As Filed with the Securities and Exchange Commission on June 29, 1999
Registration No. 333 - _______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
NUTRICEUTICALS.COM CORPORATION
----------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 7375
- -------------------------------- --------------------------
(State or Other Jurisdiction (Primary Standard Industrial
of Incorporation or Organization) Classification Code Number)
34-1755390
----------------------
(I.R.S. Employer
Identification Number)
6950 BRYAN DAIRY ROAD
LARGO, FL 33777
(727) 544-8866
------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
STEPHEN M. WATTERS
PRESIDENT
NUTRICEUTICALS.COM CORPORATION
6950 BRYAN DAIRY ROAD
LARGO, FL 33777
(727) 544-8866
---------------------------------------------------------
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
PLEASE SEND COPIES OF COMMUNICATIONS TO:
Lina Angelici, Esq. Gregory Sichenzia, Esq.
Schifino & Fleischer, P.A. Sichenzia, Ross & Friedman, LLP
One Tampa City Center, Suite 2700 135 West 50th Street, 20th Floor
Tampa, Florida 33602 New York, New York 10020
(813) 223-1535 (212) 664-1200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As Soon As Practicable After This Registration Statement Becomes Effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rue 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED (1)(2) OFFERING PRICE PER SHARE OFFERING PRICE REGISTRATION FEE(3)
=============================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, $.001 par value ....... 1,150,000 $10.00 $11,500,000 $3,197
- -----------------------------------------------------------------------------------------------------------------------------
Purchase Warrants ................... 100,000 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value........ 100,000 $12.00 $1,200,000 $334
- -----------------------------------------------------------------------------------------------------------------------------
Total................................ $12,700,000 $3,531
=============================================================================================================================
</TABLE>
(1) Includes 150,000 shares which the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Represents maximum number of shares of common stock underlying underwriters
warrants which may be exercised at 120% of the offering price per share.
(3) Pursuant to Rule 457(o), the registration fee was calculated on the basis
of the maximum aggregate offering price of all the securities listed in the
table.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DUE DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED JUNE 29, 1999
PROSPECTUS
1,000,000 SHARES
NUTRICEUTICALS.COM CORPORATION
COMMON STOCK
($.001 par value)
All of the 1,000,000 shares of Common Stock offered hereby are being
sold by Nutriceuticals.com Corporation. Although our shares are listed for
trading on the OTC Electronic Bulletin Board under the symbol "JCOM," there has
been no active trading market for our common stock. It is currently estimated
that the offering price will be between $8.00 and $10.00 per share. We intend to
apply to have our stock approved for listing on the National Association of
Securities Dealers Automated Quotation System, SmallCap Market.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TERMS OF THE OFFERING
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS BEFORE EXPENSES
PUBLIC AND COMMISSIONS TO NUTRICEUTICALS.COM (1)
-------- ---------------------- -------------------------
<S> <C> <C> <C>
Per Share....................... $ $ $
Total .......................... $ $ $
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</TABLE>
(1) The estimated expenses of the offering are $276,000.
The underwriters may, under some circumstances, for 45 days after the
date of this prospectus, purchase up to an additional 150,000 shares of Common
Stock from us at the public offering price less the underwriting discount.
Delivery of the shares of common stock will be made on or about
_______, 1999, against payment in immediately available funds.
KASHNER DAVIDSON SECURITIES CORPORATION
PROSPECTUS DATED ______ , 1999
<PAGE>
TABLE OF CONTENTS
SUMMARY.................................................... 1
RISK FACTORS............................................... 5
USE OF PROCEEDS............................................ 18
DIVIDEND POLICY............................................ 19
PRICE RANGE OF COMMON STOCK................................ 19
SELECTED CONSOLIDATED
FINANCIAL DATA........................................... 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................ 22
BUSINESS................................................... 23
MANAGEMENT................................................. 37
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS........................................ 41
DESCRIPTION OF CAPITAL STOCK............................... 42
UNDERWRITING............................................... 44
LEGAL MATTERS.............................................. 46
EXPERTS.................................................... 46
ADDITIONAL INFORMATION..................................... 46
INDEX TO FINANCIAL STATEMENTS.............................. F-1
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR
TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
INFORMATION CONTAINED ON OUR WEB SITES DOES NOT CONSTITUTE PART OF THIS
DOCUMENT.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus are forward-looking
statements. These forward-looking statements include statements in the "Business
- - Industry Background," and "-The Nutriceuticals.com Solution" sections of this
prospectus relating to trends in Internet use and electronic commerce. These
forward-looking statements also include statements relating to the Company's
performance in the "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Use of Proceeds," and "Business" sections of this
prospectus. Forward-looking statements include statements regarding the intent,
belief or current expectations of the Company or its officers (including
statements preceded by, followed by or including forward-looking terminology
such as "may," "will," "should," "believe," "expect," "anticipate," "estimate,"
"continue" or similar expressions or comparable terminology) with respect to
various matters.
All forward-looking statements in this prospectus are based on
information available to us on the date of this prospectus. Please note that
matters set forth under the caption "Risk Factors" constitute cautionary
statements identifying important factors with respect to the forward-looking
statements, including certain risks and uncertainties, that could cause actual
results to differ materially from those in such forward-looking statements.
<PAGE>
SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING SOLD IN THIS
OFFERING AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING
ELSEWHERE IN THIS PROSPECTUS. BECAUSE THIS IS ONLY A SUMMARY, YOU SHOULD READ
THE REST OF THIS PROSPECTUS BEFORE YOU INVEST IN OUR COMMON STOCK. READ THE
ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS DESCRIBED UNDER "RISK
FACTORS." UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS HAS
BEEN ADJUSTED TO GIVE RETROACTIVE EFFECT TO A NUMBER OF STOCK SPLITS AND REVERSE
STOCK SPLITS AS DESCRIBED IN NOTES 6 AND 8 TO THE COMPANY'S FINANCIAL STATEMENTS
INCLUDED ELSEWHERE HEREIN AND ASSUMES THAT THE UNDERWRITER'S OVER-ALLOTMENT
OPTION HAS NOT BEEN EXERCISED.
NUTRICEUTICALS.COM CORPORATION
The Company is a recently organized online retailer of vitamins,
nutritional supplements and other natural products. Such products are offered
through our online stores at www.nutriceuticals.com and www.javaslim.com. The
Company's business strategy is to offer the consumer a select line of popular
natural products, a convenient shopping experience and competitive prices. The
Company is implementing this strategy by offering:
o a select line of brand name, high quality natural products
online including the Company's own "Dr. Nutriceutical" and
"Java Slim" product lines;
o the convenience of shopping from the home or the office,
twenty-four-hours-a-day, seven-days-a-week; and
o discount prices.
Although we offer a wide range of vitamins, supplements, and other natural
products, substantially all of our sales to date have come from the sale of the
Company's brand labels. Approximately 50 % of sales to date have been derived
from the sale of our Java Slim weight loss coffee.
We believe the Internet is an ideal medium for the sale of vitamin and
nutritional supplements and other natural products for several reasons:
o according to Cyber Dialogue, over 17 million U.S. adults
searched for health information on the Internet for the year
ended July 1998, and this number is estimated to nearly double
in the next two years;
o according to Hambrecht & Quist, LLC's industry report dated
January 8, 1999, the e-commerce market for vitamins and other
nutraceuticals is estimated to exceed $12 billion annually by
the year 2001; and
o a potentially large and attractive customer base for the
Internet healthcare market, made up of wealthier, more
educated, and slightly more experienced Internet users than
the average adult online user.
1
<PAGE>
We have based our business on scalable technology that permits the sale
and order processing of natural products with limited human intervention.
However, we are dependent upon manufacturers and distributors of natural
products. Presently, Innovative Health Products, Inc. provides the substantial
majority of the products we sell. Jugal K. Taneja, the Chairman of our Board of
Directors is also the Chairman of the Board of Directors and the principal
shareholder of Innovative Health Products. See "Risk Factors - We Rely on
Manufacturers and Distributors of Natural Products," " - We may Have Potential
Conflicts of Interest with Innovative Health Products" and "Management - Certain
Transactions."
We intend to utilize our advantage as an early entrant in the business
of retailing natural products online to our customers and to leverage our online
store model to achieve economies of scale. For the period from September 8, 1998
(date of inception of our present e-commerce business) through March 31, 1999,
our net revenues were approximately $37,118.
BACKGROUND
The Company was founded in 1993 as NuMED Surgical, Inc. and was engaged
in the research, development and distribution of medical instruments and
surgical supplies to the healthcare market. In 1997 NuMED adopted a plan of
liquidation in which it sold its major product line and by March 31, 1998
disposed of all its operating assets. In March 1999, NuMED acquired all of the
outstanding common stock of Nutriceuticals.com Corporation, a Florida
corporation, which was organized in September 1998, and NuMED changed its
corporate name to Nutriceuticals.com Corporation. Nutriceuticals of Florida was
founded to engage in the online retailing of vitamins, nutritional supplements
and other natural products. Also in March 1999, the Company acquired
HealthSeek.com Corp. HealthSeek.com, organized in 1995, is a healthcare
community Web site providing communications and related information ("content")
to healthcare professionals and consumers. Both the Company and its wholly-owned
subsidiary HealthSeek.com may be considered development stage companies, as
revenues to date for each have been nominal.
INDUSTRY OVERVIEW
The natural products industry is large and growing. According to
industry studies, the retail market for natural products has grown from $3.5
billion in 1991 to an estimated $8 billion in 1997. Currently growing at an
annual rate of 15%, industry sales, at retail, are expected to exceed $12
billion annually by 2001.
The World Wide Web (the "Web") and commercial online services allow
millions of people to share information and conduct business electronically
("e-commerce"). International Data Corporation estimates that the total value of
goods and services purchased over the Web will increase from approximately $32.4
billion in 1998 to approximately $425.7 billion by 2002.
According to International Data Corporation, the number of Web users
worldwide will increase from approximately 97.3 million at the end of 1998 to
approximately 319.8 million by the end of 2002. International Data Corporation
further estimates that the percentage of Web users
2
<PAGE>
buying goods and services on the Internet will increase from approximately 28%
at the end of 1998 to approximately 40% by the end of 2002.
Our address is 6950 Bryan Dairy Road, Largo, Florida 35777 and our
telephone number is 727/544-8866.
THE OFFERING
Common Stock Offered................... 1,000,000 shares
Common Stock Outstanding After this
Offering............................. 6,153,414 shares (1)
Use of Proceeds........................ General corporate purposes including
working capital (principally sales and
marketing for brand development and
Web site recognition) and potential
acquisitions.
OTC Electronic Bulletin Board Symbol... JCOM
- ---------------
(1) Based on 5,153,414 shares outstanding as of June 14, 1999. See
"Description of Capital Stock" and Notes 6 and 8 of Notes to
Consolidated Financial Statements.
RISK FACTORS
For a discussion of certain risks that you should consider before
buying shares of our common stock, see "Risk Factors" beginning at page 5 of
this prospectus.
3
<PAGE>
CONSOLIDATED AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
-----------------------------------------------
1998 (1) 1999 (2) 1999 PRO FORMA (3)
--------- ----------- ------------------
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
<S> <C> <C> <C>
Net revenues ................................................. $ 7,019 $ 37,118 $ 37,118
Gross profit ................................................. (9,741) 22,622 22,622
Operating expenses:
Research and development ................................ -- -- --
Sales and marketing ..................................... -- 54,402 54,402
General and administrative .............................. 26,839 78,391 380,303
--------- ----------- -----------
Loss from operations ................................ (36,215) (110,171) (412,083)
Other income ................................................. 32,215 1,761 1,761
Net loss ..................................................... $ (4,365) $ (108,410) $ (410,322)
========= =========== ===========
Basic and diluted net loss per share ......................... (.01) $ (.04) $ N/A
===========
Pro forma basic and diluted net loss per share ............... N/A $ N/A $ (.08)
========= =========== ===========
Basic and diluted weighted average common shares outstanding . 351,028 2,744,460 5,351,028
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31
-----------------------------------------
1999
1998 1999 AS ADJUSTED(3)(4)
-------- -------- -----------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents .................................... $ 8,274 $ 56,986 $8,785,986
Working capital .............................................. (8,663) 87,738 8,816,738
Total assets ................................................. 8,274 135,618 8,864,618
Long-term obligations, net of current portion ................ -- -- --
Stockholders' equity ......................................... (8,663) 37,927 8,766,927
</TABLE>
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(1) The March 31, 1998 financial data has been reclassified from the
liquidation basis of accounting to conform with the 1999 presentation.
(2) Includes predecessor from April 1, 1998 to September 7, 1998 (prior to
merger) and Nutriceuticals from September 8, 1998 (inception) to March
31, 1999. See the "Consolidated Financial Statements and Notes thereto,
included elsewhere herein.
(3) The pro forma 1999 consolidated statement of operations data gives
effect to certain consulting and employment agreements entered into on
March 31, 1999 and April 1, 1999, respectively, as well as the
HealthSeek.com acquisition. See "Business -- The HealthSeek.com
Acquisition" and "Management -- Employment Agreement". See also, the
Unaudited Consolidated Pro Forma Financial Information and Notes
thereto included elsewhere herein.
(4) The as adjusted data gives effect to the sale of the common stock
offered hereby as of March 31, 1999, after deduction of the estimated
offering expenses and the underwriters' discount.
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING A
DECISION TO INVEST IN NUTRICEUTICALS.COM. IF ANY OF THE FOLLOWING RISKS ACTUALLY
OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF FUTURE OPERATIONS COULD
BE MATERIALLY ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
WE HAVE A LIMITED OPERATING HISTORY AND WE MAY NOT BE ABLE TO SUCCESSFULLY
MANAGE OUR BUSINESS OR ACHIEVE PROFITABILITY
The Company's natural products business began in September 1998, and
commenced Internet sales in February 1999. Accordingly, we have nominal revenues
to date and only a limited operating history on which to base an evaluation of
our business and prospects. The Company's prospects should therefore be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as online commerce. Such
risks for the Company include, but are not limited to, and evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, develop and maintain its customer
base, implement and successfully execute its business and marketing strategy,
continue to develop and upgrade its technology and transaction-processing
systems, improve its Web sites, provide superior customer service and order
fulfillment, respond to competitive developments, and attract, retain and
motivate qualified personnel. We may not be able to successfully address such
risks, or manage our business to achieve or maintain profitability. The failure
to do so could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations. In addition, our
management team faces the challenge of successfully managing our newly acquired
subsidiary, HealthSeek.com Corp., and we may acquire additional companies upon
completion of this offering. We many not be able to successfully manage
HealthSeek.com or any other newly acquired company.
WE HAVE INCURRED NET LOSSES SINCE INCEPTION AND ANTICIPATE SIGNIFICANT FUTURE
LOSSES AND NEGATIVE CASH FLOW
From inception of our e-commerce business in September 1998 through
March 31, 1999, we incurred net operating losses of approximately $104,475. As
of March 31, 1999, we had a net equity of approximately $37,927. We expect
significant operating losses and negative cash flow to continue for the
foreseeable future. We anticipate our losses will increase significantly from
current levels because we expect to invest heavily in:
o brand development, marketing and promotion;
o Web site content development;
o strategic relationship development and maintenance; and
o Web site technology and operating infrastructure development.
5
<PAGE>
The Company also intends to offer attractive pricing programs, which
will reduce its gross margins. Because we anticipate relatively low gross
margins, our ability to become profitable given our planned expenses depends on
our ability to generate and sustain substantially higher sales. If we do achieve
profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis in the future.
We base our current and future expense levels on our operating plans
and estimates of future revenues. We find sales and operating results difficult
to forecast, because they generally depend on the volume and timing of the
orders we receive. As a result, we may be unable to adjust our spending in a
timely manner to compensate for any unexpected revenue shortfall. A shortfall in
revenues will significantly harm our business and operating results. In view of
the rapidly evolving nature of our business, proposed and possible future
acquisitions and our limited operating history of selling natural products
online, we have little experience forecasting our revenues. If we cannot achieve
and sustain operating profitability or positive cash flow from operations, we
may be unable to meet our working capital requirements without seeking
additional financing.
DEPENDENCE ON OFFERING PROCEEDS AND ADDITIONAL CAPITAL NEEDS
We require substantial working capital to fund our business. The
Company does not presently have adequate cash from operations or financing
activities to meet either its short-term or long-term capital needs. In
addition, the Company has an obligation to repay $50,000 demand note, plus
accrued interest to an investor affiliated with Jugal K. Taneja, which will
become due and payable upon the closing of a public offering. The Company
expects to repay this debt from the proceeds of this offering. See "Use of
Proceeds." The Company has not paid its executive officers since inception. The
Company is indebted to Stephen M. Watters and Jugal K. Taneja in the aggregate
amount of $62,000 as of June 18, 1999. The Company intends to repay these
accrued salaries from the proceeds of this offering. If this offering is not
successful, the Company expects that it will seek alternative private financing.
In addition to the repayment of debt and accrued compensation, we
expect operating losses and negative cash flow to continue for the foreseeable
future. Accordingly, the Company is dependent on and intends to use a
substantial portion of the proceeds of this offering to fund its operations and
implement its marketing strategies. We anticipate that the net proceeds we
receive from this offering will be sufficient to meet our current capital
requirements through the next 12 months. Thereafter, if we are not able to
generate a positive cash flow, we will likely have to raise additional funds.
