shares, the transaction has been accounted for as
if Nouveau were the acquiring company. The accounts of HMI have been recorded
at book amount since it had no operations, (ii) the issuance in a private
placement of preferred stock with warrants to purchase 112,560 shares of common
stock for an aggregate of $3,500,000, (iii) repayment of debt and acquisition
of patent technology from proceeds of private placement. This statement should
be read in conjunction with the financial statements of Nouveau International,
Inc. appearing elsewhere herein. The pro forma financial information is
presented for illustrative purposes only and is not necessarily indicative of
financial position had the transactions occurred on December 31, 1995.
<TABLE>
<CAPTION>
Historical
-----------------------------
Nouveau Health
International, Management, Pro Forma
A S S E T S Inc. Inc. Adjustments Pro Forma
----------- -------------- ----------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . $ 38,971 $ 3,045,000 (B) $ 852,200
(2,231,771) (C)
Restricted cash . . . . . . . . . . . . . . . . . . 338,000 338,000
Accounts receivable . . . . . . . . . . . . . . . . 22,083 22,083
Inventory . . . . . . . . . . . . . . . . . . . . . 3,174,659 3,174,659
Settlement receivable . . . . . . . . . . . . . . . 362,694 362,694
Due from affiliate. . . . . . . . . . . . . . . . . 32,287 32,287
----------- ------------ ----------
Total current assets . . . . . . . . . . . . 3,968,694 813,229 4,781,923
Property and equipment, net. . . . . . . . . . . . . . 117,250 117,250
Settlement receivable. . . . . . . . . . . . . . . . . 448,142 448,142
Other assets . . . . . . . . . . . . . . . . . . . . . 61,474 (45,000) (B) 16,474
----------- ------------ ----------
T O T A L. . . . . . . . . . . . . . . . . . $4,595,560 $ 768,229 $5,363,789
=========== ============ ==========
L I A B I L I T I E S
---------------------
Current liabilities:
Current portion of prepetition liabilities. . . . . $1,310,577 $ 1,113,642 (C) $ 196,935
Accounts payable, accrued expenses and other
current liabilities . . . . . . . . . . . . . . . 349,640 $ 5,000 354,640
Loan payable, stockholder . . . . . . . . . . . . . 183,764 183,764
----------- ---------- ------------ ----------
Total current liabilities. . . . . . . . . . 1,843,981 5,000 (1,113,642) 735,339
Prepetition liabilities. . . . . . . . . . . . . . . . 1,266,709 (1,118,129) (C) 148,580
Fees payable . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
----------- ---------- ------------ ----------
Total liabilities. . . . . . . . . . . . . . 3,210,690 5,000 (2,231,771) 983,919
----------- ---------- ------------ ----------
STOCKHOLDERS' EQUITY
--------------------
Convertible preferred stock (convertible into
1,125,000 shares of common stock) ($3,500,000
liquidation preference) . . . . . . . . . . . . . . 3,000,000 (B) 3,000,000
Common stock . . . . . . . . . . . . . . . . . . . . . 389,714 $ 2,960 (381,424) (A) 11,250
Additional paid-in capital . . . . . . . . . . . . . . 784,705 373,464 (A) 373,464
(784,705) (A)
Retained earnings (deficit). . . . . . . . . . . . . . 995,156 (792,665) 792,665 (A) 995,156
----------- ---------- ----------- ----------
Total stockholders' equity . . . . . . . . . 1,384,870 (5,000) 3,000,000 4,379,870
----------- ---------- ----------- ----------
T O T A L . . . . . . . . . . . . . . . . . $4,595,560 $ - 0 - $ 768,229 $5,363,789
=========== ========== =========== ==========
</TABLE>
F-8
<PAGE> 25
PRO FORMA CONSOLIDATED BALANCE SHEET
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(A) Reflects the exchange of 6,750,000 shares (60%) of HMI's common stock
for all of the outstanding shares of Nouveau International, Inc.'s
common stock.
(B) Reflects the issuance of 70 shares of Series A 4% Cumulative
Convertible Redeemable Preferred Stock with a par value $.001 per
share. Each share was issued with warrants to purchase 1,608 shares
of common stock at an exercise price of $.50 per share expiring three
years from the date of issue.
<TABLE>
<S> <C>
Shares. . . . . . . . 70
Price per unit. . . . $ 50,000
-----------
3,500,000
Less issuance costs . 500,000
-----------
$3,000,000
===========
</TABLE>
F-9
<PAGE> 26
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
The following pro forma consolidated statement of operations gives
effect to the acquisition of Nouveau International, Inc., for 60% of the
outstanding stock of Health Management, Inc. This statement should be read in
conjunction with the financial statements of Nouveau International, Inc. and
Health Management, Inc. appearing elsewhere herein. The pro forma financial
information is presented for illustrative purposes only and is not necessarily
indicative of the operating results or what would have occurred if the merger
had occurred, nor is it indicative of the future operating results or financial
position of the Company.
<TABLE>
<CAPTION>
Historical
----------------------------
Nouveau Health
International, Management, Pro Forma
Inc. Inc. Adjustments Pro Forma
------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $ 245,313 $ 245,313
Cost of goods sold. . . . . . . . . . . . . . . . . 224,282 224,282
------------ ------------
Gross profit . . . . . . . . . . . . . . . . 21,031 21,031
------------ ------------
Operating expenses:
General and administrative. . . . . . . . . . . . . 618,398 $ 9,022 627,420
Selling . . . . . . . . . . . . . . . . . . . . . . 34,839 34,839
------------ -------- ------------
653,237 9,022 662,259
------------ -------- ------------
Loss from operations . . . . . . . . . . . . . . . . . (632,206) (9,022) (641,228)
Gain from settlement of lawsuit. . . . . . . . . . . . 5,979,459 $(5,979,459) (1) - 0 -
Interest income. . . . . . . . . . . . . . . . . . . . 105,216 105,216
Interest expense . . . . . . . . . . . . . . . . . . . (32,352) (32,352)
------------ -------- ------------ ------------
Income (loss) before extraordinary item . . . . . . . $ 5,420,117 $(9,022) $(5,979,459) $ (568,364)
============ ======== ============ ============
Pro forma loss per share before extraordinary item . . $(.05)
======
Pro forma weighted average shares outstanding. . . . . 11,249,988
===========
</TABLE>
(1) To adjust for nonrecurring gain on settlement of lawsuit.
F-10
<PAGE> 27
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND DECEMBER 31, 1994
<PAGE> 28
REPORT OF INDEPENDENT AUDITORS
To the Stockholder
Nouveau International, Inc.
and Subsidiaries
We have audited the accompanying balance sheets of Nouveau International,
Inc. and subsidiaries as at December 31, 1995 and December 31, 1994 and the
related statements of operations, changes in stockholder's equity (capital
deficiency) and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of Nouveau International, Inc.
and subsidiaries at December 31, 1995 and December 31, 1994, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note L, in January 1996, the Company was acquired by Health
Management, Inc. through a reverse acquisition of stock.
Richard A. Eisner & Company, LLP
New York, New York
February 7, 1996
<PAGE> 29
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
1995 -----------
--------- (debtor-in-
possession)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 38,971 $ 16,932
Restricted cash (Note B).......................................... 338,000
Accounts receivable............................................... 22,083 28,979
Inventory (Notes A[4] and C)...................................... 3,174,659 621,298
Settlement receivable (Note D).................................... 362,694
Due from affiliate (Note E)....................................... 32,287 32,287
--------- -----------
Total current assets......................................... 3,968,694 699,496
Property and equipment, net (Notes A[5] and F)...................... 117,250 265,099
Settlement receivable (Note D)...................................... 448,142
Other assets........................................................ 61,474 38,508
--------- -----------
TOTAL........................................................ $4,595,560 $1,003,103
========= =========
LIABILITIES
Current liabilities:
Current portion of prepetition liabilities (Note G)............... $1,310,577 $5,318,371
Accounts payable, accrued expenses and other current liabilities
(Note D)....................................................... 349,640 49,138
Loan payable, stockholder (Note H)................................ 183,764
--------- -----------
Total current liabilities.................................... 1,843,981 5,367,509
Prepetition liabilities (Note G).................................... 1,266,709 1,844,708
Fees payable (Note D)............................................... 100,000
--------- -----------
Total liabilities............................................ 3,210,690 7,212,217
========= =========
Commitments and contingencies (Note I)
STOCKHOLDER'S EQUITY (CAPITAL DEFICIENCY)
Common stock (Note J)............................................... 389,714 389,714
Retained earnings (deficit)......................................... 995,156 (6,598,828)
Total stockholder's equity (capital deficiency).............. 1,384,870 (6,209,114)
--------- -----------
TOTAL........................................................ $4,595,560 $1,003,103
========= =========
</TABLE>
Attention is directed to the foregoing auditors' report and to the accompanying
notes to financial statements.
2
<PAGE> 30
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1995 1994
--------- -----------
(debtor-in-
possession)
<S> <C> <C>
Revenues:
Net sales (Note K)............................................. $ 245,313 $ 943,345
Cost of goods sold............................................. 224,282 859,287
--------- -----------
Gross profit................................................ 21,031 84,058
--------- -----------
Operating expenses:
General and administrative..................................... 618,398 935,846
Selling........................................................ 34,839 75,384
--------- -----------
653,237 1,011,230
--------- -----------
(Loss) from operations........................................... (632,206) (927,172)
--------- -----------
Other income (expenses):
Gain from settlement of lawsuit (Note D)....................... 5,979,459
Interest income................................................ 105,216 23,686
Interest expense............................................... (32,352) (213,179)
(Loss) on abandonment and sale of property (Note F)............ (92,338) (3,279)
Reorganization expense......................................... (41,401) (15,000)
--------- -----------
5,918,584 (207,772)
--------- -----------
Income (loss) before extraordinary item.......................... 5,286,378 (1,134,944)
========= ==========
Extraordinary item:
Compromise of prepetition liabilities (Note G)................. 2,307,606
--------- -----------
NET INCOME (LOSS)................................................ $7,593,984 $(1,134,944)
========== ==========
Net income (loss) per share before extraordinary item............ $ .47 $ (.10)
Extraordinary item............................................... .21
NET INCOME (LOSS) PER SHARE...................................... $ .68 $ (.10)
========== ==========
Weighted average number of shares outstanding (Note A[8])........ 11,249,988 11,249,988
========== ==========
</TABLE>
Attention is directed to the foregoing auditors' report and to the accompanying
notes to financial statements.
3
<PAGE> 31
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(CAPITAL DEFICIENCY)
<TABLE>
<CAPTION>
TOTAL
STOCKHOLDER'S
RETAINED EQUITY
EARNINGS (CAPITAL
(DEFICIT) DEFICIENCY)
COMMON STOCK, $1 ---------- ----------
PAR VALUE,
10,000,000 SHARES
AUTHORIZED,
2,198,992 SHARES
ISSUED AND
OUTSTANDING
------------------
(NOTE J)
<S> <C> <C> <C>
Balance -- January 1, 1994....................... $389,714 $(5,463,884) $(5,074,170)
Net (loss)....................................... (1,134,944) (1,134,944)
------------------ ---------- ----------
Balance -- December 31, 1994..................... 389,714 (6,598,828) (6,209,114)
Net income....................................... 7,593,984 7,593,984
------------------ ---------- ----------
BALANCE -- DECEMBER 31, 1995..................... $389,714 $ 995,156 $1,384,870
============= ========== ==========
</TABLE>
Attention is directed to the foregoing auditors' report and to the accompanying
notes to financial statements.