The actual amount and timing of our future capital requirements may
differ materially from our estimates. In particular, our estimates may be
inaccurate as a result of changes and fluctuations in our revenues, operating
costs and development expenses. Our revenues, operating costs and development
expenses will be negatively affected by any inability to:
o effectively and efficiently manage the expansion of our
operations;
o obtain favorable co-branding or Internet marketing agreements
with third parties;
6
<PAGE>
o negotiate favorable contracts with suppliers, including large
volume discounts on purchases of natural products; and
o obtain brand recognition, attract sufficient numbers of
customers or increase the volume of our sales of natural
products.
Our revenues and costs also depend upon factors that we cannot control.
These factors include changes in technology and regulations, increased
competition and factors such as Web integrity, seasonality, and performance by
third parties in connection with our operations. Because of these factors, our
actual revenues and costs are uncertain and may vary considerably. These
variations may significantly affect our future need for capital. Also, if we
accelerate the expansion of our operations or complete any acquisitions, we will
require more funding sooner than we currently expect. We may be unable to raise
funds sufficient for our needs, either on suitable terms or at all. This result
would substantially harm the trading price of our common stock and materially
harm our business.
OUR MANAGEMENT TEAM IS NEW AND WE NEED ADDITIONAL PERSONNEL
Our online commerce business began in September 1998 and we launched
our first online store in February 1999. The Company is substantially dependent
on the efforts of its founders and principal officers who have no proven record
of success in the retailing of natural products via the Internet. In addition,
our future success depends on our ability to identify, attract, hire, train,
retain and motivate other highly skilled technical, managerial, editorial,
merchandising, marketing and customer service personnel. We currently have only
4 employees, including our consultant who operates our HealthSeek.com Web site.
Further, our Chief Executive Officer, Jugal K. Taneja, also serves as the
President and Chief Executive Officer of Innovative Health Products and,
accordingly, plays only a limited role in our management. Following this
offering, we expect to add additional personnel to manage the anticipated growth
of our operations. However, the e- commerce market is highly competitive, and
retaining new personnel could be costly in terms of cash compensation or equity
necessary to attract them to the Company, or such personnel may not be available
to the Company on any terms. Competition for these individuals is intense and we
may be unable to successfully attract, assimilate or retain sufficiently
qualified personnel in the future. The Company does not currently carry key man
life insurance for any of its founders or principal officers.
OUR COMMON STOCK PRICE IS VOLATILE
The stock market has experienced extreme price and volume fluctuations,
which have particularly affected the market prices of many Internet related
companies, and which have often been unrelated to the operating performance of
these companies. The trading price of our common stock is likely to be highly
volatile and subject to wide fluctuations due to the fact that we are an
Internet company, as well as in response to the following factors:
o announcements of technological innovations, new sales formats
or new products or services by us or our competitors;
7
<PAGE>
o conditions or trends in the Internet and online commerce
industries;
o changes in the economic performance and/or market valuations
of other Internet, online service or retail companies;
o announcements by us of significant acquisitions, strategic
partnerships, joint ventures or capital commitments; and
o general economic conditions and changes or volatility in the
financial market.
These broad market and industry factors may adversely affect the market
price of our common stock, regardless of our actual operating performance. In
the past, following periods of volatility in the market price of stock, many
companies have been the object of securities class action litigation. If we were
to be sued in a securities class action, it could result in substantial costs
and a diversion of management's attention and resources.
POSSIBLE ADVERSE EFFECT OF "PENNY STOCK" RULES ON LIQUIDITY FOR THE COMPANY'S
SECURITIES
Rule 3a51-1 under the Securities Exchange Act of 1934 categorizes any
equity security as a "penny stock" where the equity security has a price of less
than $5.00 per share (other than securities registered on certain national
securities exchanges or quoted on the Nasdaq system, provided that the current
price and volume information with respect to transactions in such securities is
provided by the exchange or system), subject to certain exceptions including
where the issuer has (i) net tangible assets (equal to total assets less
tangible assets and liabilities) exceeding $2,000,000 (as demonstrated by
financial statements dated less than 15 months prior to the date of the
transaction in question) and the issuer has been in continuous operation for at
least three years; (ii) tangible net assets of at least $5,000,000, if such
issuer had been in continuous operation for less than three years; or (iii)
average annual revenue of at least $6,000,000, if such issuer has been in
continuous operation for less than three years. Rule 15g-9 under the Exchange
Act imposes sales practice requirements of broker-dealers which sell penny
stocks to persons other than established customers (as defined in Rule 15g-9) or
in other limited circumstances, including requiring the broker-dealer, prior to
any transaction in a penny stock, to make a special suitability determination
for the purchaser, to receive the purchaser's written agreement to the
transaction and to deliver a disclosure statement respecting the penny stock
rules.
The public offering price of the Company's common stock will be
sufficiently high such that the common stock will not initially be "penny
stock." However, there can be no assurance that, or when, the Company will be
able to demonstrate sufficiently that it has net tangible assets exceeding
$2,000,000, or that the price of the Company's common stock will remain above
$5.00 per share prior to the Company doing so, if at all. Therefore, since the
common stock will not initially be registered on a qualified national securities
exchange or be reported securities, there can be no assurance that the common
stock will qualify for exemption from the penny stock rules. If the Company's
securities become subject to the penny stock rules, the ability or willingness
of broker-dealers to sell or make a market in the Company's common stock may be
adversely affected and the market liquidity of the Company's securities could be
adversely affected.
8
<PAGE>
POSSIBLE ILLIQUIDITY OF THE TRADING MARKET
The Company's common stock is presently quoted on the OTC Electronic
Bulletin Board, which is a significantly less liquid market than the Nasdaq
SmallCap Market or other stock exchanges. As a result of the common stock being
quoted on the OTC Electronic Bulletin Board, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the common stock than if those securities were listed on the Nasdaq SmallCap
Market or another stock exchange. We intend to apply for listing of our common
stock on the Nasdaq SmallCap Market. However, there can be no assurance that the
Company will become able to satisfy the quantitative and other listing
requirements for listing on the SmallCap Market or any other stock exchange.
Similarly, if our listing application were accepted, there can be no assurance
that we would be able to continue to meet the requirements necessary to stay
listed.
THE OFFERING PRICE OF OUR STOCK IS ARBITRARY
Prior to this offering there has been no active trading market for our
common stock. There can be no assurances that an active market for our stock
will develop or continue after this offering. The offering price of was
determined through negotiations between the Company and the underwriter. The
offering price may not bear any relationship to the market price for our common
stock after this offering. The offering price of the shares does not bear any
relationship to assets, earnings, book value, or other criteria of value
applicable to the Company. You should not consider the offering price to be and
indication of the actual value of our common stock. The price of our stock is
subject to change as a result of market conditions and other factors. No
assurances can be given that our stock can be resold at the offering price.
WE HAVE NO OBLIGATION TO SPEND THE OFFERING PROCEEDS IN A SPECIFIED MANNER
Our management will be able to spend most of the proceeds we receive
from this offering in ways in which stockholders may not agree. We cannot
predict that the proceeds will be invested to yield a favorable return. See "Use
of Proceeds."
PAYMENTS TO AFFILIATES
The Company plans to use approximately $50,000 from the proceeds of the
offering to repay a loan to an affiliate of Jugal K. Taneja, the Company's
Chairman of the Board and Chief Executive Officer. See "Use of Proceeds."
RISKS ASSOCIATED WITH LACK OF INDEPENDENT DIRECTORS
As of the date of this prospectus, we have no independent directors.
The Company presently intends to undertake to appoint two independent directors
following completion of this offering and to purchase director and officer
liability insurance. See "Use of Proceeds." In the absence of independent
directors, however, none of the ongoing transactions, or past transactions which
are now closed, between the Company and its affiliates were approved by
independent directors, and until such independent directors are appointed, any
future transactions between the
9
<PAGE>
Company and its affiliates will continue to be approved by directors who are
also officers of the Company. See "Management - Certain Transactions with
Management."
OUR FUTURE OPERATING RESULTS ARE UNPREDICTABLE
Our revenues and operating results may fluctuate significantly from
quarter to quarter due to a number of factors, not all of which are in our
control. These factors include:
o our ability to attract and retain new customers and maintain
customer satisfaction;
o new Web sites, services and products introduced by us or by
our competitors;
o price competition;
o decreases in the level of growth, use of, or consumer
acceptance of, the Internet and other online services for the
purchase of consumer products;
o our ability to upgrade and develop our systems and
infrastructure and attract new personnel in a timely and
effective manner;
o traffic levels on our Web sites and our ability to convert
that traffic into customers;
o technical difficulties or system downtime affecting the
Internet or online services, generally, or the operation of
our Web sites;
o the failure of Internet bandwidth to increase significantly
over time and/or an increase in the cost to consumers of
obtaining or using Internet bandwidth;
o government regulations related to use of the Internet for
commerce or sales and distribution of natural products; and
o general economic conditions and economic conditions specific
to the Internet, online commerce and the software industry.
We must increase sales of natural products by increasing the number of
visitors to our online sites or by increasing the percentage of visitors to our
online sites who purchase natural products. We must also increase the number of
repeat purchasers of natural products through our online sites and increase
revenues from sales to consumer purchasers in absolute dollars and as a
percentage of our total net revenues. In addition, we must successfully
establish, maintain and enhance our brands, "Dr. Nutriceutical" and "Java Slim".
We are implementing strategies we hope will achieve these goals, such as
entering into our strategic relationship with IndigoCity.com. We cannot be
certain that we can accomplish these objectives, or that our business strategy
will be successful.
10
<PAGE>
WE MUST ESTABLISH OUR BRANDS
A growing number of Internet sites, many of which already have
well-established brands, offer products and services that compete with ours. As
a result, we believe we must establish, maintain and enhance our Dr.
Nutriceutical and Java Slim brands. Our success in promoting and maintaining our
brands or any other brand that we may use in the future will depend largely on
our ability to provide a high quality online experience supported by dedicated
customer service. We cannot assure that we will be able to meet these goals. In
addition, to attract and retain online users and to promote and maintain our
current brands or future brands, we may need to substantially increase our
marketing expenditures to create and maintain strong brand loyalty among our
customers. Our business could be adversely affected if our marketing efforts are
unproductive or if we cannot increase our brand awareness.
OUR MARKETS ARE HIGHLY COMPETITIVE
The online commerce market is new, rapidly evolving and intensely
competitive. We expect competition to intensify in the future because barriers
to entry are minimal, and current and new competitors can launch new Web sites
at a relatively low cost. In addition, the natural products industry is
intensely competitive. We currently compete primarily with traditional resellers
of natural products, other online resellers of natural products and other
vendors.
In the online market, we compete with many online resellers that
maintain similar commercial Web sites including MotherNature.com, GreenTree.com,
DrugStore.com and PlanetRx.com. We also compete with the growing number of
manufacturers that sell their natural products directly online. We anticipate
that we may soon compete with other vitamin and nutritional supplement
manufacturers and vendors that plan to sell their products directly to customers
online in the near future. We also compete with traditional store-based
retailers and mail order and/or direct marketers of natural products.
Competitive pressures created by any one of these current or future competitors,
could have a material adverse affect on our operations.
See "Business - Competition."
WE RELY ON MANUFACTURERS AND DISTRIBUTORS OF NATURAL PRODUCTS
We are entirely dependent upon the manufacturers and distributors that
supply us with natural products for resale, and the availability of these
natural products is unpredictable. We also rely on distributors to ship products
to our customers. We have limited control over the shipping procedures of our
distributors and shipments by these distributors may be subject to delays.
As is common in the industry, we have no long-term or exclusive
arrangements with any manufacturer or distributor that guarantees the
availability of any natural products for resale. Although we believe that we can
replace our relationship with our current manufacturer and distributors without
much difficulty, we might be unable to establish such new relationships.
11
<PAGE>
WE MAY HAVE POTENTIAL CONFLICTS OF INTEREST WITH INNOVATIVE HEALTH PRODUCTS,
INC.
Substantially all of the Company's sales to date have resulted from the
sale of our brand labels, which are manufactured by Innovative Health Products,
Inc. We have not entered into an agreement with Innovative Health Products to
define the ongoing relationship between the companies. Jugal K. Taneja, our
Chairman of the Board and a principal shareholder of the Company, is also a
director and principal shareholder of Innovative Health Products. As a result,
any future agreement between the Company and Innovative Health may not be deemed
the result of arms' length negotiations. Further, although we and Innovative
Health Products are engaged in different but related businesses, the companies
currently have no policies to govern the pursuit or allocation of corporate
opportunities between us in the event they arise. Our business could be
adversely affected if Innovative Health Products' interests are pursued over our
interests, either in the course of intercompany transactions or where the same
corporate opportunities are available to both the Company and Innovative Health
Products. See "Business - Warehousing and Fulfillment" and "Management - Certain
Transactions."
WE ARE SUBJECT TO RISKS ASSOCIATED WITH DEPENDENCE ON THE INTERNET AND INTERNET
INFRASTRUCTURE DEVELOPMENT
Our success will depend in large part on continued growth in, and the
use of, the Internet. There are critical issues concerning the commercial use of
the Internet which remain unresolved. The issues concerning the commercial use
of the Internet which we expect to affect the development of the market for our
products and services include:
o security o ease of access
o reliability o quality of service
o cost o necessary increases in bandwidth
availability
The adoption of the Internet for information retrieval and exchange,
commerce and communications, particularly by those enterprises that have
historically relied upon traditional means of commerce and communications,
generally will require that these enterprises accept a new medium for conducting
business and exchanging information. These entities likely will accept this new
medium only if the Internet provides them with greater efficiency and an
improved area of commerce and communication.
Demand and market acceptance of the Internet are subject to a high
level of uncertainty and are dependent on a number of factors, including the
growth in consumer access to and acceptance of new interactive technologies, the
development of technologies that facilitate interactive communication between
organizations and targeted audiences and increases in user bandwidth. If the
Internet fails to develop or develops more slowly than we expect as a commercial
or business medium, it will adversely affect our business.
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<PAGE>
WE ARE SUBJECT TO RISKS ASSOCIATED WITH ONLINE COMMERCE SECURITY AND CREDIT CARD
FRAUD
A significant barrier to online commerce and communications is the
secure transmission of confidential information over public networks. Our
business may be adversely affected if our security measures do not prevent
security breaches and we cannot assure that we can prevent all security
breaches. To the extent that our activities, or those of third-party
contractors, involve the storage and transmission of proprietary information
(such as credit card numbers), security breaches could damage our reputation,
and expose us to a risk of loss or litigation and possible liability. Under
current credit card practices, a merchant is liable for fraudulent credit card
transactions where, as is the case with the transactions we process, that a
merchant does not obtain a cardholder's signature. Fraudulent use of credit card
data in the future could adversely affect our business.
WE RELY ON STRATEGIC MARKETING ALLIANCES
In an effort to drive traffic to our Web sites, we have entered into a
marketing alliance with IndigoCity.com, Inc., a newly-formed Internet media
company that offers a branded network of comprehensive information,
communication and shopping service for customers.
Although we hope our strategic marketing alliance with IndigoCity.com
will represent a significant distribution channel for our natural products, we
cannot assume that this alliance will meet this expectation, particularly
because IndigoCity.com is new and it is not certain whether IndigoCity.com will
achieve its anticipated positive market presence and growth. Conversely, if
IndigoCity.com is successful, termination of our alliance with IndigoCity.com
could have a material adverse affect on our business. We are planning to enter
into similar marketing alliances with others. The inability to enter into
similar alliances with others may also have a material adverse affect on our
business.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS
On March 31, 1999, we completed a transaction whereby we acquired
HealthSeek.com and its award winning healthcare community Web site,
www.healthseek.com. In connection with this acquisition, we issued 200,000
shares of our common stock, plus $10,000, in exchange for all of the outstanding
shares of HealthSeek.com common stock. See "Business - The HealthSeek.com
Acquisition."
We intend to continue to make investments in complementary companies,
products or technologies. If we buy a company, we could have difficulty in
assimilating that company's personnel and operations. In addition, the key
personnel of an acquired company may decide not to work for us. If we make other
types of acquisitions, we could have difficulty in assimilating the acquired
technology or products into our operations. These difficulties could disrupt our
ongoing business, distract our management and employees and increase our
expenses. In addition, future acquisitions could have a negative impact on our
business, financial condition and results of operations. Furthermore, we may
have to incur debt or issue equity securities to pay for any future acquisition,
the issuance of which would be dilutive to our existing stockholders.
13
<PAGE>
WE ARE SUBJECT TO CAPACITY CONSTRAINT RISKS; RELIANCE ON INTERNALLY DEVELOPED
SYSTEMS AND SYSTEM DEVELOPMENT RISKS
A key element of our strategy is to generate a high volume of traffic
on, and use of, our Web sites. Our revenues depend on the number of customers
who use our Web site to purchase natural products. Accordingly, our Web site
transaction processing systems and network infrastructure performance,
reliability and availability are critical to our operating results. These
factors are also critical to our reputation and our ability to attract and
retain customers and maintain adequate customer service levels. The volume of
goods we sell and the attractiveness of our product and service offerings will
decrease if there are any systems interruptions that affect the availability of
our Web sites or our ability to fulfill orders. We have experienced periodic
systems interruptions, which we believe may continue to occur. We will
continually enhance and expand our technology and transaction processing
systems, and network infrastructure and other technologies, to accommodate
increases in the volume of traffic on our Web sites. See "Use of Proceeds." We
may be unsuccessful in these efforts or we may be unable to accurately project
the rate or timing of increases in the use of our Web sites. We may also fail to
timely expand and upgrade our systems and infrastructure to accommodate these
increases.