4
<PAGE> 32
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
(debtor-in-
possession)
Cash flows from operating activities:
Net income (loss)............................................. $7,593,984 $(1,134,944)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Litigation settlement.................................... (5,979,459)
Loss on abandonment and sale of property................. 92,338 3,279
Compromise of prepetition liabilities.................... (2,307,606)
Depreciation............................................. 58,276 63,987
Interest imputed on lawsuit settlement................... (97,266)
Changes in operating assets and liabilities:.............
(Increase) in restricted cash.......................... (338,000)
Decrease in accounts receivable........................ 6,896 14,790
Decrease in inventory.................................. $39,553 $88,939
(Increase) decrease in other assets.................... (22,966) 5,478
Increase (decrease) in accounts payable and
accrued fees and expenses:
Prepetition....................................... (46,783) 603,434
Postpetition...................................... (849,498) 49,138
Proceeds from litigation settlement...................... 3,038,000
(Decrease) in customer deposits.......................... (17,542)
---------- ----------
Net cash provided by (used in) operating activities...... 1,187,469 (323,441)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment............................ (3,765) (25,444)
Proceeds from sale of asset................................... 1,000
---------- ----------
Net cash (used in) investing activities.................. (2,765) (25,444)
---------- ----------
Cash flows from financing activities:
Proceeds from loans made by investor.......................... 90,169
Payment of secured prepetition liabilities.................... (1,346,429) (10,134)
Loans from stockholder........................................ 183,764 268,616
---------- ----------
Net cash provided by (used in) financing activities...... (1,162,665) 348,651
---------- ----------
NET INCREASE (DECREASE) IN CASH................................. 22,039 (234)
Cash -- beginning of year....................................... 16,932 17,166
---------- ----------
CASH -- END OF YEAR............................................. $ 38,971 $ 16,932
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest................... $ 29,931 $ 4,976
</TABLE>
Attention is directed to the foregoing auditors' report and to the accompanying
notes to financial statements.
5
<PAGE> 33
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) -- BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
[1] THE COMPANY:
Nouveau International, Inc. and subsidiaries (the "Company") manufactures
and distributes hot food vending machines and related food products. The Company
uses certain proprietary machine and food technology in the manufacture of its
products.
On October 24, 1994, the Company (the "Debtor") filed petitions for relief
under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy
Court and subsequently submitted a plan of reorganization to the court. Under
Chapter 11, certain claims against the Debtor in existence prior to the filing
of the petitions for relief under the federal bankruptcy laws were stayed while
the Debtor continued business operations as Debtor-in-possession. On December 8,
1995 the plan of reorganization (the "Plan") was confirmed.
The Company is currently in the process of negotiating supply and marketing
agreements needed to broaden the distribution of their products.
[2] PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of Nouveau International, Inc.
include the accounts of its wholly owned subsidiaries, Nouveau Foods
International, Inc. and Nouveau Vend International, Inc. Intercompany balances
and transactions have been eliminated in the consolidated financial statements.
[3] REVENUE RECOGNITION:
Revenue is recognized when goods are shipped.
[4] INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
[5] PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (5 to 7 years).
[6] INCOME TAXES:
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109 "Accounting for Income Taxes." SFAS No. 109 provides for income
taxes to be accounted for based on the difference between reported amounts of
assets and liabilities and their tax bases.
The confirmation of the plan of reorganization, has eliminated all net
operating loss carryforwards which were available to offset future taxable
income.
[7] USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
6
<PAGE> 34
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) -- BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
(CONTINUED)
[8] EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share is based on the weighted average number of shares
outstanding during each period, retroactively restated for the stock exchange
and merger with Health Management, Inc. ("HMI") described in Note L, as if this
transaction took place at the beginning of the period.
(NOTE B) -- CASH:
As of December 31, 1995, the Company has $338,000 which was received as
part of the lawsuit settlement referred to in Note D. These funds are being held
in a restricted escrow account and are segregated for payment to a secured
creditor and the Company's attorneys.
(NOTE C) -- INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994
1995 -----------
--------- (debtor-in-
possession)
<S> <C> <C>
Component parts.................................................... $1,443,885 $ 153,560
Work-in-process.................................................... 151,800 55,962
Finished machines.................................................. 1,578,974 411,776
--------- -----------
Total.............................................................. $3,174,659 $ 621,298
========= ========
</TABLE>
Included in inventory at December 31, 1995 is approximately $900,000 of
parts and substantially all of the work-in-process and finished machines which
were received from a vendor pursuant to the litigation settlement referred to in
Note D. These goods were valued at their current replacement cost.
(NOTE D) -- LITIGATION SETTLEMENT:
In 1995, the Company settled a lawsuit with the former supplier of its
vending machines. Under the terms of the settlement agreement, the supplier
cancelled accounts payable of $884,975 and agreed to pay the Company cash of
$3,938,000 and deliver to the Company inventory parts, work-in-process and
finished machines held by them, which were valued at $2,592,914. The Company has
received cash payments totalling $3,038,000 through December 1995; the remaining
balance is due in installments of $300,000 in March 1996, $100,000 in June 1996
and a final installment of $500,000 in June 1997.
The settlement balance receivable is shown at its net present value
discounted at an effective interest rate of 11% per annum. The bankruptcy court
ordered that a portion of the cash proceeds of the settlement be used to pay a
secured claim owed to a creditor (Note G) and attorneys' fees for services
rendered in connection with the settlement of the lawsuit. Fees payable to the
litigating attorneys amount to $300,000 at December 31, 1995. The current
portion due of $200,000 is included in accounts payable and accrued expenses in
the accompanying balance sheet.
(NOTE E) -- DUE FROM AFFILIATE:
Due from affiliate consists of a loan due on demand from a company which is
wholly owned by the stockholder of the Company.
7
<PAGE> 35
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) -- PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1995 1994
--------- -----------
(debtor-in-
possession)
<S> <C> <C>
Machinery and equipment...................................... $ 228,428 $ 425,027
Furniture and fixtures....................................... 23,015 23,015
Transportation equipment..................................... 10,796 7,032
--------- -----------
262,239 455,074
Less accumulated depreciation................................ 144,989 189,975
--------- -----------
Total................................................ $ 117,250 $ 265,099
========= =========
</TABLE>
In July 1995, the Company abandoned leasehold improvements with a net book
value of $90,640.
(NOTE G) -- PREPETITION LIABILITIES:
Prepetition liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1995 1994
--------- -----------
(debtor-in-
possession)
<S> <C> <C>
Secured:
Former investor.............................................. $2,244,708 $3,444,708
Bank......................................................... 146,429
--------- -----------
2,244,708 3,591,137
--------- -----------
Priority:
Tax claims................................................... 33,293 80,076
Former stockholder........................................... 48,000
--------- -----------
81,293 80,076
--------- -----------
Unsecured:
Stockholders.................................................... 22,636 226,356
Trade and other miscellaneous claims......................... 132,131 2,300,333
Former investor.............................................. 96,518 965,177
--------- -----------
251,285 3,491,866
--------- -----------
Total................................................... 2,577,286 7,163,079
Less current portion............................................ 1,310,577 5,318,371
--------- -----------
Noncurrent portion.............................................. $1,266,709 $1,844,708
========= =========
</TABLE>
8
<PAGE> 36
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) -- PREPETITION LIABILITIES: (CONTINUED)
When the Company petitioned for bankruptcy in October 1994 two claims were
owed to secured creditors. The first claim was owed to a bank who was paid in
full in June of 1995. The payment amounted to $175,000 including accrued
interest of $28,571. The remaining claim is payable to a former investor in the
Company and is partly collateralized by the proceeds of the litigation
settlement referred to in Note D. Total payments made against this claim through
December 31, 1995 amount to $1,200,000.
In January 1996, the Company used a portion of the proceeds received from
the sale of preferred stock (Note L) to pay the remaining balance of secured
claims owed to the former investor of $1,700,950.
The plan of reorganization did not provide for the payment of interest to
the secured creditor subsequent to the date of petition. Contractual interest on
these loans was approximately 11% per annum and if it would have continued to
accrue, it would have amounted to approximately $315,000 for the year ended
December 31, 1995 and $71,000 for the period of October 24, 1994 through
December 31, 1994.
In June 1995, the Bankruptcy Court ordered the Company to pay $46,783 to
the Internal Revenue Service from the proceeds of the initial payment received
from the litigation settlement. Priority claims include remaining payroll tax
liabilities owed to a state government and unpaid rent due to a former
stockholder for leased premises which were vacated in 1995.
Upon confirmation of the plan of reorganization, unsecured claims,
including those due to certain stockholders and the former investor were settled
for 10% of their prepetition amount and are payable in two equal installments of
5% each in December 1996 and December 1997. Cancellation of debt pursuant to the
plan of reorganization resulted in an extraordinary gain of $2,307,606.
Minimum payments due for all claims under the plan of reorganization are as
follows:
<TABLE>
<CAPTION>
SECURED PRIORITY UNSECURED TOTAL
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
1996................ $1,113,642 $ 71,293 $ 125,642 $1,310,577
1997................ 984,856 10,000 125,643 1,120,499
1998................ 146,210 146,210
---------- -------- --------- ----------
$2,244,708(1) $ 81,293 $ 251,285 $2,577,286
========== ======= ======== ==========
</TABLE>
- ---------------
(1) Amount paid in full using the proceeds of the sale of preferred stock (Note
L).
(NOTE H) -- LOANS PAYABLE -- STOCKHOLDER:
These loans were made to the Company from October to December 1995, were
secured, and were repaid in January 1996. The loans bore interest at 10% per
annum. Interest expense on these loans amounted to $2,421 for the year ended
December 31, 1995.
9
<PAGE> 37
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE I) -- COMMITMENTS AND CONTINGENCIES:
[1] The Company occupies premises pursuant to an operating lease which
expires in July 1998. In addition, the Company entered into a three year lease
in January 1996 for a building which it intends to use as a facility to assemble
and store pizza vending machines. The new lease expires on March 31, 1999. These
leases are subject to escalations for the Company's pro rata share of real
estate taxes and operating expense. Future minimum rental payments, exclusive of
escalation payments for taxes and utilities, under these leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
--------------------------------------------------------
<S> <C>
1996.................................................. $ 69,672
1997.................................................. 73,440
1998.................................................. 37,662
--------
Total......................................... $180,774
========
</TABLE>
The Company also leases certain storage facilities on a month-to-month
basis. In 1995, rent expense amounted to $61,357 including $24,668 paid to a
former stockholder. In 1994 rent expense amounted to $34,105 which was paid to a
former stockholder.
[2] In connection with the Company's petition for relief under the
bankruptcy laws, various suits and judgements have been filed against the
Company. In the opinion of the Company's management and legal counsel, these
claims will not result in any liability to the Company.
(NOTE J) -- COMMON STOCK:
At December 31, 1995, 10,000,000 shares of $1 par common stock are
authorized, of which 2,198,992 are issued and outstanding. From inception, the
Company received payments totalling $389,714 from the sale of stock. The Company
is 100% owned by one stockholder who became the owner of all outstanding shares
upon confirmation of the Plan.
(NOTE K) -- OTHER:
In 1995 and 1994 sales to one customer amounted to $124,638 and $329,716
which represents 50% and 35% of net sales in each of these years, respectively.
In addition, accounts receivable due from this customer was $21,873 at December
31, 1995.
In addition, the Company sold certain vending machines to a stockholder in
1994 for $12,000.
(NOTE L) -- SUBSEQUENT EVENT:
[1] In January 1996, all of the outstanding stock of the Company was
acquired by HMI in exchange for 6,750,000 shares, representing 60%, of HMI
common stock. HMI was a nonoperating company and therefore the acquisition will
not be accounted for as a business combination. Concurrent with the transaction,
in a private placement, HMI sold 70 units, each unit consisting of 1 share of 4%
cumulative redeemable preferred stock and 1,608 common stock purchase warrants
for $3,500,000. HMI changed its name to Nouveau International, Inc. ("NI").
The preferred stock is mandatorily redeemable at a price per share which is
equal to the original issuance price plus accrued dividends on the earlier of
the date of a public offering of its common stock for minimum gross proceeds of
$5,000,000 or January 4, 1997. The Company has the right to convert the
preferred stock
10
<PAGE> 38
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
into 1,125,000 shares of common stock in the event it is not redeemed through a
public offering. The preferred stock has a liquidation value equal to the
redemption value.
Each common stock purchase warrant entitles the holder to purchase one
share of the new Company's common stock at an exercise price of $.50 per share.
The warrants expire in January 1999.
[2] NI is currently in the process of attempting to raise additional
financing through a private placement of debt securities. The Company is seeking
additional sources of financing however there is no assurance that such
financing will be obtained.
[3] In February 1996, NI formed Noveau Equities, Inc. and entered into
contract for the purchase of a building in which it will construct and operate a
food processing plant. The purchase price of the building is $1,360,000. NI has
made a nonrefundable down payment of $40,000 and is currently seeking additional
financing which is needed to fund the balance of the purchase price. There is no
assurance that such financing will be obtained.
11
<PAGE> 39
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, duly authorized.
DATED: June 28, 1996 NOUVEAU INTERNATIONAL, INC.
BY:/S/ Gary W. Black
-----------------------
Gary W. Black, Sr.
Chief Executive Officer
In accordance with Section 13 or 15(d) of the Exchange Act, this
report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/S/ Gary W. Black, Sr. Chief Executive Officer (Principle June 28, 1996
- ------------------------ Executive Officer , Principal
Gary W. Black, Sr. Financial Officer and Principal
Accounting Official and Director
/S/ Robert J. Brock, Sr. Chief Operating Officer and June 28, 1996
- ------------------------ Director
Robert J. Brock, Sr.
* Director June * , 1996
- ------------------------
Frederick W. Johnson
</TABLE>
<PAGE> 1
EXHIBIT 10.1
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT
FOR
NOUVEAU INTERNATIONAL VENDING SYSTEMS
BETWEEN
NOUVEAU INTERNATIONAL, INCORPORATED
&
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. APPOINTMENT AS EXCLUSIVE DISTRIBUTOR.............................................. 1
2. TERM.............................................................................. 1
3. SALES AND MARKETING............................................................... 1
(a) Sales and Delivery of Machines to Distributor........................... 1
(b) Sales Terms............................................................. 1
(c) Sales Literature........................................................ 2
(d) Sales by Distributor and Reports........................................ 2
(e) Minimum Purchases by Distributor........................................ 2
(f) Parts and Service....................................................... 2
(g) Alterations to Machines................................................. 2
(h) Sales to Distributor Outside the Territory.............................. 2
(i) Protection of Distributor's Exclusivity................................ 2
(j) Confidential Information............................................... 2
(k) Safety.................................................................. 3
4. DEPOSIT........................................................................... 3
5. PRODUCT WARRANTIES................................................................ 3
6. TRADEMARK AND SERVICE MARK LICENSES............................................... 3
7. SUPPLIES OF FOOD PRODUCT.......................................................... 3
8. PRIORITIES........................................................................ 4
9. THIS AGREEMENT PREVAILS........................................................... 4
10. TERMINATION....................................................................... 4
(a) Termination............................................................. 4
(b) Cause for Termination................................................... 4
11. MISCELLANEOUS..................................................................... 4
(a) Independent Contractor.................................................. 4
(b) Force Majeure........................................................... 4
(c) Waiver.................................................................. 5
(d) Limitation of Liability................................................. 5
(e) Notice.................................................................. 5
(f) Governing Law........................................................... 5
(g) No Assignment........................................................... 5
(h) Binding Effect.......................................................... 5
(i) Counterparts........................................................... 5
(j) Severability........................................................... 5
(k) Arbitration............................................................. 5
The Signing............................................................................ 6
Exhibit Section
Exhibit 1.................................................................... 1
Exhibit 2.................................................................... 2
Exhibit 3.................................................................... 3
Exhibit 4.................................................................... 4
Exhibit 5.................................................................... 5
Exhibit 6.................................................................... 6
Exhibit 7.................................................................... 7
Exhibit 8.................................................................... 8
Exhibit 9.................................................................... 9
Exhibit 10................................................................... 10
Exhibit 11................................................................... 11
</TABLE>
3
<PAGE> 3
DISTRIBUTORSHIP AGREEMENT
THIS DISTRIBUTORSHIP AGREEMENT, dated 1996 is between NOUVEAU
INTERNATIONAL, INCORPORATED or. ("Nouveau International"), a Delaware
corporation having its principal place of business at 212 Phillips Road, Exton,
Pennsylvania, U.S.A., and a corporation having
its principal place of business at .
WHEREAS, Nouveau International manufactures and offers a series of unique
vending machines ("the Pizza Chef(R), Sandwich ChefTM Nouveau ChefTM Vending
Machines") under various trademark names (the "Machine Trademark") and sold and
serviced said Vending Machines through out the world, and the Distributor is in
the business of marketing, selling and distributing vending machines and food
products and wishes to distribute Nouveau's product lines in the Territory.
WHEREAS, Nouveau Foods produces specially formulated Food Product
preparation, sold under the trademark "Pizza Chef(R) Food Products", (the "Pizza
Trademark", the Machine Trademark and the Food Products Trademark are
collectively referred to herein as the ("TRADEMARKS") and other food products
such as ready to eat sandwiches, together with a packing system which allows
Nouveau Foods prebaked products to be quick frozen, stored in a Nouveau
International Vending Machine in a deep frozen state and then rapidly reheated
in an intense directional microwave environment without adversely affecting the
taste or consistency of the food product which Nouveau Foods will make available
to the Distributor on the terms provided herein;
NOW THEREFORE, the parties agree as follows
1. APPOINTMENT AS EXCLUSIVE DISTRIBUTOR:
Nouveau hereby appoints the Distributor as their exclusive distributor of
Nouveau's product line as described in EXHIBIT 1 ("Machine Descriptions") and
any improvement, modification or change made thereto (hereinafter collectively
referred to as the "Machines") and Nouveau Foods products, including Products as
described in EXHIBIT 2 ("Food Descriptions") and any improvement, modification
or change made thereto(hereinafter collectively referred to as the "Food
Products" in the geographic area specified in EXHIBIT 3 (the "Territory"), such
appointment is exclusive in that Nouveau shall not during the term hereof (i)
engage in, directly or indirectly, selling, marketing or otherwise distributing
the Machines or the Food Products in the Territory, (ii) appoint any other
distributor for the Machines or the Food Products as in the Territory so long as
the Distributor continues to acquire those minimum purchases as provided in 3.e.
hereof. During such term the Distributor will use its best efforts to promote,
market, distribute, lease and service the Machines and the Food Products in the
Territory.
2. TERM:
The initial term of this Agreement is (5) five years. Unless either party
shall have given contrary written notice to the other at least 90 days before
the expiration of the initial or any extended term, such term will be extended
automatically for an additional period of one year.
3. SALES AND MARKETING:
(A) SALES AND DELIVERY OF MACHINES TO DISTRIBUTOR. Nouveau International
will deliver to the Distributor such reasonable quantities of the Machines as
specified in 3.e. or as the Distributor may order from time to time during the
term hereof. Each Machine will be accompanied by such machine limited warranty,
service manual and operational manual as described in EXHIBIT 4. Each Machine
will be so packaged as to resist damage in accordance with the Packaging
Description as described in EXHIBIT 5.
(B) SALES TERMS. Subject to the provisions hereof, all sales to the
Distributor will be made on the terms of sale set forth on EXHIBIT 6 attached
hereto (the "Sales Terms"). Subject to Section 4 hereof, full payment after any
deposits will made by irrevocable letter of credit. Said Letter of Credit will
be in the amount and percentages of payment as shown in EXHIBIT 11 ("Generic
ILOC").
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(C) SALES LITERATURE. Nouveau will provide the Distributor with sales
literature as described in EXHIBIT 7 in reasonable quantities in the English
language and in the event that other languages are required Nouveau will provide
its artwork for use. The Distributor will not use, publish or distribute any
sales literature or advertising or promotional material relating to the Machines
or Food Products without the prior written consent of Nouveau International.
(D) SALES BY DISTRIBUTOR AND REPORTS. The Distributor will use its best
efforts to promote, market, sell lease and service the Machines in the
Territory. The Distributor will make a quarterly report to Nouveau International
on the number of the Machines and Food Product procured during the previous
quarter and will give an estimated requirement forecast for the pending quarter
similar to that provided in EXHIBIT 9 (Distributor Forecast).
(E) MINIMUM PURCHASES BY DISTRIBUTOR. The Distributor will purchase a
minimum number Series 200, Series 100 and Series 80 Model Machines per year
during each of the first five years of the term hereof per EXHIBIT 8
("Schedule"). For the subsequent years the Distributor will submit an annual
purchase projection report to Nouveau International one year prior to the
commencement of each year. The schedule and annual purchase projections shall be
subject to renegotiation in good faith by the parties if and when any of the
following occurs:
1. The Machines and/or Food Products have become locally produced in the
Territory.
2. Any party other than Nouveau sells, leases or otherwise distributes
the Machines or the Food Products in the Territory;
3. If any problems with the machines exist (other then regular repair or
maintenance) which prevents the efficient and continuous operation
thereof; or
4. Nouveau defaults or does not otherwise satisfy its obligations
hereunder.
(F) PARTS AND SERVICE. The Distributor will maintain sufficient staff and
facilities to provide reasonable service to customers and owners of the Machines
in the Territory, including assisting such purchasers and owners to identify and
obtain warranty service in accordance with Nouveau International's warranty per
EXHIBIT 4 (Warranty") for terms and procedures. Nouveau agrees at it's expense
to (I) provide the Distributor's personnel with reasonable training to perform
the services described above, and shall otherwise provide the Distributor with
such information and technical assistance reasonable requested by the
Distributor during the term of this Agreement, and (II) deliver from time to
time sufficient quantities of components, spare parts and tools reasonably
necessary for the Distributor to provide prompt and regular repair, maintenance
and warranty service to the Machines. The Distributor will use only authorized
replacement parts acquired from Nouveau for the Machines. Any use of
unauthorized parts by the Distributor may result in cancellation of this
Agreement and termination of Nouveau International's warranty.
(G) ALTERATIONS TO MACHINES. The Distributor will not alter, modify or
otherwise change any Machine without the prior written approval of Nouveau
International. Any attempt to do so could result in cancellation of this
agreement or machine warranties.
(H) SALES TO DISTRIBUTOR OUTSIDE THE TERRITORY. If the Distributor sells
any Machines to a customer located outside the Territory, the Distributor may be
required to pay to Nouveau International or another Nouveau International's
distributor or licensee in such territory, a reasonable servicing fee to reflect
the cost of servicing such purchaser's equipment which may be borne by Nouveau
International or such other distributor/licensee. Nouveau International warranty
(set forth herein or in any other applicable document) will not apply to any
Machine sold by the Distributor to a customer located outside of the Territory
unless otherwise agreed in writing by Nouveau International.