In addition, we cannot predict whether additional network capacity will
be available from third party suppliers as we need it. Also, our network or our
suppliers' network might be unable to timely achieve or maintain a sufficiently
high capacity of data transmission to timely process orders, especially if our
Web site traffic increases. Our failure to achieve or maintain high capacity
data transmission could significantly reduce consumer demand for our services.
WE ARE SUBJECT TO RISK OF SYSTEM FAILURE
Our success, in particular our ability to successfully receive and
fulfill orders and provide high quality customer service, largely depends on the
efficient and uninterrupted operation of our computer and communications
systems. The Company and our wholly-owned subsidiary HealthSeek.com contract
with third parties to host our computer and communications hardware systems and
to maintain our critical connection to the Internet.
Our systems and operations are vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failure, break-ins, earthquake
and similar events. We have no formal disaster recovery plan and carry no
business interruption insurance to compensate us for losses that may occur.
Furthermore, our security mechanisms or those of our suppliers may not prevent
security breaches or service breakdowns. Despite our implementation of security
measures, our servers may be vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions. These events could cause
interruptions or delays in our business, loss of data or render us unable to
accept and fulfill customer orders.
RAPID TECHNOLOGICAL CHANGE MAY ADVERSELY AFFECT US
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online stores. The Internet
and the online commerce industry are characterized by rapid technological
change, changes in user and customer requirements and
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<PAGE>
preferences and frequent product and service introductions. If competitors
introduce products and services embodying new technologies or if new industry
standards and practices emerge, then our existing Web sites, proprietary
technology and systems may become obsolete. Our future success will depend on
our ability to do the following:
o both license and/or internally develop leading technologies
useful in our business;
o enhance our existing services;
o develop new services and technology that address the
increasingly sophisticated and varied needs of our prospective
customers; and
o respond to technological advances and emerging industry
standards and practices on a cost-effective and timely basis.
The development of our Web sites and other proprietary technology
entails significant technical and business risks. We may use new technologies
ineffectively or we may fail to adapt our Web sites, proprietary technology and
transaction processing systems to customer requirements or emerging industry
standards. If we face material delays in introducing new services, products and
enhancements, our customers may forego the use of our products and services and
use those of our competitors.
YEAR 2000 RISK MAY ADVERSELY AFFECT OUR COMPANY
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the Year
2000. We have assessed our systems which permit the sale, order, processing and
delivery of natural products to our customers to determine Year 2000 compliance.
Based on our review and the results of limited testing, we believe our other
systems are Year 2000 compliant.
We also utilize software, computer technology and other services
internally developed and provided by third-party vendors that may fail due to
the Year 2000 phenomenon. For example, we are dependent on the institutions
involved in processing our customers' credit card payments for Internet
services. We are also dependent on telecommunications vendors and leased
point-of- purchase vendors to maintain network reliability.
However, known or unknown errors or defects that affect the operation
of our systems could result in delay or loss of revenue, interruption of
shopping services, cancellation of customer contracts, diversion of development
resources, damage to our reputation, costs, and litigation costs, any of which
could adversely affect our business, financial condition and results of
operation. The expenses associated with our assessment and potential remediation
plan cannot be determined. Further, at this time, we do not have enough
information to determine the most reasonably likely worst case scenario.
Therefore, we do not have a contingency plan in place to handle the most
reasonably likely worst case scenario, and we do not intend to create one.
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<PAGE>
WE MAY NOT SUCCESSFULLY PROTECT OUR PROPRIETARY RIGHTS
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success. To protect
our proprietary rights, we will rely on trademark and copyright law, trade
secret protection and confidentiality and/or license agreements with our
employees, customers, partners and others. We will pursue the registration of
our trademarks and service marks in the United States. We have applied for
Federal registration of the mark "Java Slim," and after consummation of this
offering, we intend to apply for the marks "Nutriceuticals.com" and "Dr.
Nutriceutical." We cannot be certain that federal registration of these service
marks or any other service mark will issue. In addition, effective trademark,
service mark, copyright and trade secret protection may be unavailable in every
country in which our products and services are available online. We have not
applied to register any mark outside the U.S. or taken any trademark searches to
determine whether any of these marks is available for use or registration
outside the United States in connection with vitamins and other natural
products.
To date, there have been no interruptions in the Company's business as
the result of any claim of infringement. However, no assurance can be given that
the Company will not be adversely affected by the assertion of intellectual
property rights belonging to others. The effects of such assertions could
include requiring the Company to alter or withdraw existing trademarks or
products, delaying or preventing the introduction of products, or forcing the
Company to pay damages if the products have been introduced.
The steps we take to protect our proprietary rights may be inadequate,
or third parties might infringe or misappropriate our trade secrets, copyrights,
trademarks, trade dress and similar proprietary rights. In addition, others
could independently develop substantially equivalent intellectual property. We
may have to litigate in the future to enforce our intellectual property rights,
to protect our trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and the diversion of our management and technical resources which could harm our
business.
WE MAY BECOME SUBJECT TO ADDITIONAL GOVERNMENT REGULATION
Laws and regulations directly applicable to communications or commerce
over the Internet are becoming more prevalent. The most recent session of the
U.S. Congress resulted in Internet laws regarding children's privacy,
copyrights, taxation and the transmission of sexually explicit material. The
European Union recently enacted its own privacy regulations. The law of the
Internet, however, remains largely unsettled, even in areas where there has been
some legislative action. It may take years to determine whether and how existing
laws such as those governing intellectual property, privacy, libel, contracts
and taxation apply to the Internet. In addition, the growth and development of
the market for online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on companies conducting business online. The adoption or
modification of laws or regulations relating to the Internet could adversely
affect our business.
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<PAGE>
WE MAY BE LIABLE FOR INTERNET CONTENT
We believe that our future success will depend in part upon our ability
to deliver original and compelling descriptive content (information, articles,
editorials, etc.) about the products we sell on the Internet and about related
healthcare and wellness issues. Accordingly, the Company anticipates that it
will become a publisher of online content in the foreseeable future. At such
time, we will face potential liability for defamation, negligence, copyright,
patent or trademark infringement, or other claims based on the nature and
content of materials that we publish or distribute. In the past, plaintiffs have
brought such claims and sometimes successfully litigated them against online
services. In addition, in the event that we implement a greater level of
interconnectivity on our Web sites, we will not and cannot practically screen
all of the content our users generate or access, which could expose us to
liability with respect to such content. We do not presently carry general
liability insurance, and any such insurance obtained in the future may not cover
claims of these types or may be inadequate to indemnify us for all liability
that may be imposed on us. If we face liability, then our reputation and our
business may suffer.
WE MAY BE SUBJECT TO SALES AND OTHER TAXES
We do not currently collect sales or other similar taxes for physical
shipments of goods into states other than Florida. However, one or more local,
state or foreign jurisdictions may seek to impose sales tax collection
obligations on us and other out of state companies which engage in online
commerce. In addition, any new operations in states outside Florida, including
operations assumed in connection with the acquisition of HealthSeek.com, could
subject our shipments into such states to state sales taxes under current or
future laws. If one or more states or any foreign country successfully asserts
that we should collect sales or other taxes on the sale of our merchandise, it
could adversely affect our business.
MANAGEMENT AND CERTAIN STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE OVER
NUTRICEUTICALS.COM
Based upon 5,153,414 shares outstanding as of June 14, 1999, our
current directors and executive officers and their respective affiliates will
beneficially own, in the aggregate, approximately 57% of our outstanding common
stock upon completion of this offering. In particular, Jugal K. Taneja, the
Chairman of our Board of Directors, will beneficially hold approximately 18% of
our outstanding common stock upon completion of this offering. Stephen M.
Watters, our President, will hold approximately 33% of our outstanding common
stock upon completion of this offering. Therefore, if these stockholders act
together, they will be able to exercise significant influence over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. Such concentration of ownership may also
have the effect of delaying, preventing or deterring a change in our control
which could adversely affect the market price of our common stock.
FUTURE PUBLIC SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Such sales might also
17
<PAGE>
make it more difficult for us to sell equity or equity-related securities in the
future at a time and price that we deem appropriate.
Upon completion of this offering, we will have outstanding 6,153,414
shares of common stock. Of these shares, the 1,000,000 shares sold in this
offering, together with 311,784 additional shares of our common stock, will be
freely tradeable without restriction. The remaining 4,841,630 shares of our
common stock are deemed restricted shares and will be eligible for sale within
12 months of this offering.
THE BOOK VALUE OF THE SHARES YOU PURCHASE IN THIS OFFERING WILL BE DILUTED
SUBSTANTIALLY
As of March 31, 1999, the net tangible book value of the common stock
was $.01 per share. The pro forma adjusted net tangible book value of the common
stock as of March 31, 1999 will be $.68 per share. As a result, if you purchase
shares of common stock in this offering, the net tangible book value per share
of the common stock you purchase will be diluted by an amount equal to $4.32 per
share upon the completion of this offering.
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
This prospectus contains forward-looking statements that involve risks
and uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify such
forward-looking statements. This prospectus also contains forward- looking
statements attributed to certain third parties relating to their estimates
regarding the growth of certain electronic-commerce, natural products markets
and spending. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. Our actual
results could differ materially from those anticipated in these forward- looking
statements for many reasons, including the risks faced by us described above and
elsewhere in this prospectus.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately
$8,742,051 from our sale of the 1,000,000 shares of common stock offered
by us with this prospectus based on an assumed offering price of $10.00 per
share (approximately $10,074,051 if the underwriter fully exercises its
over-allotment option). This estimate is after deducting estimated underwriting
discounts and commissions and other fees and expenses payable by us.
We intend to use approximately $5 million of the net proceeds to fund
our operations and our marketing strategies designed to build our customer base
through increased recognition of our brand names and increased traffic to our
Web sites. We also anticipate expending approximately $500,000 for development
of our Web site infrastructures, $1 million for the employment of current and
additional personnel (including $62,000 for the payment of accrued compensation
to our executive officers), $100,000 for acquisition of office and warehouse
facilities, $50,000 for the repayment of a debt to an affiliate, $5,000 for the
registration of service marks, and $65,000 for the purchase of director and
officer liability insurance. We have no specific plans for use of the remaining
proceeds and expect to use such proceeds for general corporate
18
<PAGE>
purposes, including working capital and to fund anticipated operating losses and
capital expenditures, and potential acquisitions. In this regard, the Company
may, when the opportunity arises, use an unspecified portion of the net proceeds
to acquire or invest in complementary businesses, products and technologies.
However, the Company has no present understandings, commitments or agreements
with respect to any material acquisition or investment. Until we use the net
proceeds for a particular purpose, we will invest them in short-term interest
bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends. We currently expect
to retain future earnings, if any, to finance the growth and development of our
business.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the OTC Electronic Bulletin Board and is
traded under the symbol "JCOM." We intend to apply to have our stock approved
for listing on the Nasdaq SmallCap Market.
From 1997 through March 1999, before we commenced our e-commerce
business, there was no active trading market for our common stock. From April
1999 to June 18, 1999, there were a total of 10 trades reported for our common
stock on the OTC Electronic Bulletin Board. During such period, the high ask and
low bid information as reported ranged from $26.00 per share to $4.00 per share.
On June 18, 1999, the last reported sale price of the common stock on the OTC
Electronic Bulletin Board was $4.00 per share. Due to the limited trading in our
common stock, the Company believes that such trading prices are not indicative
of a true market price for our shares.
As of June 14, 1999, there were approximately 546 shareholders of
record of the common stock.
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SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The consolidated statement of
operations data for the years ended March 31, 1998 and 1999 and the consolidated
balance sheet data as of March 31, 1998 and 1999 are derived from our
Consolidated Financial Statements which have been audited by Kirkland, Russ,
Murphy & Tapp, independent auditors, and are included elsewhere in this
prospectus, and are qualified by reference to such Consolidated Financial
Statements and the Notes thereto. The historical results are not necessarily
indicative of future results.
The unaudited selected consolidated pro forma financial data of
Nutriceuticals.com and HealthSeek.com is derived from the unaudited consolidated
pro forma financial statements of Nutriceuticals.com and HealthSeek.com and
should be read in conjunction with such pro forma statements and notes thereto
which are included elsewhere in this prospectus. For pro forma purposes,
Nutriceutical's historical consolidated statement of operations data for the
year ended March 31, 1999 have been combined with HealthSeek.com's historical
consolidated statements of operations data for the year ended December 31, 1998.
The consolidated pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the HealthSeek.com acquisition
had been in effect during the periods presented, nor is it necessarily
indicative of future operating results or financial position.
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CONSOLIDATED AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
-----------------------------------------------
1998 (1) 1999 (2) 1999 PRO FORMA (3)
--------- ----------- ------------------
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
<S> <C> <C> <C>
Net revenues ................................................. $ 7,019 $ 37,118 $ 37,118
Gross profit ................................................. (9,741) 22,622 22,622
Operating expenses:
Research and development ................................ -- -- --
Sales and marketing ..................................... -- 54,402 54,402
General and administrative .............................. 26,839 78,391 380,303
--------- ----------- -----------
Loss from operations ................................ (36,215) (110,171) (412,083)
Other income ................................................. 32,215 1,761 1,761
Net loss ..................................................... $ (4,365) $ (108,410) $ (410,322)
========= =========== ===========
Basic and diluted net loss per share ......................... (.01) $ (.04) $ N/A
===========
Pro forma basic and diluted net loss per share ............... N/A $ N/A $ (.08)
========= =========== ===========
Basic and diluted weighted average common shares outstanding . 351,028 2,744,460 5,351,028
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31
-----------------------------------------
1999
1998 1999 AS ADJUSTED(3)(4)
-------- -------- -----------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents .................................... $ 8,274 $ 56,986 $8,785,986
Working capital .............................................. (8,663) 87,738 8,816,738
Total assets ................................................. 8,274 135,618 8,864,618
Long-term obligations, net of current portion ................ -- -- --
Stockholders' equity ......................................... (8,663) 37,927 8,766,927
</TABLE>
- ---------------
(1) The March 31, 1998 financial data has been reclassified from the
liquidation basis of accounting to conform with the 1999 presentation.
(2) Includes predecessor from April 1, 1998 to September 7, 1998 (prior to
merger) and Nutriceuticals from September 8, 1998 (inception) to March
31, 1999. See the "Consolidated Financial Statements and Notes thereto,
included elsewhere herein.
(3) The pro forma 1999 consolidated statement of operations data gives
effect to certain consulting and employment agreements entered into on
March 31, 1999 and April 1, 1999, respectively, as well as the
HealthSeek.com acquisition. See "Business -- The HealthSeek.com
Acquisition" and "Management -- Employment Agreement". See also, the
Unaudited Consolidated Pro Forma Financial Information and Notes
thereto included elsewhere herein.
(4) The as adjusted data gives effect to the sale of the common stock
offered hereby as of March 31, 1999, after deduction of the estimated
offering expenses and the underwriters' discount.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Effective March 31, 1997, we adopted a plan of liquidation by which we
sold our major product line and subsequently disposed of all our operating
assets by March 31, 1998. Effective March 1999, we acquired all of the
outstanding common stock of Nutriceuticals.com Corporation, a Florida
corporation, which was organized in September 1998. We merged with
Nutriceuticals of Florida and changed our name to Nutriceuticals.com
Corporation.
We have had revenues of $37,118 since the inception of our e-commerce
business September 1998 and expenses of $128,858, as of March 31, 1999.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents at September 30, 1998 and March 31, 1998
were $4,714 and $8,274, respectively. The change was minimal due to the
Company's liquidation status during the period. On March 15, 1999, we acquired
in a merger all of the outstanding common stock of Nutriceuticals.com
Corporation, a Florida corporation. Nutriceuticals of Florida had an initial
capitalization of approximately $130,000, which funded the Company's operations
from inception through May 1999. In May, 1999 we borrowed $50,000 for working
capital from an affiliate of Jugal K. Taneja. The $50,000 note bears an annual
interest rate of prime plus one and is due and payable upon the completion of
this offering or December 31, 1999, which ever occurs earlier.
We estimate that we will need the proceeds of this offering for
on-going Web site development, marketing, promotions, and for general working
capital purposes over the next 12 months, including the Company's plans to hire
additional full-time management personnel and acquire new office space.
We made need additional capital in the future. Future equity
investments in Nutriceuticals.com may have a dilutive effect on the percentage
ownership of the Company's present shareholders. There can be no assurances that
future capital will become available when needed, or at all. In the event that
Nutriceuticals.com is not able to obtain the needed funds in the future, we may
not be able to continue operations or put its business plan into full effect.
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BUSINESS
COMPANY HISTORY
The Company was founded in 1993 under the name NuMED Surgical, Inc. to
engage in the research, development and distribution of medical instruments and
surgical supplies to the health care market. We were created when NuMED Home
Health Care, Inc., a publicly held company, spun off to its stockholders all of
the assets and liabilities of its surgical/medical products division, and the
assets and liabilities of a wholly-owned subsidiary, NuMED Technologies, Inc.