(I) PROTECTION OF DISTRIBUTOR'S EXCLUSIVITY. Each of Nouveau Intentional
and Nouveau Foods represents and warrants that it will not intentionally sell or
cause to be sold the Machines and/or the Food Products by any party other than
through the Distributor.
2
<PAGE> 5
(J) CONFIDENTIAL INFORMATION. The Distributor will receive and hold in
confidence all Confidential Information (hereinafter defined) and will return
all copies thereof to Nouveau upon the termination or expiration of this
Agreement. "Confidential Information" means all data, drawings and other
information, whether or not in written form, or in models relating to the
Machines, the Food Products or any other products sold or supplied to the
Distributor pursuant hereto or in connection herewith, or the marketing thereof,
which may be acquired by the Distributor from Nouveau during the term hereof,
other than information which has been made available to the public generally
otherwise than in violation of this Agreement or applicable law. Nor will the
Distributor reveal or disclose any data, information or secretes learned by it
through its visits to Nouveau manufacturing facilities and offices.
(K) SAFETY. Nouveau acknowledges that certain safety issues may arise in
connection with the operation of the Machines in the Territory. Nouveau agrees
that should the design of the Machine pose a safety hazard it will at its
expense make reasonable changes requested by the Distributor or the local
authorities which are necessary for safe and efficient operation of the Machines
in the Territory. In such event, Nouveau shall make such changes to the Machines
to be delivered thereafter, and, if possible, make such changes to the Machines
delivered previously. In the event that changes are required by local
authorities which are unique to the Territory, such as local warning seals,
Nouveau agrees to make said changes and the Distributor agrees to pay for any
additional cost on a per machine basis incurred by Nouveau.
4. DEPOSIT:
The Distributor will provide Nouveau with a 25% deposit against orders for
products on an order by order basis and will deposit said down payment in the
bank account designated by Nouveau, such deposit will be credited against the
balance owed for the Machines and Food Products the Distributor will purchase
from Nouveau.
5. PRODUCT WARRANTIES:
Nouveau International and Nouveau Foods, respectively, warrants that the
Machines and Food Products will duly meet all necessary test, inspections,
authorizations, approvals and other requirements under International and local
relevant regulations.
Nouveau International and Nouveau Foods, respectively, will further extend
to the Distributor and, except as otherwise provided herein, to any person who
purchases or leases the Machines or Food Products from the Distributor the
warranties set forth in the Warranty and Sales Terms. Neither Nouveau
International nor Nouveau Foods will have any responsibility and the Distributor
will indemnify and save it harmless from and against any liability, to any
person for any warranty or other undertaking, express or implied, made by the
Distributor beyond the terms set forth in the Warranty and the Sales Terms. The
Distributor shall be responsible to provide service to any person who purchases
the Machines and Food Products from the Distributor in effecting the Warranty
pursuant to 8 of the Sales Terms.
6. TRADEMARK AND SERVICE MARK LICENSES
(A) TRADEMARK AND SERVICE MARK LICENSES. Nouveau's trademark and service
mark identifies Nouveau's system for quick preparation of deep frozen specially
formulated Food Products, including the vending machine in which such Food
Products are stored and prepared and the specially formulated food products;.
Nouveau hereby authorized the Distributor and each purchaser or lessor for the
Distributor of a Machine to exclusively Territory use and display the "Food
Products" trademarks and service marks on such vending machine and in literature
relating thereto so long as, Food Products supplied by Nouveau Foods are
prepared and vended by such machine. It shall be a condition of such trademark
and service mark license that, if any food product other than an authorized Food
Products vended by such machine, the operator thereof will remove therefrom
Nouveau's trademark and service mark and will not use thereon in connection
therewith any similar name or mark.
3
<PAGE> 6
7. SUPPLIES OF FOOD PRODUCTS:
(A) SUPPLIES OF FOOD PRODUCTS. During the term hereof the Distributor will
purchase from Nouveau Foods and Nouveau Foods will sell, such reasonable supply
of food products, for delivery within the territory as the Distributor may order
from time to time. Nouveau Foods warrants that food products will be
manufactured at its government approved sanitary plant(s) with severe quality
control and production date control procedures. If Nouveau Foods changes any of
the material, production process, place of production, etc., it will notify in
advance of such change to the Distributor. Subject to the provisions hereof,
sales of Food Products will be made at Nouveau Foods' prices per EXHIBIT 10
(Prices) and on the terms set forth in the Sales Terms.
8. PRIORITIES:
If either Nouveau International or Nouveau Foods has invented a new machine
or new food during the term hereof (as opposed to an improvement, modification
or change to the Machines or the Food Products, it will give the Distributor the
first rights of refusal to exclusively purchase it in the Territory. Under this
or yet to be negotiated agreement.
9. THIS AGREEMENT PREVAILS:
If there is a discrepancy or contradiction between this Agreement and the
Sales Terms, provisions of this Agreement will prevail.
10. TERMINATION:
(A) TERMINATION. Each party may terminate this Agreement at any time for
cause (defined in paragraph (b) of this Section. If this Agreement shall be
terminated, or shall expire at the end of the initial or any extended term, by
reason of Nouveau's election, Nouveau may purchase from the Distributor, in
which case the Distributor will make available to Nouveau, all of the
Distributor's inventory of Machines and Food Products at the price paid by the
Distributor therefor less the freight charges and restocking charges, provided
that Nouveau may, but need not, purchase any of such inventory acquired by the
Distributor more than 45 days prior to notice of such intended termination.
(B) CAUSE FOR TERMINATION. Each of the following events will be cause for
early termination of this Agreement by the other party or parties:
(i) any party fails to perform any of its material obligations hereunder
and such failure continues for 30 days after written notice of such
default;
(ii) the Distributor fails to pay any amount due to Nouveau International
or Nouveau Foods when due, and failure continues for a period of 15 days
after written notice thereof;
(iii) any party commences a case under an applicable bankruptcy code or
otherwise seeks to take advantage of any insolvency or other similar law
for relief from debts, or commences any proceeding for the liquidation;
(iv) any involuntary proceeding shall be commenced against any party under
an applicable bankruptcy code or any other insolvency or similar law, or
any receiver, trustee, conservator or custodian of such party or any of
its assets shall be appointed, and such proceedings shall not be
dismissed, or such appointment shall not be rescinded, within 30 days
thereafter;
(v) any party sells or agrees to sell any substantial part of its assets
or business, or there is a substantial change or an agreement to
substantially change its control or ownership, whether by sale of shares
of stock, issuance of additional shares, merger, consolidation,
reincorporation or their proceeding (whether voluntary or by operation
of law);
(vi) any party admits in writing its inability to pay its debts generally
as they become due or makes an assignment to or for the benefit of its
creditors.
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<PAGE> 7
11. MISCELLANEOUS:
(A) INDEPENDENT CONTRACTOR. This agreement does not, and shall not be
construed to, create an employer-employee relationship, agency, joint venture or
partnership between Nouveau and the Distributor. Neither the Distributor nor
Nouveau shall have any authority to act for or to bind the other in any way.
(B) FORCE MAJEURE. Neither Nouveau nor the Distributor shall be liable to
the other for any failure to perform any obligation under this Agreement due to
any cause beyond such party's reasonable control and of a nature which such
party does not have the authority or power to remedy, including without
limitation acts of God, acts of the opposite party, acts of civil or military
authority (including government, priorities). Strikes or other labor
disturbances, fire, flood, epidemic, war, riot, delay in transportation or
unavailability of materials or supplies from ordinary sources. In the event of
such an occurrence, the party claiming relief therefor shall give prompt written
notice thereof to the other party and the relevant time for the performance of
such claiming party's obligation shall be extended by the time of the delay
attributable to such occurrence.
(C) WAIVER. The failure of either party to insist upon strict performance
of any of the terms of this Agreement, or the waiver by either party of any
breach of any term of this Agreement, shall not prevent any subsequent strict
enforcement of such terms nor be deemed a waiver of any subsequent breach,
whether or not similar in nature.
(D) LIMITATION OF LIABILITY. In no event shall any party hereto be liable
to the others(s) for any loss of profits, special or consequential damages
arising out of any breach of such party's obligations under this Agreement.
(E) NOTICE. All notices, requests, demands and other communications given
pursuant to or in respect of this Agreement shall be in writing and it shall be
deemed to have been duly given if delivered, sent by telefax (or similar
transmission means) or mailed by certified or registered mail, return receipt
requested, postage prepaid, to a party at the following address or to such other
address as such party may specify in a notice given hereafter to the other.
<TABLE>
<S> <C>
IF TO NOUVEAU INTERNATIONAL: IF TO DISTRIBUTOR:
Nouveau International, Inc.
212 Phillips Road
Exton, Pennsylvania 19341, U.S.A.
Fax No: 1-610-524-9535
</TABLE>
(F) GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware, U.S.A. without
regard to its principles or conflicts of law.
(G) NO ASSIGNMENT. The Distributor may not assign any of its rights or
delegate any of its obligations hereunder without the prior written consent of
Nouveau, which consent may be unreasonable withheld.
(H) BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(I) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which will constitute an original and taken together shall constitute one in the
same instrument.
(J) SEVERABILITY. In the event that any provision or part thereof in this
Agreement is held invalid or unenforceable by a court or other tribunal of
competent jurisdiction then the same shall be deemed severed and separate from
the other provisions of this Agreement which shall remain in full force and
effect. To the extent enforcement is so limited, then the provision or
provisions so affected shall be deemed to have been modified to reflect the
limitation on enforcement.
(K) ARBITRATION. Any dispute arising under the Agreement or with respect to
the interpretation of any provision hereof shall be determined finally by
arbitration. If the arbitration is requested by Nouveau International or Nouveau
Foods the arbitration shall be held in Geneva Switzerland and conducted in
accordance with the rules of the International Rules of Arbitration. If the
arbitration is requested by the Distributor, the arbitration shall be held in
Philadelphia, Pennsylvania and conducted in accordance with the rules of the
American Arbitration Association applicable to commercial arbitration.
5
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date first above written.
THE SIGNING
NOUVEAU INTERNATIONAL, INCORPORATED
Distributor c/c:
6
<PAGE> 9
EXHIBIT 1
MACHINE DESCRIPTIONS
1
<PAGE> 10
EXHIBIT 2
FOOD DESCRIPTIONS
2
<PAGE> 11
EXHIBIT 3
THE TERRITORY
3
<PAGE> 12
EXHIBIT 4
WARRANTIES & MANUALS
4
<PAGE> 13
EXHIBIT 5
PACKAGING DESCRIPTION
5
<PAGE> 14
5.1 SERIES 200 ROBOTIC VENDING MACHINES
DESCRIPTION: The 200 Series Machines will be packaged one (1) per pallet
and will be fastened to the pallet with high strength plastic banding straps.
The pallets will be constructed of wooden material with a size of 48 inches by
36 inches.
The machines will have heavy C-flute cardboard protective corners around
the machine which will be placed between the machine and the straps. Once
strapped, the machines are fastened to the pallet, a heavy cardboard protective
cover will be slipped over the entire machine and fastened with additional
plastic bands. The cardboard is constructed with a water resistant coating. All
movable components inside the machine are taped and braced with foam padding to
prevent movement.
5.2 SERIES 100 MODELS VENDING MACHINES
DESCRIPTION: The 100 Series Machines will be packaged two (2) per pallet
and will be fastened to the pallet with six (6) plastic band/straps. The pallets
will be constructed of wood slats and be 48 inches X 36 inches. The banded
machines will be over packed with cardboard boxes for complete coverage
protection and banded with two (2) criss cross bands. The cardboard box has been
coated to resist water damage.
5.3 SERIES 80 MODELS VENDING MACHINES
DESCRIPTION: The 80 Series Machines are packaged four (4) machines per 48
inch X 36 inch pallet and banded onto the pallet using plastic straps. Under
each plastic strap is a cardboard RUB shield as well as on the inner and outer
corners of the machines. Once banded onto the pallet, the machines are
completely covered with a water resistant cardboard box/sleeve which is then
over banded to the pallet.
All moveable components with in the machine itself are packaged in
removable foam supports.
ALL MACHINES: Each machine is packaged with service and operation manuals
plus one warranty card.
5.4 PIZZA CHEF(R) PIZZAS (ALL TYPES)
DESCRIPTION: Pizzas are packaged in Nouveau's patented storage and cooking
box which is 7 inches (177.8 mm) in diameter weighing from 7.5 to 8 ounces (212
to 226.4 gm). The package is sealed with a tamper proof heat shrink seal which
is tamper evident. Forty-Eight (48) individual package pizzas are placed into an
overpack case (master box) which is constructed of water resistant cardboard.
Each overpack case is sealed with water resistant plastic tape. Cases are
shipped fifty (50) cases per pallet, the pallet being of wood construction of 48
inches wide X 36 inches square. The fifty (50) cases are held onto the pallet by
plastic straps after which the entire fifty (50) cases are overwrapped with
shrink wrap weather proof plastic sheeting.
5.5 SANDWICH CHEF, "LIL BITE SANDWICHES" (ALL TYPES).
DESCRIPTION:Lil Bite Sandwiches are packaged in Nouveau's patented storage
and cooking box which is 7 inches (177.8 mm) and weighing from 193 to 221 gms).
The package is sealed with a tamper proof heat shrink seal which is tamper
evident. Twenty-Four (24) individual packages containing three (3) Lil Bite
Sandwiches each are placed into an overpack case (master box) which is
constructed of a water resistant cardboard. Each overpack case is sealed with
water resistant plastic tape cases are shipped fifty (50) cases per pallet, the
pallets being made of wood construction of 48 inches wide X 36 inches deep
(1,219 X 914 mm) square. The fifty (50) case pallet is banded (strapped) into
place using strand reinforced plastic banding after which the entire fifty (50)
case pallet is overwrapped with shrink wrap weather proof plastic sheeting.
1
<PAGE> 15
EXHIBIT 6
SALES TERMS
2
<PAGE> 16
SELLER: NOUVEAU INTERNATIONAL, INC. FOR VENDING MACHINES AND COMPONENTS &
NOUVEAU INTERNATIONAL, INC. FOODS DIVISION FOR FOOD PRODUCTS
1. PLACE OF DELIVERY.
The goods will be delivered to the place where the Distributor will
designate from time to time.
2. PRICE, PAYMENT AND TIMING.
The goods will be sold at Nouveau's prices, f.o.b. Nouveau's plants located
at Exton or Downingtown, Pennsylvania, U.S.A. as per Exhibit 9 attached hereto,
unless otherwise agreed in writing. Nouveau shall provide the party designated
by the Distributor access to the Machines for delivery within twenty-four (24)
days after it receives each order therefor from the Distributor, and shall
provide the party designated by the Distributor access to the Pizzas for
delivery within seven (7) days after it receives each order therefor from the
Distributor.
All orders will be accompanied with a twenty-five percent (25%) deposit.
3. BUYERS OUTSIDE THE UNITED STATES.
The provisions of this Section apply if the Distributor is located outside
the United States of America. Shipments will be made only against irrevocable
letters of credit (drawn on or confirmed by a US. bank acceptable to Seller)
delivered to Seller upon Seller's confirmation of accepting purchase order(s),
unless otherwise agreed to by the parties.
(A) All payments hereunder will be made to Nouveau in US. dollars at such
bank in the US. as Nouveau may designate from time to time. The Distributor will
be solely responsible to obtain any exchange control license or other government
permission required to permit it to make the payments called for hereunder when
due.
(B) Except as provided below in this Section, any withholding tax which may
be levied by foreign governments on the amounts payable under these Sales Terms
will be borne by the Distributor. Any direct or indirect sales tax levied in the
Territory on or in respect of any amounts payable to Nouveau pursuant hereto
will be borne by the Distributor and shall be remitted by the Distributor to the
applicable government authority; it is understood that all amounts payable to
Nouveau pursuant hereto shall be paid by the distributor in such amount without
any deduction of any tax or charge other than withholding taxes otherwise
permitted by this Section.
4. RIGHT OF INSPECTION.
The Distributor will have the right to inspect the goods at Nouveau's plant
before shipment. Inspection of the goods by the Distributor will not release
Nouveau from being responsible for the warranty hereunder or affect or modify
the Distributor's right to reject the shipments as provided herein.
5. ALLOCATION OF RISKS OF LOSS.
Nouveau will bear no risk or loss of or damage to the goods during any
transportation or shipment outside of Nouveau's dock side Exton, PA., facility
as all goods are sold to the Distributor exclusive of freight an insurance which
is for the account of the Distributor. The Distributor will bear the risk of
loss or damage to the goods once they have left Nouveau's property.
6. REJECTION OF NON-CONFORMING GOODS.
If any goods fail to conform to their specifications or the requirement(s)
of the Agreement, or are discovered to be defective for reasons other than
shipping damage, abusive handling, vandalism or environmental contamination the
Distributor is entitled to reject such goods. Nouveau must receive from the
Distributor written notification of rejection of goods within ten (10) business
days after the package of the goods is first opened and such tests are conducted
by the Distributor or any of the Distributor's customers
1
<PAGE> 17
determining such conformity of the goods or whether any such defect exists. The
notice must state the basis of the alleged nonconformity or defect and describe
that specific portion of the shipment being rejected.
7. PROCEDURE AS TO REJECTED GOODS.
On receipt of a proper notification of rejection, Nouveau will immediately
arrange for the return shipment of the goods at Nouveau's expense. However,
within three (3) days of receipt of such notification, Nouveau may have an agent
inspect the goods for nonconformity; otherwise, the inspection will be made on
return to Nouveau's plant. When the goods are confirmed by Nouveau as
non-conforming or defective, Nouveau will at its expense ship replacement
conforming goods (i) within ten (10) days in the case of vending machines and
(ii) immediately in the case of food products.
8. WARRANTIES.
Nouveau warrants that the goods consisting of machines, components or parts
have been manufactured free from defects in material and workmanship. This
warranty is effective for the periods from the date of purchase specified as per
Exhibit 4 (Warranties & Manuals).
Nouveau warrants that the goods consisting of foodstuffs are suitable for
consumption, subject to proper storage after delivery and consumption before any
expiration date stated on the package. The Pizza Chef(R) Pizzas are frozen food
products which must be kept frozen at all times.
Nouveau will have no responsibility to the Distributor for any loss or
damage resulting from alteration, abuse, misuse or improper installation of the
goods beyond the control of Nouveau.
Subject to the provisions of the Agreement and these Sales Terms, NOUVEAU'S
LIABILITY AND THE DISTRIBUTOR'S SOLE AND EXCLUSIVE REMEDY IS LIMITED TO
REPLACEMENT OR REPAIR OF DEFECTIVE GOODS. The Distributor must furnish Nouveau
with a written description of the claimed non-conforming or defect within
fifteen (15) days of its discovery. Nouveau will have the option to remedy the
defect either at the Distributor's facility or at a repair location specified by
Nouveau or have the Distributor remedy the defect. If Nouveau elects to remedy
it at a repair location specified by Nouveau, it will issue a Return Goods
Authorization number ("RGA") to the Distributor. No allegedly defective goods
will be accepted at Nouveau's repair location without a RGA number. The
distributor shall return, only those goods claimed to be defective during the
warranty period. All goods repaired or replaced under this warranty will be
warranted for the remainder of the original warranty period or ninety (90) days,
which ever is longer. Nouveau will at its expense make reasonable efforts
promptly to repair or replace all goods which are claimed to be defective or not
suitable for consumption in accordance with the foregoing procedures. EXCEPT AS
SET FORTH IN THE AGREEMENT OR THESE SALES TERMS THERE ARE NO OTHER WARRANTIES,
EXPRESS OR IMPLIED AND THE IMPLIED WARRANTIES OF MERCHANT ABILITY AND FITNESS
FOR A PARTICULAR PURPOSE ARE EXPRESSLY DISCLAIMED AND EXCLUDED FROM THESE SALES
TERMS. IN NO EVENT SHALL NOUVEAU BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL OR
SPECIAL DAMAGES ARISING OUT OF ANY BREACH OF WARRANTY.
9. PATENTS: TRADEMARKS.
Nouveau will defend any suit or proceeding brought against the Distributor
and/or any of its customers to the extent that it is based on a claim that (i)
the Distributor's and/or any of its customers' use of any goods furnished
pursuant hereto constitutes an infringement of any United States patent or
patent in the Territory, or (ii) the Distributor and/or any of its customer's
use of the Trademarks constitutes an infringement of any of United States
trademark or trademark in the Territory, if Nouveau is notified promptly in
writing after the Distributor becomes aware thereof and given authority,
information and assistance, at Nouveau's expense, for the defense of same, and
Nouveau will pay all damages and costs awarded therein against the Distributor
and/or any of its customers.
2
<PAGE> 18
If Nouveau receives notice that any such goods infringe such a patent or
any such use infringes such a trademark, the distributor will, if Nouveau
requests, immediately cease using such goods and Nouveau will have the
obligation provided in the next sentence (as the case may be) as if a final
determination of infringement had then been made. In the event of a
determination of such patent infringement by final order of a court of competent
jurisdiction, Nouveau will, at its expense, within a reasonable time:
(A) procure for the Distributor and its customers the right to continue to
use such goods or replace the same with a non-infringing product;
(B) modify such goods so that they become non-fringing; or
(C) remove such goods and refund to the Distributor the purchase price and
transportation cost thereof therefore paid.
In the event of a determination of such trademark infringement by final
order of a court of competent jurisdiction, Nouveau will, at its expense, within
a reasonable time:
(A) procure for the distributor and its customers the right to continue to
use such Trademarks; or
(B) remove such infringing goods and refund to the Distributor the purchase
price and transportation cost thereof therefore paid.
Nouveau will have no responsibility to pay any sums in connection with any
settlement of any such claims not made with its written consent. The foregoing
will not apply to, and Nouveau will have no responsibility respecting, any claim
of infringement by reason of the use of the goods for a purpose other than for
which Nouveau manufactured and furnished the same pursuant hereto. THE FOREGOING
STATES NOUVEAU'S ENTIRE LIABILITY AND CONSTITUTES THE DISTRIBUTOR'S EXCLUSIVE
REMEDIES AGAINST NOUVEAU FOR PATENT INFRINGEMENT. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, IN NO EVENT WILL NOUVEAU BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL
DAMAGES SUFFERED BY THE DISTRIBUTOR.
10. FORCE MAJEURE
Should force majeure circumstances (including but not limited to fires,
floods, earthquakes, strikes or labor disturbances, unavailability of supplies
or materials from ordinary sources, delays in transportation beyond reasonable
control, military actions or governmental actions) occur which prevent the
fulfillment of the obligations of any party hereunder, the time stipulated for
the fulfillment of such obligations will be extended for a period equal to that
during which the circumstances of the force majeure shall last. Such obligations
will fulfilled promptly after the force majeure circumstances have ceased.
11. GOVERNING LAW
This Agreement will be construed under and in accordance with and all
questions or disputes arising hereunder (including but not limited to the
validity of this Sales Terms) will be resolved in accordance with the laws of
the Commonwealth of Pennsylvania, U.S.A.