Prior to the spin off, we had no operations or business other than as a division
or wholly-owned subsidiary of NuMED Home Health Care. In connection with the
spin off, our common stock was registered on SEC Form 10-SB, under Section 12(g)
of the Securities Exchange Act of 1934.
On March 31, 1997 we adopted a plan of liquidation, sold our major
product line and disposed of all our operating assets by March 31, 1998. On
March 15, 1999, we acquired in a merger all of the outstanding common stock of
Nutriceuticals.com Corporation, a Florida corporation. Nutriceuticals of Florida
was organized in September 1998 to engage in the online retailing of natural
products over the Internet. After we acquired Nutriceuticals of Florida, we
changed our corporate name to Nutriceuticals.com Corporation.
On March 31, 1999, we acquired HealthSeek.com Corp. HealthSeek.com was
founded in 1995 to provide Web-based healthcare content and related information
to healthcare professionals, medical patients, and consumers. With the
acquisition of HealthSeek.com, the Company has become a provider of information
("content") over the Internet, and we have acquired a community of Internet
users, in addition to conducting e-commerce transactions in the natural products
industry via our Web stores. Nutriceuticals.com and our wholly-owned subsidiary
HealthSeek.com may be considered development stage companies, as revenues to
date for each have been nominal.
OVERVIEW
Nutriceuticals.com is an innovative online retailer of natural
products. Our objective is that our Web stores, www.nutriceuticals.com and
www.javaslim.com, with the aid of our Web community at www.healthseek.com,
become well-known and widely-used Web sites for the purchase of natural products
and the provision of healthcare information. We believe we can provide consumers
with superior value because we offer a select line of high quality natural
products as well as the convenience of shopping from home or office,
twenty-four-hours-a-day, seven-days-a-week.
The Company's business strategy is to offer, through our online stores
www.nutriceuticals.com and www.javaslim.com, a select line of natural products,
a convenient shopping experience and competitive prices. The Company is
implementing this strategy by offering:
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o a select line of brand name, high quality natural products
online, including the Company's own "Dr. Nutriceutical" and
"Java Slim" product lines;
o the convenience of shopping from the home or the office,
twenty-four-hours-a- day, seven-days-a-week; and
o discount prices.
We believe that the Internet is an ideal medium to sell natural
products for several reasons:
o according to Cyber Dialogue, over 17 million U.S. adults
searched for health information on the Internet for the year
ended July 1998, and this number is estimated to nearly double
in the next two years;
o according to Hambrecht & Quist, LLC's industry report dated
January 8, 1999, the e-commerce market for vitamins and other
nutraceuticals is estimated to exceed $12 billion annually by
the year 2001; and
o a potentially large and attractive customer base for the
Internet healthcare market, made up of wealthier, more
educated, and slightly more experienced Internet users than
the average adult online user.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND ONLINE COMMERCE
The Web and commercial online services such as America Online allow
millions of people to share information and conduct business electronically.
International Data Corporation estimates that the total value of goods and
services purchased over the Web will increase from approximately $32.4 billion
in 1998 to approximately $425.7 billion by 2002. A number of factors contribute
to the growth of the Internet and its increased commercial use, including:
o large and growing numbers of personal computers in the home
and workplace;
o improvements in network infrastructure and bandwidth;
o easier and cheaper access to the Internet;
o increased awareness of the Internet among consumers; and
o the rapidly expanding availability of online content and
commerce which increases the value to users of being connected
to the Internet.
According to International Data Corporation, the number of Web users
worldwide will increase from approximately 97.3 million at the end of 1998 to
approximately 319.8 million by the end of 2002. International Data Corporation
further estimates that the percentage of Web users
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buying goods and services on the Internet will increase from approximately 28%
at the end of 1998 to approximately 40% by the end of 2002.
TRADITIONAL NATURAL PRODUCTS INDUSTRY
According to industry studies, the retail market for vitamins and
nutritional supplements has grown from only $3.5 billion in 1991 to an estimated
$8 billion in 1997. Currently growing at an annual rate of 15.0%, industry
sales, at retail, are expected to exceed $12 billion annually by 2001. This
growth has resulted from increased national interest in preventive health
alternatives, favorable consumer attitude shifts toward natural health care, an
increased consumer bias towards self-care in response to rising health care
costs, and a rapidly growing segment of the population over 40 years old that is
concerned with aging and disease. Additionally, through mainstream media, the
public has become increasingly aware of the positive impact of vitamins and
other nutritional supplements on health. Recent estimates indicate that
approximately 40% of the U.S. population use nutritional supplements in some
form.
Currently, most industry sales are transacted through traditional
retail stores and mail order catalogs. However, these channels are inherently
limited by their narrow product selections, lack of convenience and inability to
provide high value-added customer and product-specific information in a private,
interactive environment. We believe that such limitations present the Company
with a significant opportunity to resell natural products through a new, more
robust mode of distribution. This new mode of distribution is the Internet.
THE NUTRICEUTICALS.COM SOLUTION
Nutriceuticals.com is a recently formed, innovative, Internet-based
electronic retailer specializing in the sale of select line of popular
nutritional supplements and natural products at discounted prices. Through our
Web stores, www.nutriceuticals.com, and www.javaslim.com, we offer a solution to
many of the inefficiencies inherent in the traditional natural products
reselling model. Key components of our solution include:
SELECTION
Through a search and retrieval interface, we currently offer a select
line of brand name, high quality vitamins and other natural products through our
online store at www.nutriceuticals.com. In addition we offer a similar selection
of diet-related products through our www.javaslim.com store. In addition,
consumers can request products not specifically offered in the index of products
on our online stores. While we presently offer only a select line of popular
natural products (approximately 300 products under 10 brand names), our Web
stores are not limited by the shelf space or storage capacity of a traditional
bricks and mortar stores. In contrast, we have the ability to offer an extensive
breadth of selection that would be economically impractical to stock in a
physical store or to include in a mail-order catalog. We may extend our product
offerings in the future, however there can be no assurances that the Company
will extend the line of natural products offered at any of its Web stores. For
the foreseeable future, the Company intends to maintain its select but full line
of natural products. However, we can, and
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presently do, fulfill customer's special orders for products not specifically
offered at our Web stores. See "Business - Products."
ONLINE STORE ECONOMICS
As an online retailer, we enjoy meaningful structural economic
advantages relative to traditional retailers. As a result of our online business
model, we eliminate investment in expensive retail real estate and related
expenses, and we reduce personnel requirements. In addition, the Company
believes that through our method of online selling we will be able to target
customers for particular product offerings, and because we order most products
based on actual customer demand, returns of products to manufacturers and
wholesalers will be significantly below industry norms.
CUSTOMER CONVENIENCE
Beyond the benefits of selection, purchasing natural products from us
is more convenient than shopping in a physical store because our store is open
24 hours a day and shopping does not require a trip to a store. Products can be
shipped directly to the customer's home or office. The Company believes that
customers may buy more natural products because they have more hours to shop,
can act immediately on a purchase impulse and can locate products that are hard
to find. Because our store has unlimited reach, it can deliver a wide selection
of natural products to customers in rural or other locations that cannot support
a large-scale physical vitamin and natural products store.
CUSTOMER SERVICE
The Company maintains a toll-free 800 telephone line to facilitate
customers' transactions. In addition, we send an electronic confirmation to our
customers after an order has been placed. The Company also offers consumers an
opportunity to submit questions regarding the Company's products or nutrition in
general, and customers are encouraged to provide their e-mail addresses.
COMPELLING CONTENT
Through the recent acquisition of our wholly-owned subsidiary
HealthSeek.com and its Web community at www.healthseek.com, the Company now
delivers relevant, informative, entertaining, and high quality healthcare
information that ranges from clinical information to other health-related topics
such as wellness, fitness, and diet. By providing high quality content
(information) at our HealthSeek Web site, the Company hopes to provide consumers
with an inviting and familiar experience that will encourage them to return to
the HealthSeek Web site, interact with other visitors of the site, visit our Web
stores at www.nutriceuticals.com and www.javaslim.com, and ultimately result in
loyalty and frequent repeat visits to our Web sites in the future.
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STRATEGY
The Company's objective is to be a leading online retailer of natural
products. The Company plans to attain this goal through the following key
strategies:
CREATE CUSTOMER LOYALTY
The Company's goal is to be a source for natural products by delivering
to its customers the benefits of online commerce. We strive to offer our
customers compelling value through select line of natural products, customer
service, and competitive pricing. In addition, the Company seeks to offer its
customers a high-quality shopping experience through informative and
entertaining content at its HealthSeek.com Web site, as well as simple and
efficient navigation and search capabilities at its online stores.
CREATE BRAND RECOGNITION AND GENERATE TRAFFIC TO OUR WEB SITES
Our www.nutriceuticals.com Web site was launched in mid-February 1999,
and our www.javaslim.com Web store opened in June 1999. In order to be a
successful reseller of natural products, we must build awareness of our Web
sites to attract and expand our Internet customer base. We intend to promote,
advertise and increase recognition of our Web stores and our brand names, "Dr.
Nutriceutical" and "Java Slim," through a variety of marketing and promotional
techniques, including:
o co-marketing agreements with major online sites and services;
o online content and ease of use of our Web sites;
o enhanced customer service and technical support;
o advertising on radio, television, leading web sites and other
traditional media;
o conducting an ongoing public relations campaign; and
o developing other business alliances and partnerships.
DEVELOP STRATEGIC RELATIONSHIPS
We believe that developing strategic relationships with a diverse set
of partners, including on-line portals, broad band access providers and on-line
content providers, is critical to our success because such strategic marketing
alliances may enhance our brand recognition, increase customer sales and expand
our online visibility. As a result, we intend to enter into relationships with
Internet access providers, search engines and other high traffic Web sites. See
"Business Marketing and Sales."
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MAINTAIN TECHNOLOGY FOCUS AND EXPERTISE
A state of the art, interactive commerce platform is necessary to
enhance the services we offer and to expand the benefits of online reselling of
natural products. We also intend to upgrade our technology platform to further
enhance our customer interaction and support systems which we believe offer us a
competitive advantage. We will continue to expend substantial efforts to
develop, purchase, license and make technological advancements to our Web sites
and our transaction processing systems to enhance our availability, reliability
and site up-time, and to improve the efficiency of our fulfillment activities.
See "Use of Proceeds."
LEVERAGE SUPERIOR ECONOMIC MODEL; FOCUS ON ONLINE ENVIRONMENT
We believe we have inherent economic advantages relative to natural
product retailers operating through stores or catalogs because we are not
burdened with the personnel costs or overhead of operating a physical store or
the costs and limitations of selling through printed catalogs. We can also
effectively target potential natural product customers because the demographics
of Internet users overlap one-to-one with the demographics of potential natural
products purchasers. Leveraging our online model will allow us to achieve cost
and margin advantages compared to traditional natural products resellers.
ATTRACT AND RETAIN EXCEPTIONAL EMPLOYEES
Talented employees, management and directors provide significant
advantages in the rapidly evolving electronic commerce market. We intend to
devote substantial efforts to building a talented employee base. See "Use of
Proceeds."
ONLINE COMMUNITY
If successful, the content-based Web site of the Company's subsidiary
HealthSeek.com will provide the Company with a critical mass of loyal and
frequent users. In additon, the HealthSeek.com Web site facilitates interaction
between customers through postings on its message board. The development of a
vibrant online community of frequent HealthSeek.com users may potentially
facilitate the Company's e-commerce business, by providing links to the
Company's online stores. Presently, HealthSeek.com's Web site contains a banner
directing potential customers to the Nutriceuticals.com Web site.
The development of an online community of users may also enable the
Company to expand into additional revenue areas including (i) advertising, (ii)
sponsorship, and (iii) value-added services offerings such as hospital
information access (e.g. lab results), answering services, transcription, and
staffing services. There can be no assurance that the Company will develop a
large and loyal community through its HealthSeek.com Web site, or that if such a
community develops, that the Company will be able to successfully capitalize on
any additional revenue opportunities that the existence of such a community may
present.
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COLLABORATIVE FILTERING
With a portion of the proceeds of this offering, we presently intend to
further develop our online stores with the addition of a collaborative filtering
service for our customers. Such collaborative filtering software will function
as an expert reviewer that accumulates information about customers and helps
them to find products they may like based on their preferences. It will match
these preferences by drawing from a pool of products chosen by other
Nutriceuticals.com customers who share similar interests and tastes.
OUR ONLINE STORES
Customers enter our online stores at www.nutriceuticals.com and
www.javaslim.com. Our Nutriceuticals store opened in February 1999, and our Java
Slim store was launched in June 1999. The Company's goal is to make the shopping
process as easy as possible for customers through our simple, intuitive and easy
to use online stores. Users accessing our Web stores will generally fall into
one of two categories: individuals who know what products they want to buy and
seek to purchase it immediately in a highly convenient manner, or individuals
who will browse the stores, seeking an entertaining and informative shopping
experience. We designed our online stores to satisfy both types of users in a
simple, intuitive fashion.
Presently, customers who use our online stores can:
o conduct targeted searches through an index of selected natural
products;
o browse among featured products and special offerings;
o obtain a confirmation of their orders; and
o access our customer support representatives by telephone and
fax during regular business hours, and by e-mail
twenty-four-hours-a-day, seven-days-a-week.
We expect to further improve our online stores to include, product
reviews, greater interactivity, and product presentations that we design based
on customer preferences.
Shoppers purchase products by simply clicking on a button to add
products to their virtual shopping baskets. Just as in a physical store,
customers can add and subtract products from their shopping baskets as they
browse prior to making a final purchase decision. To execute orders, customers
click on the buy button. A message on the screen prompts customers to supply
shipping and, in the case of consumers, credit card details, either by e-mail or
by telephone. All customer information is stored on our secure server. Our
system automatically confirms each order by e-mail to the customer after the
customer places the order, and advises customers by e-mail after the product is
shipped. We provide customer service and support, answer general questions and
make available product information by telephone, fax and e-mail. We do not
currently charge our customers for service and support services.
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PRODUCTS
We currently offer at our Web stores approximately 300 high-quality
natural products packaged under 10 brand names, including our own two brands,
"Dr. Nutriceutical" and "Java Slim." Substantially all of the Company's sales to
date have come from the sale of our brand label products, of which approximately
50 % of such sales have been derived from the sale of the Company's Java Slim
weight loss coffee. Our select product line, however, includes a full range of
widely used vitamins and supplements and other natural products. Due to the
efficiencies related to online inventory, we have the ability to, and may in the
future, offer a broader selection of natural products, including hard to find
and specialty products which may not be available in traditional vitamin stores.
We do not carry significant inventory and we rely on manufacturers and
distributors of natural products to fulfill our customers' orders. When a
customer places an order, we promptly transmit the order information to a vendor
and distributor for processing and rapid shipment to our customers. This allows
us to offer a potentially unlimited and evolving selection of products, while
avoiding the high costs and capital requirements associated with owning and
warehousing product inventory.
At present, a single manufacturer of natural products, Innovative
Health Products, an affiliated company, supplies us with (i) all of the products
we sell under our brand labels, (ii) 30% of the products offered at our Web
stores, and (iii) over 95% of the products we have sold since the opening of our
first online store in mid-February 1999. See "Business - Warehousing and
Fulfillment, and "Management - Certain Transactions." We have no formal
agreement with Innovative Health Products to continue to fulfill our customers'
orders.
In the event a customer desires to purchase products which we cannot
fulfill through Innovative Health Products, the Company has entered into an
agreement with an unaffiliated distributor of natural products for the
fulfillment and distribution of such orders. Although we believe that we can
replace our relationship with Innovative Health Products without much
difficulty, if this relationship terminates we cannot be assured that we will be
able to establish new relationships with other vendors.
MARKETING AND SALES
STRATEGIC RELATIONSHIPS
We intend to pursue strategic relationships to expand our online
presence, increase our access to online customers and build our brand
recognition. See "Use of Proceeds." In pursuing these relationships, we seek to
be the exclusive or semi-exclusive reseller of natural products on key screens
of major Web sites. To date, we have entered into one such strategic alliance.
In April 1999, we entered into a non-exclusive agreement with
IndigoCity.com, Inc., a newly formed Internet media company that offers a
branded network of comprehensive information, communication and shopping service
for customers. IndigoCity.com's Web page is currently located at
www.indigocity.com. IndigoCity.com's Web site was launched in June 1999.
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Under our agreement with IndigoCity.com, we must pay a monthly hosting
fee to IndigoCity.com. In addition, we must distribute 50% of gross margin for
our products that are sold as a result of our strategic alliance with
IndigoCity.com. Generally, "gross margins" shall be equal to gross revenue from
such sales, less cost of product and cost of shipping. In addition,
IndigoCity.com has the following responsibilities to us under our marketing
alliance:
o incorporate the Nutriceuticals.com Web site contents into
feature sections and spotlight articles on the IndigoCity.com
Web site;
o build an IndigoCity.com banner and/or logo that we will place
on the home page of our Web site, that will allow visitors
that come from IndigoCity.com's Web site to return; and
o use its best efforts to cross promote our products and
services on an ongoing basis.
We must provide IndigoCity.com with our Web site, and valuable
health-related content in the form of products, services, articles and reviews.