3
<PAGE> 19
EXHIBIT 7
SALES LITERATURE
4
<PAGE> 20
EXHIBIT 8
MINIMUM PURCHASE
5
<PAGE> 21
EXHIBIT 9
DISTRIBUTOR FORECAST
6
<PAGE> 22
EXHIBIT 10
PRICES
7
<PAGE> 23
EXHIBIT 11
GENERIC ILOC
IRREVOCABLE LETTER OF CREDIT
8
<PAGE> 1
EXHIBIT 10.2
NOUVEAU INTERNATIONAL, INC. OMNIBUS STOCK PLAN
1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
Nouveau International, Inc. hereby establishes the NOUVEAU INTERNATIONAL,
INC. OMNIBUS STOCK PLAN (the "Plan"). the purpose of the Plan is to promote the
long-term growth and profitability of Nouveau International, Inc. (the
"Corporation") by (i) providing key people with incentives to improve
stockholder value and so contribute to the growth and financial success of the
Corporation, and (ii) enabling the Corporation to attract, retain and reward the
best available persons for positions of substantial responsibility.
The Plan permits the granting of stock options (including nonqualified
stock options and incentive stock options qualifying under Section 422 of the
Code), stock appreciation rights (including free-standing, tandem and limited
stock appreciation rights), restricted or unrestricted share awards, phantom
stock, performance awards or any combination of the foregoing (collectively,
"Awards").
The Plan is a compensatory benefit plan within the meaning of Rule 701
under the Securities Act of 1933 (the "Securities Act"). Except to the extent
any other exemption from the Securities Act is expressly relied upon in
connection with any agreement entered into pursuant to the Plan, the issuance of
Common Stock pursuant to the Plan is intended to qualify for the exemption from
registration under the Securities Act provided by Rule 701 for so long as the
Corporation is not subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") and is not an
investment company registered or required to be registered under the Investment
Company Act of 1940. To the extent that no exemption from registration under the
Securities Act provided by Rule 701 is unavailable, all unregistered offers and
sales of Awards and shares of Common Stock issuable upon exercise of an Award
are intended to be otherwise exempt from registration under the Securities act,
and the Plan shall be so administered.
1. DEFINITIONS
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "BOARD" shall mean the Board of Directors of the Corporation.
(b) "CHANGE IN CONTROL" shall mean (i) any sales, exchange or other
disposition of substantially all of the Corporation's assets ; or (ii)
any merger, share exchange, consolidation or other reorganization or
business combination in which the Corporation is not the surviving or
continuing corporation, or in which the Corporation's stockholders
become entitled to receive cash, securities of the Corporation other
than voting common stock or securities of another issuer.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations issued thereunder.
(d) "COMMITTEE" shall mean the Board or committee of Board members
appointed pursuant to Section 3 of the Plan to administer the Plan.
(e) "COMMON STOCK" shall mean shares of the Corporation's Common Stock,
par value of one mill ($.001) per share.
(f) "FAIR MARKET VALUE" of a share of the Corporation's Common Stock for
any purpose on a particular date shall be determined in a manner such as
the Committee shall in good faith determine to be appropriate; provided
however, that if the Common Stock is publicly traded, then Fair Market
Value shall mean the last reported sale price per share of Common Stock,
regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices regular way, in either case
as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on a national
securities exchange or included for quotation on the NASDAQ-National
Market, or if the Common Stock is not so listed or admitted to trading
or included for quotation, the last quoted price, or if the Common Stock
is not
<PAGE> 2
so quoted, the average of the high bid and low asked prices, regular
way, in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or,
if such system is no longer in use, the principal other automated
quotation system that may then be in sue or, if the Common Stock is not
quote by any such organization, the average of the closing bid and asked
prices, regular way, as furnished by a professional market maker making
a market in the Common Stock as selected in good faith by the Committee
or by such other source or sources as shall be selected in good faith by
the Committee; and provided further, that in the case of incentive stock
options the determination of Fair Market Value shall be made by the
Committee in god faith in conformance with the Treasury Regulations
under Section 422 of the Code. If, as the case may be, the relevant date
is not a trading day, the determination shall be made as of the next
receding trading day. As used herein, the term "trading day" shall mean
a day on which public trading of securities occurs and is reported in
the principal consolidated reporting system referred to above, or if the
Common Stock is not listed or admitted to trading on a national
securities exchange or included for quotation on the VASDAQ-National
Market, any day other than a Saturday, a Sunday or a day in which
banking institutions in the State of New York are closed.
(g) "GRANT AGREEMENT" shall mean a written agreement between the
Corporation and a grantee memorializing the terms and conditions of an
Award granted pursuant to the Plan.
(h) "GRANT DATE" shall mean the date on which the Committee formally acts
to grant an Award to a grantee or such other date as the Committee shall
so designate at the time of taking such formal action.
(i) "PARENT" shall mean a corporation, whether now or hereafter existing,
within the meaning of the definition of "parent corporation" provided in
Section 424(e) of the Code, or any successor thereto of similar import.
(j) "RULE 16B-3" shall mean Rule 16b-3 as in effect under the Exchange
Act on the effective date of the Plan, or any successor provision
prescribing conditions necessary to exempt the issuance of securities
under the Plan (and further transactions in such securities) from
Section 16(b) of the Exchange Act.
(k) "SUBSIDIARY" AND "SUBSIDIARIES" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of
the definition of "subsidiary corporation" provided in Section 424(f) of
the Code, or any successor thereto of similar import.
1. ADMINISTRATION
(a) PROCEDURE. The Plan shall be administered by the Board, in the
alternative, the Board may appoint a Committee consisting of not less than two
(2) members of the Board to administer the Plan on behalf of the Board, subject
to such terms and conditions as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time, the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and, thereafter, directly administer the Plan in
the event that the Board is the administrator of the Plan in lieu of a
Committee, the term "Committee" as used herein shall be deemed to mean the
Board.
Members of the Board or Committee who are either eligible for Awards or
have been granted Awards may vote on any manners affecting the administration of
the Plan or the grant of Awards pursuant to the Plan, except that no such member
shall act upon the granting of an Award to himself or herself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board or the Committee during which action is taken with respect to the
granting of an Award to him or her.
The Committee shall meet at such times and places and upon such notice as
it may determine. A majority of the Committee shall constitute a quorum. Any
acts by the Committee may be taken at any meeting at which a quorum is present
and shall be by majority vote of those members entitled to vote.
<PAGE> 3
Additionally, any acts reduced to writing or approved in writing by all of the
members of the Committee shall be valid acts of the Committee.
(b) PROCEDURE AFTER REGISTRATION OF COMMON STOCK. Notwithstanding the
provisions of subsection (a) above, in the event that the Common Stock or any
other capital stock of the Corporation becomes registered under Section 12 of
the Exchange Act, the members of the Committee shall be both "disinterested
persons" within the meaning of Rule 16b-3 and "outside directors" within the
meaning of Section 162(m) of the Code. Upon and after the point in time that the
Common Stock or any other capital stock of the Corporation becomes registered
under Section 12 of the Exchange Act, the Board shall take all action necessary
to accuse the Plan to be administered in accordance with the them effective
provisions of Rule 16b-3, provided that any amendment to the Plan required for
compliance with such provisions shall be made in accordance with Section 13 of
the Plan.
(c) POWERS OF THE COMMITTEE. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Awards under the Plan, prescribe Grant
Agreements evidencing such Awards and establish programs for granting Awards.
The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to:
(i) determine the eligible persons to whom, and the time or times at
which Awards shall be granted,
(ii) determine the types of Awards to be granted,
(iii) determine the number of shares to be covered by or used for
reference purposes for each Award.
(iv) impose such terms, limitations, restrictions and conditions upon
any such Award as the Committee shall deem appropriate.
(v) modify, extend or renew outstanding Awards, accept the surrender
of outstanding Awards and substitute new Awards, provided that no such
action shall be taken with respect to any outstanding Award which would
adversely affect the grantee without the grantee's consent.
(vi) accelerate or otherwise change the time in which an Award may be
exercised or becomes payable and to waive or accelerate the lapse, in whole
or in part, of any restriction or condition with respect to such Award,
including, but not limited to, any restriction or condition with respect to
the vesting or exercisability of an Award following termination of any
grantee's employment, and
(vii)to establish objectives and conditions, if any, for earning
Awards and determining whether Awards will be paid after the end of a
performance period.
The Committee shall have full power and authority to administer and interpret
the Plan and to adopt such rules, regulations, agreements, guidelines and
instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable and to interpret same,
all within the Committee's sole and absolute discretion.
(d) LIMITED LIABILITY. To the maximum extent permitted by law, no member
of the Board or Committee shall be liable for any action taken or decision made
in good faith relating to the Plan or any Award thereunder.
(e) INDEMNIFICATION. To the maximum extent permitted by law, the members
of the Board and Committee shall be indemnified by the Corporation in respect of
all their activities under the Plan.
(f) EFFECT OF COMMITTEE'S DECISION. All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation and their respective successors
in interest.
<PAGE> 4
4. SHARES AVAILABLE FOR THE PLAN MAXIMUM AWARDS.
Subject to adjustments as provided in Section 12 of the Plan, the shares of
stock that may be delivered or purchased or used for reference purposes (with
respect to stock appreciation rights, phantom stock units or performance awards
payable in cash) under the Plan, including with respect to incentive stock
options intended to qualify under Section 422 of the Code, shall be 500,000
shares of Common Stock of the Corporation. The Corporation shall reserve such
number of shares for Awards under the Plan, subject to adjustments as provided
in Section 12 of the Plan. if any Award, or portion of an Award, under the Plan
expires or terminates unexercised, becomes unexercisable or is forfeited or
otherwise terminated, surrendered or canceled as to any shares, the shares
subject to such Award shall thereafter be available for further Awards under the
Plan unless such shares would not be deemed available for future Awards pursuant
to Section 16 of the Exchange Act.
5. PARTICIPATION
Participation in the Plan shall be open to all employees, officers,
directors and consultants of the Corporation, or of any Parent or Subsidiary of
the Corporation, as may be selected by the Committee from time to time.
Notwithstanding the foregoing, participation in the Plan with respect to Awards
of incentive stock options shall be limited to employees of the Corporation or
of any Parent or Subsidiary of the Corporation. To the extent necessary to
comply with Rule 16b-3 or to constitute an "outside director" within the meaning
of Section 162(m) of the Code, and only in the event that Rule 16b-3 or Section
162(m) of the Code is applicable to the Plan or an Award made thereunder,
Committee members shall not be eligible to participate in the Plan while members
of the Committee.
Awards may be granted to such eligible persons and for or with respect to
such number of shares of Common Stock as the Committee shall determine, subject
to the limitations in Section 4 of the Plan. a grant of any type of Award made
in any one year to an eligible person shall neither guarantee nor preclude a
further grant of that or any other type of Award to such person in that year or
subsequent years.
6. STOCK OPTIONS
Subject to the other applicable provisions of the Plan, the Committee may
from time to time grant to eligible participants nonqualified stock options or
incentive stock options as that term is defined in Section 422 of the Code. The
stock options granted shall be subject to the following terms and conditions.
(a) GRANT OF OPTION. The grant of a stock option shall be evidenced by a
Grant Agreement, executed by the Corporation and the grantee, stating the number
of shares of Common Stock subject to the stock option evidenced thereby and the
terms and conditions of such stock option, in such form as the Committee may
from time to time determine.