Accordingly, we must purchase health- related content for our
www.nutriceuticals.com Web site. See "Use of Proceeds."
TRADITIONAL ADVERTISING
In March, 1999, we began to promote our online store through a
proactive advertising program. This program initially targeted potential
customers through radio broadcasts. We intend to expand our advertising programs
to national media outlets such as magazines and newspapers. We may eventually
advertise on television. We believe an expanded advertising program will
facilitate the growth of our brand, increase the reach of our name recognition
and direct new customers to our online stores.
ONLINE ADVERTISING
In addition to strategic agreements and traditional advertising, we
intend to use many online sales and marketing techniques to increase brand
recognition and direct traffic to our online stores. These include purchasing
banner advertising on search engine Web sites and Internet directories and
direct links from healthcare home pages. See "Use of Proceeds."
We can display banner advertisements for certain periods of time or
when a user searches for information relating to certain keywords (such as
"vitamins") and programs, as well as the names of vendors. We plan to establish
direct links with the Web sites for certain vendors. These links allow a
potential customer visiting that vendor's Web site to automatically link to our
order form and purchase our products. In order to display banner advertisements
on our Web sites, we will need to upgrade our Web site platforms. See "Use of
Proceeds."
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DIRECT MARKETING
We believe that the demographics of Internet users overlap one-to-one
with the demographics of potential of natural products purchasers and that the
Internet provides additional opportunities for direct marketing to the Company's
customers through a variety of mechanisms. We may use direct marketing
techniques to target new and existing customers with customized offers such as
an e-mail newsletter that includes purchase recommendations based on
demonstrated customer preferences or prior purchases. In order to engage in such
direct marketing opportunities, we will need to upgrade our Web site platform
technology. See "Use of Proceeds."
AFFILIATES PROGRAM
We intend to expand our market presence by allowing affiliate Web sites
to offer natural products to their audience for which we provide fulfillment.
The affiliate embeds a hyperlink to our site, together with software recommended
for that affiliate's targeted customers base. This hyperlink automatically
connects the customer to our online store where the affiliate's customer may
place an order. The affiliate can offer enhanced services and recommendations,
while avoiding ordering and fulfillment costs. Under these short term
arrangements, we would be required to pay the affiliate a percentage of the
sales they generate. Generally, these agreements can be terminated with limited
notice. To capitalize on affiliate programs, we presently intend to make the
necessary enhancements to our Web site platform technology. See "Use of
Proceeds."
CUSTOMER SERVICE AND SUPPORT
We believe that we can establish and maintain long-term relationships
with our customers and encourage repeat visits and purchases if, among other
things, we have good customer support and service. We currently offer online
information regarding our products and nutrition in general. We answer customer
questions about the ordering process, and investigate the status of orders,
shipments and payments. A customer can access our staff by fax or e-mail by
following prompts located on our Web sites, or by calling our toll free
telephone line. Customers who do not wish to enter their credit card numbers
through one of our Web sites also may use the toll free line for purchases. We
may eventually increase the level of, and outsource, our customer support and
services through a provider of customer support services. See "Use of Proceeds."
WAREHOUSING AND FULFILLMENT
Electronically ordered products often are shipped within hours of our
receipt of a customer's order. We currently fulfill substantially all of our
orders from a single vendor, Innovative Health Products, an affiliated company.
We carry minimal inventory and rely to a large extent on fulfillment of our
customers' orders from Innovative Health Products, which carries a broad
selection of natural products. We have no formal agreement with Innovative
Health Products. See "Management - Certain Transactions." For the fulfillment of
orders that cannot be filled by Innovative Health Products, we have a written
agreement with an unaffiliated supplier and distributor of natural products. See
"Risk Factors - Reliance on Certain Suppliers," and "Business - Products."
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TECHNOLOGY AND SECURITY
We contract with a Web site provider that specializes in providing
scaleable business solutions to high volume Internet sites for mission critical
Internet connectivity. We contracted with the provider to deliver a secure
platform for server hosting with uninterruptible power supply and back up
generators, fire suppression, raised floors, heating ventilation and
air-conditioning, separate cooling zones, operations twenty-four-hours-a-day,
seven-days-a-week.
Notwithstanding these precautions, we cannot assure that the security
mechanisms used by us, our suppliers or our Internet provider will prevent
security breaches or service breakdowns. Despite the network security measures
we have implemented, our servers may be vulnerable to computer viruses, physical
or electronic break-ins and similar disruptions. Such a description could lead
to interruptions or delays in our service, loss of data, or our inability to
accept and fulfill customer orders. Any of these events would materially hurt
our business, results of operations and financial condition.
To be a successful online retailer, we must maintain the integrity of
information, particularly the security of information such as credit card
numbers. We believe that our existing security systems are at least as secure as
those used for traditional transactions (i.e., in store or mail order
purchases). We also believe that we have a comprehensive security strategy. Our
system automatically monitors each purchase, confirms each order by e-mail to
the customer after the customer places the order and advises customers by e-mail
after physical shipment of an order.
The Company is greatly aware of the importance of securing and
utilizing the most sophisticated information technology solutions available on
the market. Toward that goal, we will explore new and innovative solutions that
can improve the reliability, efficiency and scalability of our Web sites. As we
intend to create a highly enjoyable and secure shopping experience for our
customers, committed to achieving and maintaining technological leadership in
the e-commerce industry. See "Use of Proceeds."
THE HEALTHSEEK.COM ACQUISITION
On March 31, 1999, we completed the acquisition of HealthSeek.com
Corp., and its popular and award winning healthcare content and community site,
www.healthseek.com. HealthSeek.com is frequented daily by hundreds of care
giving professionals, medical patients, and consumers. The site offers a rich
set of features and important resources, as well as monthly "spotlighted" Web
sites and client offerings, to make each user experience pleasant, informative
and fun. The acquisition of HealthSeek.com is intended to provide content and
community and generate traffic to the Company's online stores. The following is
a summary of certain aspects of the acquisition agreement and is qualified in
its entirety by reference to the Agreement and Plan of Reorganization dated as
of March 31, 1999. In connection with this acquisition, we have issued 200,000
shares of our Nutriceuticals.com common stock to HealthSeek.com's sole
shareholder in exchange for all of the outstanding shares of HealthSeek.com
common stock. Also pursuant to the purchase agreement with HealthSeek.com, the
Company entered into a consulting arrangement with the sole shareholder of
HealthSeek.com to maintain and operate the HealthSeek.com Web site. Under the
terms of the consulting agreement, our consultant received
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an initial $10,000 payment, and he will receive an additional $40,000 annual
salary for the current year, and for every year in which the consulting
agreement is renewed by the Company.
COMPETITION
The online commerce market is new, rapidly evolving and intensely
competitive. We expect competition to intensify in the future because barriers
to entry are minimal, and current and new competitors can launch new Web sites
at relatively low cost. In addition, the natural products reselling industry is
intensely competitive. We currently compete primarily with traditional
resellers, other online resellers and other vendors of natural products, such as
MotherNature.com, GreenTree.com, DrugStore.com and PlanetRx.com. We also compete
with:
o mail order and/or direct marketers of vitamin and nutritional
supplements products including cataloguers such as Vitamin
Shoppe and Vitamin Discount Connection; and with manufacturers
such as Twin Labs, Natrol, and Nature's Way; and
o major store-based retailers of vitamin and nutritional
supplements and other related products, such as GNC,
Walgreens, Eckard, and Walmart.
Further, these traditional store-based retailers and mail order and/or direct
marketers of natural products have established or may soon establish, commercial
Web sites offering vitamins, nutritional supplements, and other natural
products.
Unlike other well-publicized product categories such as online book or
compact disc retailing, there is no current market leader in the online
provision of natural products to consumers. Our immediate goal is to position
ourselves as a leading online natural products retailer. To that end, the
Company believes that its early entry into the online natural products market
will enable it to establish critical competitive advantages over future
competitors. Management believes that such competitive advantages include the:
o establishment of a recognizable brand;
o development of online marketing and media relationships;
o acquisition of exclusive advertising space;
o creation and development of a powerful Affiliate Program;
o development of important relationships with manufacturers,
distributors, and content providers; and most importantly
o acquisition of customers.
There are substantial barriers to entry in the nutritional supplement
industry that have prohibited the development of a major online leader to date.
Unlike the more mature book and compact disc industries, which have established
fulfillment mechanisms to "drop-ship" product,
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the natural products manufacturing and distribution industries are highly
fragmented and relatively inefficient. As a result, natural product resellers
must address numerous, and significant, order fulfillment challenges.
Although the Company has direct competition from several small online
merchants, there is no established leader that has been able to capture
significant market share to date. A number of indirect online commerce
competitors who may potentially compete in this market include GreenTree.com and
MotherNature.com.
Competitive pressures created by any one of these current or future
competitors, or by our competitors collectively, could materially hurt our
business. We believe that the principal competitive factors in our market are:
o brand recognition o speed and accessibility
o selection o customer service
o convenience o quality of site content
o price o reliability and speed of fulfillment
Many of our current and potential competitors have longer operating
histories and larger customer bases than we do. In addition, many of our current
and potential competitors have greater brand recognition and significantly
greater financial, marketing and other resources than we do. In addition, as
more people use the Internet and other online services, larger, well established
and well financed entities may:
o acquire online competitors or suppliers;
o invest in online competitors or suppliers; or
o form joint ventures with online competitors or suppliers.
Certain of our actual or potential competitors, such as
MotherNature.com, DrugStore.com, GreenTree.com and PlanetRx.com, may be able to:
o secure merchandise from vendors on more favorable terms;
o devote greater resources to marketing and promotional
campaigns;
o adopt more aggressive pricing or inventory availability
policies; and
o devote substantially more resources to Web site and systems
development than we do.
In addition, new technologies and expansion of existing technologies,
such as price comparison programs that select specific titles from a variety of
Web sites, may direct customers
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to online resellers which compete with us and may increase competition.
Increased competition may reduce our operating margins, as well as cause a loss
to both our market share and brand recognition. Further, to strategically
respond to changes in the competitive environment, we may sometimes make
pricing, service or marketing decisions or acquisitions that could materially
hurt our business. In addition, companies controlling access to Internet
transactions through network access or Web browsers could promote our
competitors or charge us a substantial fee for inclusion in their product or
service offerings. We cannot assure that we can compete successfully against
current and future competitors. Failure to compete successfully against our
current and future competitors could materially hurt our business.
LEGAL PROCEEDINGS
From time to time, we may become involved in litigation arising in the
ordinary course of our business. We are not presently subject to any material
legal proceedings.
PROPRIETARY RIGHTS
We will rely on a combination of copyright, trademark, patent and trade
secret laws and contractual restrictions to establish and protect our technology
and proprietary rights and information. We currently have applied for protection
of our "Java Slim" brand name. We intend to apply for protection of our "Dr.
Nutriceutical" brand name, and for "Nutriceuticals.com." See "Use of Proceeds."
We require employees and consultants to sign confidentiality and non-competition
agreements. However, we cannot assure you that our steps will be sufficient to
prevent misappropriation of our technology, proprietary rights and information,
or that our competitors will not independently develop technologies that are
substantially equivalent or superior to ours.
EMPLOYEES
As of March 31, 1999, we employed 4 persons. Labor unions do not
represent any of our employees. We consider our employee relations to be good.
Competition for qualified personnel in our industry is intense, particularly for
technical staff. Upon consummation of the offering, we intend to hire
approximately 15 additional personnel who will be responsible for marketing,
advertising, Web development, and general and administrative activities. We
believe that we need to attract, hire and retain qualified personnel to be
successful in the future. See "Use of Proceeds."
FACILITIES
Our principal administrative, marketing and customer service facilities
total approximately 400 square feet of office and warehouse space, which is
located at 6950 Bryan Dairy Road, Largo, Florida 33777, and is currently
provided to us, without charge, by Innovative Health Products, an affiliated
company. See "Management - Certain Transactions." These facilities will not be
sufficient for the near future, and after this offering, the Company plans to
acquire new facilities of 1,000 to 3,000 square feet for administrative,
customer service and limited warehousing purposes. See "Use of Proceeds."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information for each director and
executive officer of the Company.
NAME AGE POSITION
---- --- ---------
Jugal K. Taneja 55 Chairman of the Board,
Chief Executive Officer
Stephen M. Watters 32 President and Director
Mandeep K. Taneja 24 Director
Pursuant to the Company's bylaws, each director of the Company serves
as a director for a term of one (1) year and until his successor is duly
qualified. Officers shall be appointed annually by the Board of Directors, at
its annual meeting, to hold such office until an officer's successor shall have
been duly appointed and qualified, unless an officer sooner dies, resigns or is
removed by the Board.
Set forth below is the business experience and other biographical
information regarding our directors and officers.
JUGAL K. TANEJA has served as the Chief Executive Officer of the
Company from its inception in October 1993 until April 18, 1995, and from
January 1, 1996 until the present. He has also served as the President,
Secretary and a Director of the Company since its inception. In addition, Mr.
Taneja currently serves as the Chairman of the Board and Chief Executive Officer
of NuMED Home Health Care, Inc., which operates eight wholly-owned subsidiaries
providing home health care services and staffing, and contract rehabilitation
staffing, since its inception in 1991; and as the Chairman of the Board of
Dynamic Health Products, Inc. since its inception in 1991. Dynamic Health
Products, Inc., is a manufacturer and distributor of nutritional and health
products, and the parent company of Innovative Health Products, Inc.; Becan,
Inc.; Incredible Products. Previously, Mr. Taneja served as Senior Vice
President of Union Commerce Bank and Huntington National Bank from 1979 to 1983.
STEPHEN M. WATTERS was President and a Director of Nutriceuticals.com
since the inception in September 1998 until its merger with and into the Company
in March, 1999. Since the merger he has been President and a Director of the
Company. Mr. Watters was Vice President of Finance of Dynamic Health Products,
Inc., a manufacturer and distributor of nutritional and health products, during
September, October and November 1998. Prior to his association with Dynamic
Health Products, Mr. Watters was in the investment banking and brokerage
business. He served as Vice President, Sales for Gilford Securities, from
February 1998 to September 1998; Vice President, Sales for Hobbs, Melville
Corp., from November 1997 to February 1998; and as Branch Manager, Sales, with
Schneider Securities, Inc. from 1995 to
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1997. He received his Executive Masters of Business Administration Degree from
Case Western Reserve University in 1997.
MANDEEP K. TANEJA has served as Director of Nutriceuticals.com since
its inception in September 1998. During the past five years, Mandeep Taneja
earned an undergraduate degree in Business Management from the University of
Rochester, and a doctorate degree from the University of Miami School of Law. He
is currently a law clerk with the law firm of Johnson, Blakely, Pope, Bokor,
Ruppel & Burns, P.A., Tampa, Florida. Mandeep Taneja has actively invested in
various venture capital activities and he is the son of Jugal K. Taneja.
DIRECTOR MEETINGS AND COMMITTEES
During the fiscal year ended March 31, 1999, the Board of Directors of
the Company held a total of 7 meetings. Each of the Directors attended more than
seventy-five percent (75%) of the total number of meetings of the Board of
Directors. The Company does not have standing audit, nominating or compensation
committees, or committees performing similar functions.
COMPENSATION OF DIRECTORS
Our directors currently receive no compensation for their services as a
director.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth all cash and/or
non-cash compensation paid to or accrued for the past three (3) fiscal years for
the Company's Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SALARY, BONUS, &
NAME AND PRINCIPAL POSITION (1) FISCAL YEAR ENDED MARCH 31 ALL OTHER COMPENSATION ($)
- ------------------------------- -------------------------- --------------------------
<S> <C> <C>
Jugal K. Taneja, Chief Executive Officer 1999 0
1998 0
1997 0
</TABLE>
- ---------------
1 We have no officers or other individuals whose compensation from the
Company exceeded $100,000 in any of the past three (3) fiscal years.
EMPLOYMENT AGREEMENTS
In the first quarter of the current fiscal year, we entered into an
employment agreement with Mr. Watters which provides for an initial term of
three years commencing April 15, 1999 at an initial base salary of $150,000,
plus an annual performance bonus and stock options to be determined by the Board
of Directors, in exchange for Mr. Watters' full-time services to the
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Company. Mr. Watters' employment agreement also contains standard termination
provisions for disability, for cause, and for good reason. Mr. Watters'
employment agreement further provides for health insurance benefits and contains
confidentiality and non-competition provisions that prohibit him form competing
with us. The period covered by the non-competition provisions will end three
years after Mr. Watters' termination.
We also entered into and employment agreement with our Chief Executive
Officer, Mr. Jugal K. Taneja for an initial term of one year commencing April
15, 1999, at an annual salary of $100,000, in exchange for Mr. Taneja's services
to Nutriceuticals.com. It is anticipated that Mr. Taneja will devote
approximately 25% of his time to the affairs of the Company. Mr. Taneja's
employment agreement also contains standard termination provisions for
disability, for cause, and for good reason. Mr. Taneja's employment agreement
further provides for health insurance benefits and contains confidentiality and
non-competition provisions that prohibit him form competing with us. The period
covered by the non-competition provisions will end three years after Mr.
Taneja's termination.
Accrued payments owing under the employment agreements with Messrs.
Taneja and Watters, in the aggregate amount of $62,500, will be paid out of the
proceeds of this offering. See "Use of Proceeds."
1999 STOCK OPTION PLAN
Under the Company's 1999 Stock Option Plan, 400,000 shares of common
stock are reserved for issuance upon exercise of stock options. The Plan is
designed as a means to retain and motivate key employees. The Board of Directors
administers and interprets the Plan. Options may be granted to all eligible
employees of the Company, including officers and non-employee directors and
others who perform services for the Company.
The Plan provides for the granting of both incentive stock options (as
defined in Section 422 of the Internal Revenue Code) and non-statutory stock
options. Options are granted under the Plan on such terms and at such prices as
determined by the Board of Directors, except that the per share exercise price
of the options cannot be less than the fair market value of the common stock on
the date of the grant. Each option is exercisable after the period or periods
specified in the option agreement, but no option may be exercisable after the
expiration of ten years from the date of grant. Options granted under the Plan
are not transferable other than by will or by the laws of descent and
distribution. Presently, the Company has not granted any options under the Plan.
CERTAIN TRANSACTIONS WITH MANAGEMENT
INNOVATIVE HEALTH PRODUCTS, INC.
Innovative Health Products is the supplier of substantially all of
natural products sold by the Company, however, there presently is no agreement
between the Company and Innovative Health Products for the fulfillment of the
Company's customer orders. Innovative Health Products is a wholly-owned
subsidiary of Dynamic Health Products, Inc., a manufacturer and distributor of
nutritional and health products. Dynamic Health Products is a wholly-owned
subsidiary of
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NuMED Home Health Care, which is approximately 56% beneficially owned and
operated by Jugal K. Taneja, our Chairman of the Board and Chief Executive
Officer. Any products obtained by Nutriceuticals.com from Innovative Health
Products have been and will continue to be supplied on terms which are not less
favorable than those which we could obtain from a disinterested third party
vendor or less favorable than those on which Innovative Health Products would
sell to a disinterested third party. See "Risk Factors -- Reliance on Certain
Suppliers," "Business -Products, and - Warehousing and Fulfillment."
We are currently utilizing office and warehouse space, and general
office equipment, which has been provided to us, without charge, by Innovative
Health Products. See "Business - Warehouse and Fulfillment."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
all executive officers, directors, and each person who is the beneficial owner
of more than 10% of the common shares of a company that files reports pursuant
to Section 12 of the Exchange Act, are required to report the ownership of such
common shares, options, and stock appreciation rights (other than certain
cash-only rights), and any changes in that ownership, with the Securities and
Exchange Commission (the "SEC"). Specific due dates for these reports have been
established, and the Company is required to report, in this Proxy Statement, any
failure to comply therewith during the fiscal year ended March 31, 1998. The
Company believes that all of these filing requirements are presently satisfied
by its Officers, Directors and by the beneficial owners of more than 10% of the
Nutriceuticals.com common stock, except that 21st Century Healthcare Fund, LLC
made an inadvertently late filing of its Form 3 (Initial Statement of Beneficial
Ownership of Securities), which form must be filed with the SEC shortly after a
person becomes a 10% beneficial owner. In making this statement, the Company has
relied on copies of the reporting forms received by it, and upon the written
representations from certain reporting persons that no Form 5 (Annual Statement
of Changes in Beneficial Ownership) were required to be filed under applicable
rules of the SEC.
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SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock as of June 14, 1999, by (i)
each Officer and Director of the Company, (ii) each person known to own
beneficially more than 5% of the Company's Common Stock, and (iii) all Directors
and Officers as a group. As of June 14 , 1999 there were approximately 5,153,414
common shares issued and outstanding.
NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
OF BENEFICIAL OWNER OF BENEFICIAL OWNER (1)(2) OF CLASS
- -------------------------- -------------------------- ----------
21st Century Healthcare Fund LLC (3)............... 600,000 11.6%
6950 Bryan Dairy Road
Largo, Florida 35777
Stephen M. Watters................................. 2,000,000 38.8%
Jugal K. Taneja (4)................................ 1,077,630 20.9%
Manju Taneja (5)................................... 423,642 8.2%
Mandeep K. Taneja (6).............................. 400,000 7.8%
All Directors and Officers as a group (3 persons).. 3,477,630 67.5%
- -------------------
1 Number of shares beneficially owned is determined based on 5,153,414
shares outstanding as of June 14, 1999. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. The number of shares beneficially owned by a person
includes shares of common stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of April
30, 1999. Such shares issuable pursuant to such options are deemed
outstanding for computing the percentage ownership of the person
holding such options but not deemed outstanding for the purposes of
computing the percentage ownership of each other person. To our
knowledge, the persons named in this table have sole voting and
investment power with respect to all shares of common stock shown as
owned by them, subject to community property laws where applicable and
except as indicated in the other footnotes to this table. Unless
otherwise indicated, the address of each of the individuals named above
is: c/o Nutriceuticals.com Corporation, 6950 Bryan Dairy Road, Largo,
Florida 35777.
2 Except as otherwise indicated by footnote, the persons named in the
table have sole voting and investment power with respect to all of the
common shares beneficially owned by them.
3 21st Century Healthcare Fund, LLC, is a limited liability company of
which Jugal K. Taneja is the principal.
4 Includes all of the shares held of record by 21st Century Healthcare
Fund, LLC, a limited liability company of which Jugal K. Taneja is the
principal; 17,988 shares held of record by The First Delhi Trust, a
trust established for the benefit of the children of Jugal K. Taneja;
36,000 shares held of record by Westminster Trust Company, a
partnership in which Jugal K. Taneja is the general partner; and
420,982 shares held of record by Manju Taneja, his spouse. Mr. Taneja
disclaims voting power with respect to the shares held of record by his
spouse.
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5 Includes 2,660 shares held of record by Jugal K. Taneja, her spouse.
Ms. Taneja disclaims voting power with respect to the shares held of
record by her spouse. Does not include shares held of record by 21st
Century Healthcare Fund, LLC, The First Delhi Trust or Westminster
Trust Company, whose shares are beneficially owned by her husband.
6 Mandeep K. Taneja is the adult son of Jugal K. Taneja and Manju Taneja.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
We are authorized to issue up to 48,000,000 shares of common stock and
2,000,000 shares of preferred stock. The following description of our capital
stock is not complete and is qualified in its entirety by our articles of
incorporation and bylaws, both of which are included as exhibits to the
registration statement of which this prospectus forms a part, and by applicable
Nevada laws.
COMMON STOCK
As of June 14, 1999, there were approximately 5,153,414 shares of
common stock outstanding held by approximately 546 stockholders of record.
Subject to preferences that may be applicable to any outstanding shares of
preferred stock, our board of directors may declare a dividend out of funds
legally available and the holders of common stock are entitled to receive
ratably any such dividends. In the event of our liquidation, dissolution or
winding up, holders of our common stock are entitled to share ratably in all of
our assets remaining after we pay our liabilities and liquidation preferences of
any outstanding shares of preferred stock. Holders of our common stock have no
preemptive rights or other subscription rights to convert their shares into any
other securities. There are no redemption or sinking fund provisions applicable
to the common stock.
PREFERRED STOCK
Our board of directors has the authority, without further action by our
stockholders, to issue up to 2,000,000 shares of preferred stock in one or more
series and to fix the privileges and rights of each series. These privileges and
rights may be greater than those of the common stock. Our board of directors,
without further stockholder approval, can issue preferred stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of common stock. This type of "blank check preferred
stock" makes it possible for us to issue preferred stock quickly with terms
calculated to delay or prevent a change in our control or make removal of our
management more difficult. Additionally, if we issue this preferred stock, then
the market price of common stock may decrease, and voting and other rights may
decrease. We currently have no plans to issue any of this preferred stock.
INDEMNIFICATION
While these provisions provide directors with protection from awards
for monetary damages for breaches of their duty of care, they do not eliminate
such duty. Accordingly, these provisions will have no effect on the availability
of equitable remedies such as an injunction or
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rescission based on a director's breach of his or her duty of care. The
provisions described above apply to an officer of a corporation only if he or
she is a director of such corporation and is acting in his or her capacity as
director, and do not apply to the officers of the corporation who are not
directors.
Our bylaws provide that, to the fullest extent permitted by the Nevada
Revised Statutes, we may indemnify our directors, officers and employees. Our
bylaws further provide that we may similarly indemnify our agents. In addition,
we anticipate that each director will enter into an indemnification agreement
pursuant to which we will indemnify such director to the fullest extent
permitted by the. At present, there is no pending litigation or proceeding
involving any of our directors or officers in which indemnification is required
or permitted, and we are not aware of any threatened litigation or proceeding
that may result in a claim for such indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American
Securities Transfer & Trust, Inc. The transfer agent's address is 938 Quail
Street, Suite 101, Lakewood, Colorado 80215 and telephone number is (303)
234-5300.
SHARES ELIGIBLE FOR FUTURE SALES
Sales of a substantial number of shares of common stock in the public
market following the offering made by this prospectus could adversely affect
market prices prevailing from time to time. Furthermore, sales of substantial
amounts of common stock in the public market after various resale restrictions
lapse could adversely affect the prevailing market price and our ability to
raise equity capital in the future.
Upon the completion of this offering, 6,153,414 shares of common stock
will be outstanding, based on 5,153,414 shares outstanding on June 14, 1999, and
assuming the underwriters do not exercise their over-allotment option. Of these
shares, the 1,000,000 shares sold in this offering will be freely tradeable
without restriction under the Securities Act. In addition, approximately 311,784
additional shares are freely tradeable without restriction.
The remaining 4,841,630 shares outstanding upon completion of the
offering will be "restricted securities" as that term is defined in Rule 144 and
may not be sold publicly unless they are registered under the Securities Act or
are sold pursuant to Rule 144 or another exemption from registration. Of these
restricted securities, no shares are eligible for immediate sale without
restriction under Rule 144(k) and 23,642 shares are eligible for immediate sale
pursuant to Rule 144 under the Securities Act, subject to compliance with the
volume limitations and other restrictions under Rule 144. In connection with
this offering, the holders of 3,477,630 shares of common stock (consisting of
our directors, officers and 5% holders) have entered into lock-up agreements
with Kashner Davidson Securities under which they have agreed not to offer, sell
or otherwise dispose of any such shares of common stock, any options or warrants
to acquire shares of common stock or any securities convertible into shares of
common stock (or any shares of common stock issuable upon exercise or conversion
of securities) owned by them for a period of 18 months after the date of this
prospectus. Kashner Davidson Securities may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
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<PAGE>
such lock-up agreements. Kashner Davidson Securities currently has no plans to
release any portion of the securities subject to such lock-up agreements.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
(as defined in Rule 144) for at least one year (including the holding period of
any prior owner, except an affiliate) is entitled to sell, within any three
month period, a number of shares that does not exceed the greater of (i) one
percent of the number of shares of common stock then outstanding or (ii) the
average weekly trading volume of the common stock on the Nasdaq National Market
during the four calendar weeks preceding the required filing of a Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions and notice requirements and to the availability of current
public information about us. Under Rule 144(k), a person who is not deemed to
have been an affiliate at any time during the 90 days preceding a sale, and who
has beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume and other limitation or notice provisions of Rule 144. In
general, under Rule 701 of the Securities Act as currently in effect, any
employee, consultant or advisor of ours who purchases shares from us in
connection with a compensatory stock or option plan or other written agreement
is eligible to resell such shares 90 days after the effective date of our
initial public offering (which was completed in June 1998) in reliance on Rule
144, but without compliance with certain restrictions, including the holding
period, contained in Rule 144.
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated June ___ , 1999, we have agreed to sell to the
underwriters named below, for whom Kashner Davidson Securities Corporation is
acting as representative, the following numbers of shares of common stock:
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
Kashner Davidson Securities Corporation .....................
Total ................................................... 1,000,000
=========
The underwriting agreement provides that the underwriters are obligated
to purchase all of the shares of common stock in the offering, if any are
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an underwriter
defaults the purchase commitments of non-defaulting underwriters may be
increased or the offering of common stock may be terminated.
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We have granted to the underwriters a 45 day option to purchase up to
150,000 additional shares of common stock at the offering price, less
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and, to certain
selling group members at that price less a concession of $________ per share.
The underwriters and selling group members may allow a discount of $
_____________ per share on sales to other broker/dealers. After the offering,
the public offering price and concession and discount to dealers may be changed
by the representatives.
The following table summarizes the compensation and estimated expenses
we will pay.
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
Underwriting Discounts and Commissions $ $ $
paid by Nutriceuticals.com
Expenses payable by Nutriceuticals.com $ $ $
As additional compensation to the underwriters, the underwriting
agreement provides for the sale to the underwriters, for an aggregate of $100,
warrants to purchase an number of shares in the amount up to 10% of the total
shares of common stock sold in the offering. The underwriter's warrant will be
exercisable, in whole or in part, between the first and fifth years, at an
exercise price equal to 120% of the offering price of this offering. The
underwriters shall have the option to require us to register the warrants and/or
the common stock underlying the warrants.
We and certain of our directors, officers and stockholders have agreed
that we and they will not offer, sell, contract to sell, announce their
intention to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the Securities and Exchange Commission a registration statement under
the Securities Act of 1933 relating to any additional shares of the common stock
or securities convertible into or exchangeable or exercisable for any shares of
the common stock, without the prior written consent of Kashner Davidson
Securities, for a period of 18 months after the date of this prospectus.
We have agreed to indemnify the underwriters against liabilities under
the Securities Act, or contribute to payments that the underwriters may be
required to make in that respect.
The representatives may engage in over-allotment, stabilizing
transactions, syndicate covering transactions, penalty bids and "passive" market
making in accordance with Regulation M under the Securities Exchange Act of
1934. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the shares of common stock in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
shares of common stock originally sold by such syndicate member are
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purchased in a syndicate covering transaction to cover syndicate short
positions. In "passive" market making, market makers in the securities who are
underwriters or prospective underwriters may, subject to certain limitations,
make bids for or purchases of the securities until the time, if any, at which a
stabilizing bid is made. These stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the common stock to be
higher than it would otherwise be in the absence of these transactions. These
transactions may be effected on the over-the-counter Bulletin Board or otherwise
and, if commenced, may be discontinued at any time.
Prior to this offering there has been no active trading market for our
common stock. Accordingly, the offering price of the shares was determined by
negotiation between the Company and the underwriter. Factors considered in
determining such price and terms, include prevailing market conditions and an
assessment of our future prospects. The offering price of the shares does not
bear any relationship to assets, earnings, book value, or other criteria of
value applicable to the Company. You should not consider the offering price to
be and indication of the actual value of our common stock. The price of our
stock is subject to change as a result of market conditions and other factors.
No assurances can be given that our stock can be resold at the offering price.
LEGAL MATTERS
Certain legal matters will be passed on for us by our counsel, Schifino
& Fleischer, P.A., Tampa, Florida. Certain legal matters will be passed on for
the underwriters by Sichenzia, Ross & Friedman, LLP, 135 West 50th Street, 20th
Floor, New York, New York 10020.
EXPERTS
Kirkland, Russ, Murphy & Tapp, Clearwater, Florida, independent
auditors, have audited our consolidated financial statements and financial
statement schedule as of March 31, 1997 and 1998, as set forth in their report.
We have included our consolidated financial statements in the prospectus and
elsewhere in the registration statement in reliance on Kirkland, Russ, Murphy &
Tapp's report, given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, file
reports, proxy statements and other information with the SEC. Such reports,
proxy statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661 and Seven World Trade Center, 13th Floor, New York, NY 10048. Copies of
such material can be obtained from the Public Reference Section of the SEC upon
payment of certain fees prescribed by the SEC. The SEC's Web site contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of that site is
http://www.sec.gov. Our common stock is quoted on the OTC Electronic Bulletin
Board and our reports, proxy statements and other information may also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
46
<PAGE>
We have filed a Registration Statement on Form SB-2 with the SEC under
the Securities Act in respect of the common stock offered hereby. This
prospectus, which is a part of the registration statement, omits certain
information contained in the registration statement as permitted by the SEC's
rules and regulations. For further information with respect to
Nutriceuticals.com and the common stock offered hereby, please reference the
registration statement, including its exhibits. Statements herein concerning the
contents of any contract or other document filed with the SEC as an exhibit to
the registration statement are not necessarily complete and are qualified in all
respects by such reference. Copies of the registration statement, including all
exhibits and schedules thereto, may be inspected without charge at the public
reference facilities maintained by the SEC, or obtained at prescribed rates from
the Public Reference Section of the SEC at the address set forth above.