(b) PRICE. The price per share payable upon the exercise of each stock
option ("exercise price") shall be determined by the Committee; provided,
however, that in the case of incentive stock options, the exercise price shall
not be less than 100% of the Fair Market Value of the shares on the date the
stock option is granted.
(c) PAYMENT. Stock option may be exercised in whole or in part by payment
of the exercise price of the shares to be acquired in accordance with the
provisions of the Grant Agreement and/or such rules and regulations as the
Committee may have prescribed, and/or such determinations, orders, or decisions
as the Committee may have made. Payment may be made in cash (or cash equivalents
acceptable to the Committee) or, unless otherwise determined by the Committee,
in shares of Common Stock or a combination of cash and shares of Common Stock,
or by such other means as the Committee may prescribe. The Fair Market Value of
shares of Common Stock delivered n exercise of stock options shall be determined
as of the date of exercise. Shares of Common Stock delivered in payment of the
exercise price may be previously owned shares or if approved by the Committee,
shares acquired upon exercise of the stock option. Any fractional share will be
paid in cash. The Corporation may make or guarantee loans to grantees to assist
grantees in exercising stock options.
<PAGE> 5
If the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Committee, subject to such limitations as it may determine,
may authorize payment of the exercise price, in whole or in part, by delivery of
a properly executed exercise notice, together with irrevocable instructions, to:
(i) a brokerage firm designated by the Corporation to deliver promptly to the
Corporation the aggregate amount of sale or loan proceeds to pay the exercise
price and any withholding tax obligations that may arise in connection with the
exercise, and (ii) the Corporation to deliver the certificates for such
purchased shares directly to such brokerage firm.
(d) TERMS OF OPTIONS. The term during which each stock option may be
exercised shall be determined by the Committee. In no event shall a stock option
be exercisable more than ten years from the date it is granted. Prior to the
exercise of the stock option and delivery of the shares certificates represented
thereby, the grantee shall have none of the rights of a stockholder with respect
to any shares represented by an outstanding stock option.
(e) RELOAD OPTIONS. The terms of a stock option may provide for the
automatic grant of a new stock option Award when the exercise price of the stock
option and/or any related tax withholding obligation is paid by tendering shares
of Common Stock, provided that such automatic replenishment feature shall be
limited to any extent required by rules, regulations or interpretations under
the Exchange Act with respect to any particular grant of an Award in the case of
a grantee who is or becomes subject to Section 16 of the Exchange Act. Any stock
option Award which would automatically be granted pursuant to this Section 6)(e)
without any further Committee action may be exercisable for not more than the
number of shares tendered to exercise the initial stock option and/or to pay any
tax withholding obligation related to such exercise, shall have an exercise
price set at the then Fair Market Value of such shares, and shall have a term
that does not extend beyond the term of the initial stock option.
(f) RESTRICTIONS ON INCENTIVE STOCK OPTIONS. The aggregate Fair Market
Value (determined as of the Grant Date) of shares of Common Stock with respect
to which all incentive stock options first become exercisable by any grantee in
any calendar year under this or any other plan of the Corporation and its Parent
and Subsidiary corporations may not exceed $100,000 or such other amount as may
be permitted from time to time under Section 422 of the Code. To the extent that
such aggregate Fair Market Value shall exceed $100,000, or other applicable
amount, such stock options (taking options into account in the order I which
they were granted) shall be treated as nonqualified stock options. In such case,
the Corporation may designate the shares of Common Stock that are to be treated
as stock acquired pursuant to the exercise of an incentive stock option by
issuing a separate certificate for such shares and identifying the certificate
as Incentive stock option shares in the stock transfer records of the
Corporation.
The exercise price of any incentive stock option granted to a grantee who
owns (within the meaning of Section 422(b) (6) of the Code, after the
application of the attribution rules in Section 424(d) of the Code) more than
10% of the total combined voting power of al classes of shares of the
Corporation or its Parent or Subsidiary corporations (within the meaning of
Sections 422 and 424 of the Code) shall be not less than 110% of the Fair Market
Value of the Common Stock on the grant date and the term of such stock option
shall not exceed five years.
Incentive stock options shall only be issued to employees of the
Corporation or of any Parent or Subsidiary of the Corporation.
(g) OTHER TERMS AND CONDITIONS. Stock options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine appropriate from time to time. No stock option shall be an
incentive stock option unless so designated by the Committee at the time of
grant or in the Grant Agreement evidencing such stock option.
7. STOCK APPRECIATION RIGHTS
(a) AWARD OF STOCK APPRECIATION RIGHTS. Subject to the other applicable
provisions of the Plan, the Committee may at any time and from time to time
grant stock appreciation rights (SARs) to eligible participants, either on a
free-standing basis (without regard to the grant of a stock option) or on a
tandem
<PAGE> 6
basis (related to the grant of an underlying stock option), as it determines.
SARs shall be evidenced by Grant Agreements, executed by the Corporation and the
grantee, stating the number of shares of Common Stock subject to the SAR
evidenced thereby and the terms and conditions of such SAR, in such form as the
Committee may from time to time determine. The term during which each SAR may be
exercised shall be determined by the Committee. In no event shall an SAR be
exercisable more than ten years from the date it is granted. The grantee shall
have none of the rights of a stockholder with respect to any shares of Common
Stock represented by an SAR.
(b) RESTRICTIONS OF TANDEM SARS. No incentive stock option may be
surrendered in connection with the exercise of a tandem SAR unless the Fair
Market Value of the Common Stock subject to the incentive stock option is
greater than the exercise price for such incentive stock option. SARs granted in
tandem with stock options shall be exercisable only to the same extent and
subject to the same conditions as the stock options related thereto are
exercisable. The Committee may, in its discretion, prescribe additional
conditions to the exercise of any such tandem SAR.
(c) AMOUNT OF PAYMENT UPON EXERCISE OF SARS. An SAR shall entitle the
grantee to receive, subject to the provisions of the Plan and the Grant
Agreement, a payment having an aggregate value equal to the product of (i) the
excess of (A) the Fair Market Value on the exercise date of one share of Common
Stock over (B) the base price per share specified in the Grant Agreement times
(ii) the number of shares specified by the SAR, or portion thereof, which is
exercised. In the case of exercise of a tandem SAR, such payment shall be made
in exchange for the surrender of the unexercised related stock option (or any
portion or portions thereof which the grantee from time to time determines to
surrender for this purpose.)
(d) FORM OF PAYMENT UPON EXERCISE OF SARS. Payment by the Corporation of
the amount receivable upon any exercise of an SAR may be made by the delivery of
Common Stock or cash, or any combination of Common Stock and cash, as determined
in the sole discretion of the Committee from time to time. The Committee may
impose such restrictions upon the forms of payment upon exercise of an SAR as it
may deem necessary or appropriate to comply with the requirements for exemption
under Rule 16b-3. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment and the Committee shall determine whether cash shall be given
in lieu of such fractional shares or whether such fractional shares shall be
eliminated.
8. STOCK AWARDS (INCLUDING RESTRICTED AND UNRESTRICTED SHARES AND PHANTOM
STOCK)
(a) STOCK AWARDS IN GENERAL. Subject to the other applicable provisions of
the Plan, the Committee may at any time and from time to time grant stock Awards
to eligible participants in such amounts and for such consideration, including
no consideration or such minimum consideration as may be required by law, as it
determines. A stock Award may be denominated in shares of Common Stock or
stock-equivalent units ("phantom stock"), and may be paid in Common Stock, in
cash, or in a combination of Common Stock and cash, as determined in the sole
discretion of the Committee from time to time. The Committee may impose such
restrictions upon the forms of payment of a stock Award as it may deem necessary
or appropriate to comply with there requirements for exemption under Rule 16b-3.
(b) RESTRICTED SHARES. Each stock Award shall specify the applicable
restrictions, if any, on such shares of Common Stock, the duration of such
restrictions and the time or times at which such restrictions shall lapse with
respect to all or a specified number of shares of Common Stock that are part of
the Award. Notwithstanding the foregoing, the Committee may reduce or shorten
the duration of any restriction applicable to any shares of Common Stock awarded
to any grantee under the Plan. Share certificates with respect to restricted
shares of Common Stock granted pursuant to a stock Award may be issued at the
time of grant of the stock Award, subject to forfeiture if the restrictions do
not lapse, or upon lapse of the restrictions. If share certificates are issued
at the time of grant of the stock Award, the certificates shall bear an
appropriate legend with respect to the restrictions applicable to such stock
Award or, alternatively the grantee may be required to deposit the certificates
with the Corporation during the period of any restriction thereon and to execute
a blank stock power or other instrument of transfer therefor. Except as
otherwise provided by the
<PAGE> 7
Committee, during such period of restriction following issuance of share
certificates, the grantee shall have all of the rights of a holder of Common
Stock, including but not limited to the rights to receive dividends (or amounts
equivalent to dividends) and to vote with respect to the restricted shares. If
share certificates are issued upon lapse of restrictions on a stock Award, the
Committee may provide that the grantee will be entitled to receive any amounts
per share pursuant to any dividend or distribution paid by the Corporation on
its Common Stock to stockholders of record after grant of the stock Award and
prior to the issuance of the share certificates.
(c) PHANTOM STOCK. The grant of phantom stock units shall be evidenced by
a Grant Agreement, executed by the Corporation and the grantee, that
incorporates the terms of the Plan and states the number of phantom stock units
evidenced thereby and the terms and conditions of such phantom stock units in
such form as the Committee may from time to time determine. Phantom stock units
granted to a participant shall be credited to a bookkeeping reserve account
solely for accounting purposes and shall not require a segregation of any of the
Corporation's assets. Phantom stock units may be exercised in whole or in part
by delivery of an appropriate exercise notice to the Committee in accordance
with the provisions of the Grant Agreement and/or such rules and regulations as
the Committee may prescribe, and/or such determinations, orders, or decisions as
the Committee may make. Except as otherwise provided in the applicable Grant
Agreement, the grantee shall have none of the rights of a stockholder with
respect to any shares of Common Stock represented by a phantom stock unit as a
result of the grant of a phantom stock unit to the grantee. Phantom stock units
may contain such other provisions, not inconsistent with the provisions of the
Plan, as the Committee shall determine appropriate from time to time.
9. PERFORMANCE AWARDS
The Committee may in its discretion grant performance Awards which become
payable on account of attainment of one or more performance goals established by
the Committee. Performance Awards may be paid by the delivery of Common Stock or
cash, or any combination of Common Stock and cash, as determined in the sole
discretion of the Committee from time to time. The Committee may impose such
restrictions upon the forms of payment of a performance Award as it may deem
necessary or appropriate to comply with the requirements for exemption under
Rule 16b-3. Performance goals established by the Committee may be based on the
Corporation's operating income or one or more other business criteria selected
by the Committee that apply to an individual or group of individuals, a business
unit, or the Corporation as a whole, over such performance period ass the
Committee may designate. The Committee in its discretion may recommend to the
Board of Directors of the Corporation that the material terms of any performance
Award or program with respect to some or all eligible participants be submitted
for approval by the stockholders.