47
<PAGE>
INDEX TO FINANCIAL STATEMENTS
NUTRICEUTICALS.COM CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Kirkland, Russ, Murphy & Tapp, Independent Auditors......... F-2
Consolidated Balance Sheets .......................................... F-3
Consolidated Statement of Income...................................... F-4
Consolidated Statements of Changes in Net Deficiency in Liquidation... F-5
Consolidated Statements of Stockholders' Equity (Deficit)............. F-6
Consolidated Statement of Cash Flows.................................. F-7
Notes to Consolidated Financial Statements............................ F-8
UNAUDITED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION
Unaudited Consolidated Pro forma Financial Information ............... F-16
Unaudited Consolidated Pro forma Statement of Operations.............. F-17
Notes to Consolidated Unaudited Pro forma Financial Statements........ F-18
F-1
<PAGE>
REPORT OF KIRKLAND, RUSS, MURPHY & TAPP
To the Board of Directors and Shareholders
Nutriceuticals.com Corporation:
We have audited the accompanying consolidated balance sheets of
Nutriceuticals.com Corporation, as of March 31, 1999 and 1998, and the related
statements of income, stockholders' equity, and cash flows for the period from
September 8, 1998 (date of inception) to March 31, 1999, and the related
statement of changes in net deficiency in liquidation for the period from April
1, 1998 to September 7, 1998 and the year ended March 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Nutriceuticals.com, Corporation as of March 31, 1999 and 1998, and results of
its operations and its cash flows for the period from September 8, 1998 (date of
inception) to March 31, 1999, and results of its changes in net deficiency in
liquidation for the period from April 1, 1998 to September 7, 1998 and the year
ended March 31, 1998, in conformity with generally accepted accounting
principles.
KIRKLAND, RUSS, MURPHY & TAPP
Clearwater, Florida
April 26, 1999
F-2
<PAGE>
NUTRICEUTICALS.COM CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash $ 56,986 8,274
Accounts receivable, less allowance for doubtful
accounts of $-0- and $13,270, in 1999 and 1998 9,278 --
Due from related party 5,171 --
Inventory 16,303 --
-------- --------
Total current assets 87,738 8,274
Computer software, net 47,500 --
Deposits 380 --
-------- --------
$135,618 8,274
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable 80,186 500
Accrued expenses 17,505 16,437
-------- --------
Total current liabilities 97,691 16,937
Stockholders' equity (deficit):
Preferred stock, $.001 par value, 2,000,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $.001 par value, 48,000,000 shares
authorized, 5,351,028 shares issued and outstanding 5,352 --
Additional paid-in capital 137,050 --
Deficit (104,475) --
Net deficiency in liquidation, attributed to 351,028
shares -- (8,663)
-------- --------
Total stockholders' equity (deficit) 37,927 (8,663)
-------- --------
$135,618 8,274
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
NUTRICEUTICALS.COM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD FROM SEPTEMBER 8, 1998 (DATE OF INCEPTION)
TO MARCH 31, 1999
Net revenues $ 37,118
Cost of revenues 14,496
-----------
Gross profit 22,622
Selling, general and administrative expenses 128,858
-----------
Operating loss (106,236)
Other income:
Interest income 1,761
-----------
Net loss $ (104,475)
===========
Basic and diluted net loss per share of common stock (.02)
Weighted common shares outstanding 4,617,695
===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
NUTRICEUTICALS.COM, CORPORATION
STATEMENTS OF CHANGES IN NET DEFICIENCY IN LIQUIDATION
FOR THE PERIOD FROM APRIL 1, 1998 TO SEPTEMBER 7, 1998
AND THE YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
APRIL 1, 1998
TO MARCH 31,
SEPTEMBER 7, 1998 1998
----------------- ---------
<S> <C> <C>
Increase in net assets in liquidation:
Sales $ -- 3,918
Bad debt recovery -- 3,101
--------- --------
Decreases in net assets in liquidation:
Cost of goods sold -- (16,760)
Professional fees (3,875) (13,012)
Occupancy -- (6,432)
Office expense (60) (1,283)
Other -- (6,112)
--------- --------
Decrease in net assets in
liquidation before adjustments (3,935) (36,580)
Adjustments of estimated values -- 32,215
--------- --------
Decrease in net assets in liquidation (3,935) (4,365)
Beginning net liabilities in liquidation (8,663) (4,298)
--------- --------
Ending net liabilities in liquidation $ (12,598) (8,663)
========= ========
Loss per share:
Loss attributable to common stockholders $ (3,935) (4,365)
Net loss per common share (basic and diluted) (.01) (.01)
========= ========
Weighted common shares outstanding (basic and diluted) 351,028 351,028
========= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
NUTRICEUTICALS.COM, CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 1998 AND MARCH 31, 1999
<TABLE>
<CAPTION>
ADDITIONAL RETAINED NET TOTAL
COMMON PAID-IN EARNINGS DEFICIENCY STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) IN LIQUIDATION EQUITY (DEFICIT)
------- ------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at March 31, 1997,
on the liquidation basis
of accounting $ -- -- -- (4,298) (4,298)
Loss attributable to common
stockholders -- -- -- (4,365) (4,365)
------ -------- -------- ------- --------
Balances at March 31, 1998,
on the liquidation basis of
accounting -- -- -- (8,663) (8,663)
Loss attributable to common
stockholders prior to merger -- -- -- (3,935) (3,935)
Recapitalization at date of merger 352 (12,950) -- 12,598 --
September 24, 1998, initial
capital contribution, 4,000,000
shares at $.075 per share 4,000 26,000 -- -- 30,000
October 30, 1998 sale of 800,000
shares of common stock at $.125
per share 800 99,200 -- -- 100,000
Issuance of 200,000 shares at
$.125 per share for acquisition 200 24,800 -- -- 25,000
Net loss -- -- (104,475) -- (104,475)
------ -------- -------- ------- --------
Balances at March 31, 1999 $5,352 137,050 (104,475) -- 37,927
====== ======== ======== ======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
NUTRICEUTICALS.COM CORPORATION
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 8, 1998 (DATE OF INCEPTION)
TO MARCH 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $ (104,475)
Adjustment to reconcile net loss to net cash used by
operating activities:
Amortization expense 2,500
Change in operating assets and liabilities:
Accounts receivable, net (9,278)
Due from related party (5,171)
Inventory (16,303)
Deposits (380)
Accounts payable 69,311
Accrued expenses 1,068
---------
Net cash used by operating activities (62,728)
Cash flows from investing activities:
Purchase of computer software (15,000)
---------
Net cash used in investing activities (15,000)
Cash flows from financing activities:
Initial capital contributions 30,000
Sale of common stock 100,000
---------
Net cash provided by financing activities 130,000
Net increase in cash 52,272
Cash at beginning of period 4,714
Cash at end of year $ 56,986
========
</TABLE>
Supplemental disclosure of non-cash financing activity:
In exchange for 200,000 shares of its common stock at $.125 per share and
$10,000 cash (in accounts payable), the Company acquired all of the common stock
of HealthSeek.com, Inc. on March 31, 1999.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
NUTRICEUTICALS.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND MERGER
NuMed Surgical, Inc. (NuMed) was engaged in the research,
development and distribution of medical instruments and
surgical supplies to the health care market since February
1991. Effective March 31, 1997, NuMed adopted a plan of
liquidation in which it sold its major product line and
subsequently disposed of all its operating assets by March 31,
1998.
Effective March 1999, NuMed acquired all of the outstanding
common stock of Nutriceuticals.com, Corporation
(Nutriceuticals), which was organized in the State of Florida
on September 8, 1998 (date of inception). Nutriceuticals is
engaged in the retailing of nutritional supplements via the
Internet. For accounting purposes, the acquisition has been
treated as an acquisition of NuMed by Nutriceuticals and as a
recapitalization of Nutriceuticals. Additionally,
Nutriceuticals was merged into NuMed and NuMed changed its
name to Nutriceuticals.com, Corporation (the Company).
As a result of the merger, each issued and outstanding share
of Nutriceutical's common stock was converted into one share
of NuMed's common stock (on a one-for-fifty post-reverse stock
split basis). The results of operations of the consolidated
companies are reflected as if the above transaction took place
at September 8, 1998 (date of inception). Consequently, for
comparative purposes, the consolidated financial statements
have been presented as if the Company were a single entity for
all periods presented and all significant intercompany
accounts and transactions have been eliminated in
consolidation.
(b) ACQUISITION
Effective March 31, 1999, the Company acquired HealthSeek.com
Corp. (HealthSeek), a Massachusetts corporation. HealthSeek is
a health care community website providing information to
health care professionals and consumers. The acquisition was
accounted for using the purchase method of accounting. The
Company acquired all of the common stock of HealthSeek, in
exchange for 200,000 (post two-for-one split) shares of voting
common stock and $10,000 cash. In consideration of the sale
and transfer of the shares, the Company acquired the
registered domain name HealthSeek and all assets, copyrights
and other documentation relating to the website and assumed
all costs and expenses related to the ongoing maintenance of
the website. HealthSeek did not have significant historical
book assets, liabilities or revenues and expenses during its
limited operating history. The purchase price was allocated to
HealthSeek's only asset, it's website. HealthSeek is a
wholly-owned subsidiary of the Company.
F-8
<PAGE>
NUTRICEUTICALS.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(c) DESCRIPTION OF BUSINESS
The Company and its wholly-owned subsidiary, Healthseek,
consists of two distinct linked websites providing web-based
health care communications and related information to
consumers, including retailing low-priced nutritional
supplements via the Internet (e- commerce).
(d) COMPARABILITY OF FINANCIAL INFORMATION
The significant accounting policies of the Company conform
with generally accepted accounting principles and reflect
practices appropriate to the businesses in which it operates.
On March 31, 1997, the Company adopted a plan of liquidation
in which it sold its major product line and subsequently
disposed of all its operating assets. The Company accounted
for the liquidation using the liquidation basis of accounting.
Thus, the post liquidation basis financial statements as of
and for the year ended March 31, 1998, and for the period from
April 1, 1998 to September 7, 1998, are not comparable to the
consolidated financial statements as of March 31, 1999, and
for the period from September 8, 1998 (date of inception) to
March 31, 1999.
(e) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. All significant
intercompany accounts have been eliminated in the
consolidation.
(f) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.
(g) RISKS AND UNCERTAINTIES
(1) Concentration of Credit Risk
Financial instruments, which potentially subject the
Company to significant concentrations of credit risk,
consist principally of cash and cash equivalents.
Substantially all of the Company's cash and cash
equivalents are vested in short-term money market
accounts, which bear minimal risk, and are available
on demand. The carrying amounts reported in the
balance sheets for cash and cash equivalents
approximate their fair values due to the short-term
nature of
F-9
<PAGE>
NUTRICEUTICALS.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) Business Risk
The markets for the products and services offered on
HealthSeek.com and Nutriceuticals.com are intensely
competitive. The Company competes with both
traditional distribution channels and online
services. The Company may potentially face
competition from a number of other online services
that have expertise in developing online commerce and
in facilitating Internet traffic.
(3) Significant Customers
The Company is entirely dependent upon the
manufacturers and distributors that supply natural
products for resale. Currently, sales and purchases
of natural products provided by Innovative Health
Products, Inc., a related party, account for a
substantial portion of the Company's revenues and
inventory.
(h) INCOME TAXES
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under
the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Valuation
allowances are established when necessary to reduce deferred
tax assets to amounts expected to be realized.
(i) ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates.
(j) PRODUCT DEVELOPMENT COSTS
Product development costs that consist primarily of website
development and maintenance services are expensed as incurred.
F-10
<PAGE>
NUTRICEUTICALS.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(k) ADVERTISING COSTS
Advertising costs are charged to expense in the period the
costs are incurred. Advertising expense was $54,402 for the
period from September 8, 1998 (date of inception) to March 31,
1999, and $-0- for the period from April 1, 1998 to September
7, 1998 and the year ended March 31, 1998.
(l) REVENUE RECOGNITION
The Company recognizes revenue when goods or services are
provided.
(m) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
(n) ACCOUNTS RECEIVABLE
Accounts receivable are due primarily from individuals through
credit card sales via e- commerce and from companies and
individuals concentrated in the state of Florida via
traditional distribution channels.
(o) COMPUTER SOFTWARE
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-1,
ACCOUNTING FOR COSTS OF COMPUTER SOFTWARE DEVELOPED OR
OBTAINED FOR INTERNAL USE, This SOP is effective for fiscal
years beginning after December 15, 1998 and requires
capitalization of certain costs of computer software developed
or obtained for internal use.
Computer software are stated at cost less accumulated
amortization. Amortization is recorded using the straight-line
method over an estimated useful life of three years.
(p) NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board issued SFAS
No. 128, EARNINGS PER SHARE, and, in February 1998, the
Securities and Exchange Commission issued Staff Accounting
Bulletin No. 98 related to SFAS 128. SFAS 128 replaced the
calculation for primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is similar to the
previously reported fully diluted earnings per share. The
Company has no common stock equivalents at March 31, 1999 and
1998, resulting in diluted earnings per share.
F-11
<PAGE>
NUTRICEUTICALS.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(q) RECENT ACCOUNTING PRONOUNCEMENTS
(1) Comprehensive Income
Effective April 1, 1998, the Company adopted SFAS No.
130, REPORTING COMPREHENSIVE INCOME. Under SFAS 130
changes in net assets of an entity resulting from
transactions and other events and circumstances from
non-owner sources are reported in the financial
statements for the period in which they are
recognized. Because there were no such changes,
adoption of SFAS 130 did not impact the consolidated
financial statements of the Company.
(2) Segment Reporting
Effective April 1, 1998, the Company adopted SFAS No.
131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION. The Company operates as a single
segment and will evaluate additional segment
disclosure requirements as it expands its operations.
(3) Derivative Instruments and Hedging Activities
In June 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES was released. The
statement requires the recognition of all derivatives
as either assets or liabilities in the balance sheet
and the measurement of those instruments at fair
value. The accounting for changes in the fair value
of a derivative depends on the planned use of the
derivative and the resulting designation. The Company
is required to implement the statement in the first
quarter of fiscal 2000. The Company has not used
derivative instruments and believes the impact of
adoption of this statement will not have a
significant effect on the consolidated financial
statements.
(4) Long-Lived Assets
The Company has adopted SFAS No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG- LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 121
requires that long-lived assets and certain
identifiable intangibles held and used by an entity
be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of
an asset may not be recoverable. If the sum of the
expected future cash flows (undiscounted and without
interest) is less than the carrying amount of the
asset, an impairment loss is recognized. Measurement
of that loss would be based on the fair value of the
asset. SFAS 121 also generally requires long-lived
assets and certain identifiable intangibles to be
disposed of to be reported at the lower of the
carrying amount or the fair value less cost to sell.
F-12
<PAGE>
NUTRICEUTICALS.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) INVENTORIES
Inventories at March 31, 1999 and 1998 consist of the following:
1999 1998
--------- --------
Nutritional supplements $ 16,303 --
======== ========
(3) COMPUTER SOFTWARE
Computer software consists of the following at March 31, 1999 and
1998:
1999 1998
--------- ----------
HealthSeek.com website domain $ 35,000 --
Nutriceuticals.com website domain 15,000 --
------- ---------
50,000 --
Less accumulated amortization (2,500) --
------- ---------
Net computer software $ 47,500 --
======= =========
Amortization related to computer software totaled approximately
$2,500 for the period from September 8, 1998 (date of inception) to
March 31, 1999, and $0 for the period from April 1, 1998 to September
7, 1998, and the year ended March 31, 1998.
(4) RELATED PARTY TRANSACTIONS
The Company's principal administrative, marketing and customer
service facilities are currently provided without charge by
Innovative Health Products, Inc., a related party.
Innovative Health Products, Inc. is the Company's principal supplier
of natural products and has common significant shareholder's of the
Company.
Amounts due to related party represent amounts due to Innovative
Health Products, Inc. for the purchase of inventory.
(5) INCOME TAXES
The Company had no income tax expense for the periods from April 1,
1998 to September 7, 1998, and from September 8, 1998 (date of
inception) to March 31, 1999, or the year ended March 31, 1998.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. The Company had no such differences at March 31, 1999 and
1998.
F-13
<PAGE>
NUTRICEUTICALS.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of March 31, 1999, the Company has approximately $41,000 of
federal and $6,000 of state net operating loss carryforwards (NOL) to
offset future income through 2014.
MARCH 31, 1999
Net operating losses, federal $ 41,000
Net operating losses, state 6,000
--------
47,000
Valuation allowance (47,000)
---------
Net operating loss carryforward $ --
=========
FASB 109 requires a valuation allowance to reduce the deferred tax
assets reported, if based on the weight of the evidence, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. As such, a $47,000 valuation allowance has been
established at March 31, 1999.
(6) STOCKHOLDERS' EQUITY
As discussed in note 1, the merger between NuMed and Nutriceuticals
has been accounted for as a reverse acquisition/ recapitalization
and, as a result, for comparative purposes, the consolidated
financial statements, including equity transactions, have been
presented as if the Company were a single entity for all periods
presented.
On January 15, 1999, the Board of Directors approved a one-to-fifty
reverse stock split of the outstanding shares of NuMed Common Stock.
The reverse stock split reduced the number of outstanding shares of
NuMed Common Stock, but did not reduce the total number of shares
authorized. Prior to the reverse stock split, approximately 8,775,685
shares of NuMed Common Stock were issued and outstanding. Following
the reverse stock split, 175,514 shares of NuMed common stock
remained outstanding and, pursuant to the merger agreement,
shareholders of Nutriceuticals received, in exchange for each issued
and outstanding share of Nutriceuticals Common Stock, one share of
NuMed Common Stock, on a post reverse stock split basis. The post
reverse split shares issued and outstanding to the shareholders of
the Nutriceuticals were 2,400,000. Shareholders' equity has been
restated to give retroactive recognition to the stock split in prior
periods. Total number of shares of Common Stock issued and
outstanding following the reverse split was 2,575,514 (prior to the
two-for-one stock split (see Note 9a)).