10. WITHHOLDING OF TAXES.
The Corporation may require, as a condition to the grant of any Award under
the Plan or exercise pursuant to such Award or to the delivery of certificates
for shares issued or payments of cash to a grantee pursuant to the Plan or a
Grant Agreement (hereinafter collectively referred to as a "taxable event"),
that the grantee pay to the Corporation, in cash or, unless otherwise determined
by the Corporation, in shares of Common Stock, including shares acquired upon
grant of the Award or exercise of the Award, valued at Fair Market Value on the
date as of which the withholding tax liability is determined, any federal, state
or local taxes of any kind required by law to be withhold with respect to any
taxable event under the Plan; subject, however, if the grantee is subject to
Section 16(b) of the Exchange Act, to such restrictions as may be imposed from
time to time by the Securities and Exchange Act, to such restrictions as may be
imposed from time to time by the Securities and Exchange Commission to Comply
with section 16(b) of the Exchange Act. An election to deliver Common Stock to
pay withholding taxes must be made on or before the date the amount of tax to be
withhold is determined and once made will be irrevocable. The withholding tax
obligation that may be paid by the withholding or delivery of shares may not
exceed the statutory minimum required withholding amount with respect to the
grantee's federal, state and local income tax obligations in connection with a
taxable event. The Corporation to the extent permitted or required by law, shall
have the right to deduct from any payment of any kind (including salary or
bonus) otherwise due to a grantee any federal, state or local
<PAGE> 8
taxes of any kind required by law to be withheld with respect to any taxable
event under the Plan, or to retain or sell without notice a sufficient number of
the shares to be issued to such grantee to cover any such taxes.
11. TRANSFERABILITY.
To the extent required to comply with Rule 16b-3, if applicable, and in any
event in the case of an incentive stock option or a stock appreciation right
granted with respect to an incentive stock option, no Award granted under the
Plan shall be transferable by a grantee otherwise than by will or the laws of
descent and distribution. Unless otherwise determined by the Committee in accord
with the provisions of the immediately preceding sentence, an Award may be
exercised during the lifetime of the grantee, only by the grantee or, during the
period the grantee is under a legal disability, by the grantee's guardian or
legal representative.
12. ADJUSTMENTS: BUSINESS COMBINATIONS.
In the event of a reclassification recapitalization, stock split, stock
dividend, combination of shares or other similar event, the maximum number and
kind of shares reserved for issuance or with respect to which Awards may be
granted under the Plan as provided in Section 4 shall be adjusted to reflect
such event, and the Committee shall make such adjustments as it deems
appropriate and equitable in the number, kind and price of shares covered by
outstanding Awards made under the Plan, and in any other matters which relate to
Awards and which are affected by the changes in the Common Stock referred to
above.
In the event of any proposed Change in Control, the Committee shall take
such action as it deems appropriate to effectuate the purposes of this Plan and
to protect the grantees of Award, which action may include, but without
limitation, any one or more of the following; (i) acceleration or change of the
exercise dates of any Award; (ii) arrangements with grantees for the payment of
appropriate consideration to them for the cancellation and surrender of any
Award; and (iii) in any case where equity securities other than Common Stock of
the Corporation are proposed to be delivered in exchange for or with respect to
Common Stock of the Corporation, arrangements providing that any Award shall
become one or more Awards with respect to such other equity securities.
In the event the Corporation dissolves and liquidates (other than pursuant
to a plan of merger or reorganization), then notwithstanding any restrictions on
exercise set forth I this Plan or any Grant Agreement, or other agreement
evidencing a stock option, stock appreciation right or restricted stock Award;
(i) each grantee shall have the right to exercise his stock option or stock
appreciation right, or to require delivery of share certificates representing
any such restricted stock Award, at any time up to ten (10) days prior to the
effective date of such liquidation and dissolution; and (ii) the Committee may
make arrangements with the grantees for the payment of appropriate consideration
to them for the cancellation and surrender of any stock option, stock
appreciation right or restricted stock Award that is so canceled or surrendered
at any time up to ten (10) days prior to the effective date of such liquidation
and dissolution the Committee may establish a different period (and different
conditions) for such exercise deliver, cancellation, or surrender to avoid
subjecting the grantee to liability under Section 16(b) of the Exchange Act. Any
stock option or stock appreciation right not so exercised, canceled, or
surrendered shall terminate on the last day for exercise prior to such effective
date; and any restricted stock as to which there has not been such delivery of
share certificates or that has not been so canceled or surrendered, shall be
forfeited on the last day prior to such effective date.
13. TERMINATION AND MODIFICATION OF THE PLAN.
The Board, without further approval of the stockholders, may modify or
terminate the Plan, except that no modification shall become effective without
prior approval of the stockholders of the Corporation if stockholder approval
would be required for continued compliance with Rule 16b-3 or Section 422 of the
Code.
The committee shall be authorized to make minor or administrative
modifications to the Plan as well as modifications to the Plan that may be
dictated by requirements of federal or state laws applicable to the Corporation
or that may be authorized or made desirable by such laws. The Committee may
amend or modify the grant of any outstanding Award in any manner to the extent
that the Committee would have had the
<PAGE> 9
authority to make such Award as so modified or amended. Not modification may be
made that would materially adversely affect any Award previously made under the
Plan without the approval of the grantee.
14. NON-GUARANTEE OF EMPLOYMENT.
Nothing in the Plan or in any Grant Agreement thereunder shall confer any
right on an employee to continue in the employ of the Corporation or shall
interfere I any way with the right of the Corporation to terminate an employee
at any time.
15. TERMINATION OF EMPLOYMENT.
For purposes of maintaining a grantee's continuous status as an employee
and accrual of rights under any Award, transfer of an employee among the
Corporation and the Corporation's Parent or Subsidiaries shall not be considered
a termination of employment. Nor shall it be considered a termination of
employment for such purposes if an employee is placed on military or sick leave
or such other leave of absence which is considered as continuing intact the
employment relationship; in such a case, the employment relationship shall be
continued until the date when an employee's right to reemployment shall no
longer be guaranteed either by law or contract.
16. WRITTEN AGREEMENT.
Each Grant Agreement entered into between the Corporation and a grantee
with respect to an Award granted under the Plan shall incorporate the terms of
this Plan and shall contain such provisions, consistent with the provisions of
the Plan, as may be established by the Committee.
17. NON-UNIFORM DETERMINATIONS.
The Committee's determinations under the Plan (including without limitation
determinations of the persons to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the agreements
evidencing same) need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated.
18. LIMITATION ON BENEFITS.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan or action by
the Committee to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
19. LISTING AND REGISTRATION.
If the Corporation determines that the listing, registration or
qualification upon any securities exchange or upon any listing or quotation
system established by the National Association of Securities Dealers, Inc.
("NASDAQ System") or under any law, of shares subject to any Award is necessary
or desirable as a condition of , or in connection with, the granting of same or
the issue or purchase of shares thereunder, no such Award may be exercised in
whole or in part and no restrictions on such Award shall lapse, unless such
listing, registration or qualification is affected free of any conditions not
acceptable to the Corporation.
20. COMPLIANCE WITH SECURITIES LAW.
The Corporation may require that a grantee, as a condition to exercise of
an Award, and as a condition to the delivery of any share certificate, provide
to the Corporation, at the time of each such exercise and each such delivery, a
written representation that the shares of Common Stock being acquired shall be
acquired by the grantee solely for investment and will not be sold or
transferred without registration or the availability of an exemption from
registration under the Securities Act and applicable state securities laws. The
Corporation
<PAGE> 10
may also require that a grantee submit other written representations which will
permit the Corporation to comply with federal and applicable state securities
laws in connection with the issuance of the Common Stock, including
representations as to the knowledge and experience in financial and business
matters of the grantee and the grantee's ability to bear the economic risk of
the grantee's investment. The Corporation may require that the grantee obtain a
"purchaser representative" as that term is defined in applicable federal and
state securities laws. The stock certificates for any shares of Common Stock
issued pursuant to this Plan may bear a legend restricting transferability of
the shares of Common Stock unless such shares are registered or an exemption
from registration is available under the Securities Act and applicable state
securities laws. The Corporation may notify its transfer agent to stop any
transfer of shares of Common Stock not made in compliance with these
restrictions. Common stock shall not be issued with respect to an Award granted
under the Plan unless the exercise of such Award and delivery of share
certificates for such Common Stock pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any national securities exchange or NASDAQ System upon which the
Common Stock may then be listed or quoted and shall be further subject to the
approval of counsel for the Corporation with respect to such compliance to the
extent such approval is sought by the Committee.
21. GOVERNING LAW.
The validity, construction and affect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Board or Committee relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or claiming to have any
interest therein or thereunder shall be determined exclusively in accordance
with applicable federal laws and the laws of the Commonwealth of Pennsylvania,
without regard to its conflict of laws rules and principles.
22. PLAN SUBJECT TO CHARTER AND BY-LAWS.
This Plan is subject to the Charter and By-laws of the Corporation, as they
may be amended from time to time.
23. EFFECTIVE DATE: TERMINATION DATE.
The Plan is effective as of June 3, 1996, the date on which the Plan was
adopted by the Board, subject to approval of the stockholders within twelve
months of such date. Unless previously terminated, the Plan shall terminate on
the close of business on June 3, 2006, ten years from the effective date.
Subject to other applicable provisions of the Plan, all Awards made under the
plan prior to termination of the Plan shall remain in effect until such Awards
have been satisfied or terminated in accordance with the Plan and the terms of
such Awards.
<PAGE> 1
EXHIBIT 10.3
NOUVEAU INTERNATIONAL, INC.
MANAGEMENT INCENTIVE PLAN
The Nouveau International, Inc. Management Incentive Plan (the "Plan")
exists as an incentive pool to encourage creativity and performance from key
employees to increase the profitability of the Company. The Plan is intended to
enhance key employees' earnings in conjunction with the success of Nouveau as a
corporation. The Plan is set up as follows:
A bonus pool is set at five percent (5%) of the Company's pretax profits.
These funds will be distributed, subject to Board of Directors approval, on an
annual basis within sixty days of the end of the Company's fiscal year.
The amount to be allocated to key employees is limited to the amount
necessary to bring key employees to a predetermined target salary outlined
below. Once these levels are attained no further bonus monies will be paid. The
distribution to key employees will occur as follows:
<TABLE>
<CAPTION>
NAME BASE INCREASE RATE BASE + BONUS
------------------------------------------- -------- -------- ---- ------------
<S> <C> <C> <C> <C>
Gary W. Black, Sr.......................... $150,000 $150,000 50% $300,000
Robert J. Brock, Sr........................ $ 80,000 $ 80,000 25% $160,000
Gary W. Black, Jr.......................... $ 72,000 $ 72,000 12.5% $144,000
Brett A. Black............................. $ 60,000 $ 60,000 12.5% $120,000
-------- -------- ---- ------------
Total.................................... $362,000 $362,000 100% $724,000
</TABLE>
The determination as to whether a bonus pursuant to the Plan will be paid
will be decided by the Company's Board of Directors who may in their sole
judgment choose not to have a bonus paid in any year. However the Board of
Directors may not determine to award a partial bonus to only certain key
employees.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 376,971
<SECURITIES> 0
<RECEIVABLES> 22,083
<ALLOWANCES> 0
<INVENTORY> 3,174,659
<CURRENT-ASSETS> 3,968,694
<PP&E> 262,239
<DEPRECIATION> 144,989
<TOTAL-ASSETS> 4,595,560
<CURRENT-LIABILITIES> 1,843,981
<BONDS> 0
0
0
<COMMON> 389,714
<OTHER-SE> 995,156
<TOTAL-LIABILITY-AND-EQUITY> 4,595,560
<SALES> 245,313
<TOTAL-REVENUES> 245,313
<CGS> 224,282
<TOTAL-COSTS> 259,121
<OTHER-EXPENSES> 618,398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,352
<INCOME-PRETAX> 5,286,378
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,286,378
<DISCONTINUED> 0
<EXTRAORDINARY> 2,307,606
<CHANGES> 0
<NET-INCOME> 7,593,984
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