(7) CONSULTING AGREEMENT
On March 31, 1999, the Company acquired Healthseek, and, as a result
of the acquisition, entered into a consulting agreement with the
seller to maintain and operate the website. The consultant shall
devote six hours per week to provide such services, including
implementation of the matters as
F-14
<PAGE>
NUTRICEUTICALS.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
described in the agreement. Annual compensation to be paid by the
Company as a result of the agreement is $40,000, payable monthly,
with the first payment due May 1, 1999. The term of the agreement is
for one year, expiring on March 31, 2000.
(8) SUBSEQUENT EVENTS
(a) STOCK SPLIT
On April 14, 1999, the Company's Board of Directors
authorized a two-for-one stock split effected in the form of
a stock dividend distributed to shareholders of record on
April 26, 1999. As a result of the split, 2,675,514
additional shares were issued. All share and per share data
appearing in the consolidated financial statements and notes
thereto have been retroactively adjusted for the stock
split.
(b) STRATEGIC ALLIANCE
During the second quarter of 1999, the Company entered into
a strategic alliance with IndigoCity.com, Inc. (Indigo
City), a Florida corporation. Indigo City will provide
advertising, developmental and technical services on its
website on behalf of the Company. The parties agree to
equally share gross margin revenues as a result of the
strategic alliance. The Company will incur expenses of $150
per month for cross promotional products and services on
Indigo City's website.
(c) SECONDARY OFFERING
During fiscal year 2000, the Company intends to complete a
secondary stock offering in which approximately 1,000,000
shares of common stock are expected to be issued. The
proceeds will be used to fund working capital and marketing
expenses.
(9) YEAR 2000 ISSUE (UNAUDITED)
The Company does not expect the Year 2000 Issue to have a significant
effect on operations. Management of the Company does not expect major
vendors or customers to be unable to sell to, provide services to, or
purchase from the Company because of the Year 2000 Issue.
F-15
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On March 31, 1999, we completed a transaction whereby we purchased all
of the outstanding shares of the common stock of HealthSeek.com. In connection
with the purchase, we issued 200,000 shares of our common stock (on a post stock
dividend basis) to the sole shareholder of HealthSeek.com.
The unaudited consolidated pro forma financial information for
Nutriceuticals.com set forth below gives effect to certain consulting and
employment agreements as well as the acquisition of HealthSeek.com. The
historical information set forth below has been derived from, and is qualified
by reference to, the consolidated financial statements of Nutriceuticals.com,
and should be read in conjunction with those financial statements and the notes
thereto included elsewhere herein. The financial statements of HealthSeek.com
have not been included herewith, as HealthSeek.com has not had any revenues to
date and its expenses have been nominal.
The unaudited consolidated pro forma financial information set forth
herein combines the statement of operations of Nutriceuticals.com for the year
ended March 31, 1999 and the HealthSeek.com statement of operations for the year
ended December 31, 1998, and reflects certain adjustments, including among
others, adjustments to reflect a website consulting agreement and certain
employment contracts entered into subsequent to March 31, 1999. The information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" and the financial
statements and notes to the financial statements of Nutriceuticals.com, which
are included elsewhere herein. The unaudited consolidated pro forma financial
information set forth below does not purport to project the future consolidated
results of operations or financial condition of Nutriceuticals.com.
F-16
<PAGE>
UNAUDITED CONSOLIDATED PRO FORMA
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NUTRICEUTICALS HEALTHSEEK FOR
FOR THE YEAR THE YEAR ENDED PRO FORMA
ENDED MARCH DECEMBER 31, PRO FORMA MARCH 31,
31, 1999(1) 1998 ADJUSTMENTS 1999
---------- ----- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues ......................................... $ 37,118 -- -- $ 37,118
Gross profit ......................................... 22,622 -- -- 22,622
Operating expenses
Research and development ........................ -- -- -- --
Sales and marketing ............................. 54,402 -- -- 54,402
General and administrative ...................... 78,391 245 11,667(2) 380,303
40,000(3)
250,000(4)
---------- ----- ---------- ----------
Total operating expenses ............................. 132,793 245 301,667 434,705
---------- ----- ---------- ----------
Loss from continuing operations ...................... (110,171) (245) (301,667) (412,083)
Interest income ...................................... 1,761 -- -- 1,761
---------- ----- ---------- ----------
Net loss ............................................. (108,410) (245) (301,667) (410,322)
---------- ----- ---------- ----------
Basic and diluted net loss per share ................. $ (0.04) (.08)
========== ==========
Weighted average shares outstanding .................. 2,744,460 5,351,028(5)
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION.
F-17
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
Pro forma adjustments for unaudited pro forma condensed statement of
operations for the year ended March 31, 1999 are as follows:
(1) Includes predecessor from April 1, 1998 to September 7, 1998
(prior to merger) and Nutriceuticals from September 8, 1998
(inception) to March 10, 1999. See Consolidated Financial
Statements and Notes there to included elsewhere herein.
(2) Amount of Web site domain of $35,000 amortized over 3 years.
(3) Annual compensation for Web site maintenance per consulting
agreement.
(4) Employment agreements for Chief Executive Officer ($150,000)
and President ($100,000).
(5) Assumes all shares outstanding as of March 31, 1999 (including
shares issued for acquisition of Healthseek have been
outstanding throughout the period.
F-18
<PAGE>
================================================================================
1,000,000 SHARES
COMMON STOCK
NUTRICEUTICALS.COM CORPORATION
----------
PROSPECTUS
----------
KASHNER DAVIDSON SECURITIES CORPORATION
THE DATE OF THIS PROSPECTUS IS
____________, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.7502 of the Nevada Revised Statutes permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond the indemnification specifically provided by the current law.
Article XI of our Bylaws provides for the indemnification of officers,
directors and third parties acting on our behalf if such person acted in good
faith and in a manner reasonably believed to be in, and not opposed to, our best
interest and, with respect to any criminal action or proceeding, the indemnified
party had no reason to believe his or her conduct was unlawful.
In addition to providing for indemnification in our Bylaws, the Company
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against any
liability asserted against such person and incurred by such person in any such
capacity or arising out of his or her status as such. Further, we may enter into
indemnification agreements with our directors and executive officers in the
future.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee.
DESCRIPTION AMOUNT
----------- ------
Securities and Exchange Commission filing fee............ $ 3,531
* NASD filing fee.......................................... $ 1,264
* Nasdaq listing fee....................................... $ 6,154
* Blue Sky filing fees and expenses........................ $ 20,000
* Legal fees and expenses.................................. $ 75,000
* Underwriter's expenses................................... $ 25,000
* Accounting fees and expenses............................. $ 5,000
* Printing, postage, and mailing expenses.................. $ 100,000
* Stock transfer agent fees and certificates .............. $ 5,000
* Miscellaneous ........................................... $ 35,000
-------
* Total............................................... $ 275,949
=======
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, we have issued unregistered securities to
a limited number of persons as described below. The following information
regarding our shares of common stock has been adjusted to give effect to (i) the
one-for-fifty reverse split of our common stock effected in March 1999, and (ii)
the two-for-one stock split in the form of a stock dividend effected in April
1999.
(1) On March 15, 1999, we issued an aggregate of 4,800,000 shares of
common stock to 14 investors in connection with the merger of Nutriceuticals.com
Corporation, a Florida corporation, with and into the Company; and
(2) On March 31, 1999, we issued an aggregate of 200,000 shares of
common stock, to one (1) investor in connection with the acquisition of
HealthSeek.com Corporation, a Massachusetts corporation.
None of the foregoing transactions involved any underwriters,
underwriting discounts or commissions or any public offering, and we believe
that each transaction was exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof, Regulation D promulgated
thereunder. The recipients in such transactions represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof, and appropriate legends were affixed
to the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with us, to
information about us.
ITEM 27. EXHIBITS.
The Exhibit Index attached hereto is hereby incorporated to this Item
by reference thereto.
ITEM 28. UNDERTAKINGS
We hereby undertake to:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in this registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
II-2
<PAGE>
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of our annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of Largo,
state of Florida, on June 28, 1999.
Nutriceuticals.com Corporation
By: /s/ STEPHEN M. WATTERS
----------------------
Stephen M. Watters
President and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Stephen M. Watters his attorney -in-fact, with the power of substitution, for
him in any and all capacities, to sign any amendments to this registration
statement, and to file the same with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact or his substitute or
substitutes may do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ JUGAL K. TANEJA Chief Executive Officer and
- ------------------- Chairman of the Board of Directors June 28, 1999
Jugal K. Taneja
/s/ STEPHEN M. WATTERS President and Director June 28, 1999
- ----------------------
Stephen M. Watters
/s/ MANDEEP K. TANEJA Director June 28, 1999
- ----------------------
Mandeep K. Taneja
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBITS
1.1 Form of Underwriting Agreement *
1.2 Form of Underwriter's Warrant *
3.1 Articles of Incorporation, as amended *
3.2 Bylaws of the Registrant *
4.1 Specimen of Certificate for Common Stock **
5.1 Opinion of Schifino & Fleischer, P.A., re: Legality of securities
being registered **
10.1 Employment Agreement by and between the Registrant and Stephen M.
Watters, dated as of April 1, 1999 *
10.2 Employment Agreement by and between the Registrant and Jugal K.
Taneja, dated as of April 1, 1999 *
10.3 Consulting Agreement and Agreement Regarding Ownership of Computer
Software between Healthseek.com Corp. and Eric Egnet, dated as of
March 31, 1999 *
10.4 Strategic Alliance Agreement by and between IndigoCity.com, Inc. and
the Registrant, dated as of April 13, 1999 *
10.5 Agreement and Plan of Merger by and between NuMed Surgical, Inc. and
Nutriceuticals.com Corporation, dated as of January 15, 1999 *
10.6 Agreement and Plan of Reorganization between the Registrant and Eric
Egnet, dated March 31, 1999 *
21 Subsidiaries of the Registrant *
23.1 Consent of Kirkland, Russ, Murphy & Tapp, independent auditors *
23.2 Consent of Schifino & Fleischer, P.A. (included in Exhibit 5.1) **
24 Power of Attorney (reference is made to the signature page) **
27 Financial Data Schedule***
- -----------
* Filed herewith.
** To be filed by amendment.
*** Contained in electronically filed version only.
EXHIBIT 1.1
NUTRICEUTICALS.COM
1,000,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
, 1999
Kashner Davidson Securities Corporation
77 South Palm Avenue
Sarasota, Florida 34326
Gentlemen:
Nutriceuticals.Com., a corporation organized under the laws of the
State of Nevada (the "Company"), hereby confirms its agreement with Kashner
Davidson Securities Corporation, ("Kashner") as the underwriter of its
securities (the "Underwriter"), as set forth below.
The Company proposes to issue and sell to the Underwriters 1,000,000
shares of the Company's common stock, $.001 par value per share (the "Common
Stock"). The shares of Common Stock being sold by the Company are referred to as
the "Firm Shares."
In addition, for the sole purpose of covering over-allotments from the
sale of the Firm Shares the Company proposes to grant to the Underwriters an
option to purchase an additional 150,000 shares of Common Stock, (the "Firm
Option Shares" or the "Option Shares"), all as provided in Section 2(c) of this
agreement (the "Agreement") and to issue to you the Underwriter's Warrant (as
defined in Section 2 hereof) to purchase certain further additional shares of
Common Stock. The Firm Shares and the Option Shares are collectively referred to
herein as either the "Shares" or the "Securities".
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333- ), with
respect to the Securities and the Underwriter's Warrant Securities (as
hereinafter defined), including a prospectus subject to completion, has been
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act "), and one
or more amendments to that registration statement may have been so filed. Copies
of such registration statement and of each amendment heretofore filed by the
Company with the Commission have been delivered to the Underwriters. After the
execution of this Agreement, the Company will file with the
<PAGE>
Commission either (i) if the registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act, a
prospectus in the form most recently included in that registration statement
(or, if an amendment thereto shall have been filed, in such amendment), with
such changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and approved
by the Underwriters prior to the execution of this Agreement, or (ii) if that
registration statement, as it may have been amended, has not been declared by
the Commission to be effective under the Act, an amendment to that registration
statement, including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Underwriters prior to the execution of this
Agreement. The Company also may file a related registration statement with the
Commission pursuant to Rule 462(b) under the Act for purposes of registering
certain additional Securities, which registration statement shall become
effective upon filing with the Commission (the "Rule 462(b) Registration
Statement@). As used in this Agreement, the term "Registration Statement" means
that registration statement, as amended at the time it was or is declared
effective, and any amendment thereto that was or is thereafter declared
effective, including all financial schedules and exhibits thereto and any
information omitted therefrom pursuant to Rule 430A under the Act and included
in the Prospectus (as hereinafter defined), together with any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus" means each prospectus
subject to completion filed with the Registration Statement (including the
prospectus subject to completion, if any, included in the Registration Statement
at the time it was or is declared effective); and the term "Prospectus" means
the prospectus first filed with the Commission pursuant to Rule 424(b) under the
Act or, if no prospectus is so filed pursuant to Rule 424(b), the prospectus
included in the Registration Statement. The Company has caused to be delivered
to the Underwriters copies of each Preliminary Prospectus and has consented to
the use of those copies for the purposes permitted by the Act. If the Company
has elected to rely on Rule 462(b) and the Rule 462(b) Registration Statement
has not been declared effective, then (i) the Company has filed a Rule 462(b)
Registration Statement in compliance with and that is effective upon filing
pursuant to Rule 462(b) and has received confirmation of its receipt and (ii)
the Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under the Act or
the Commission has received payment of such filing fee.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus. When each Preliminary Prospectus and each
amendment and each supplement thereto was filed with the Commission it (i)
contained all statements required to be stated therein, in accordance with, and
complied with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not include any untrue statement
2
<PAGE>
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement was or is declared
effective, it (i) contained or will contain all statements required to be stated
therein in accordance with, and complied or will comply with the requirements
of, the Act and the rules and regulations of the Commission thereunder and (ii)
did not or will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading.
When the Prospectus and each amendment or supplement thereto is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or
supplement is not required so to be filed, when the Registration Statement
containing such Prospectus or amendment or supplement thereto was or is declared
effective) and on the Firm Closing Date and any Option Closing Date (as each
such term is hereinafter defined), the Prospectus, as amended or supplemented at
any such time, (i) contained or will contain all statements required to be
stated therein in accordance with, and complied or will comply with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The foregoing provisions o this paragraph (b) do not apply to
statements or omissions made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by the
Underwriters specifically for use therein.
(c) The Company is duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdictions of
incorporation, and duly qualified or authorized to transact business as a
foreign corporation and is in good standing in each jurisdiction where the
ownership or leasing of its properties or the conduct of its businesses require
such qualification or authorization.
(d) The Company has full corporate power and authority, and all
necessary material authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory authorities, to own or lease its
property and conduct its business as now being conducted and as proposed to be
conducted as described in the Registration Statement and the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(e) The Company does not own, directly or indirectly, an interest in
any corporation, partnership, limited liability company, joint venture, trust or
other business entity.
(f) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All of the issued shares of
capital stock of the Company, have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. There are no
outstanding options, warrants or other rights granted by the Company to purchase
shares of its Common Stock or other securities, other than as described in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The Firm Shares have been duly authorized, by all
necessary corporate action on the part of the Company and, when the Firm Shares
are issued and delivered to and paid for by the Underwriter pursuant to this
Agreement, the Firm Shares will be validly issued, fully paid, nonassessable and
free of preemptive rights and will conform
3
<PAGE>
to the description thereof in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). No holder of outstanding
securities of the Company is entitled as such to any preemptive or other right
to subscribe for any of the Securities, and no person is entitled to have
securities registered by the Company under the Registration Statement or
otherwise under the Act other than as described in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(g) The capital stock of the Company conforms to the description
thereof contained in the Prospectus (and, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(h) All issuances of securities of the Company have been effected
pursuant to an exemption from the registration requirements of the Act. No
compensation was paid to or on behalf of any member of the National Association
of Securities Dealers, Inc. ("NASD"), or any affiliate or employee thereof, in
connection with any such issuance.
(i) The financial statements of the Company included in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present the financial
position of the Company as of the dates indicated and the results of operations
of the Company for the periods specified. Such financial statements have been
prepared in accordance with accounting principles generally accepted in effect
in the United States of America, consistently applied, except to the extent that
certain footnote disclosures regarding unaudited interim periods may have been
omitted in accordance with the applicable rules of the Commission under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The financial data
set forth under the caption "Summary Financial Information" in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present, on the basis stated in the Prospectus (or such
Preliminary Prospectus), the information included therein.
(j) [ ] has audited certain financial statements of the Company
and delivered their report with respect to the financial statements included in
the Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and are independent public
accountants with respect to the Company as required by the Act and the
applicable rules and regulations thereunder.
(k) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), (i) except as otherwise
contemplated therein, there has been no material adverse change in the business,
operations, condition (financial or otherwise), earnings or prospects of the
Company, whether or not arising in the ordinary course of business, (ii) except
as otherwise stated therein, there have been no transactions entered into by the
Company and no commitments made by the Company that, individually or in the
aggregate, are material with respect to the Company, (iii) there has not
4
<PAGE>
been any change in the capital stock or indebtedness of the Company, and (iv)
there has been no dividend or distribution of any kind declared, paid or made by
the Company in respect of any class of its capital stock.
(l) The Company has full corporate power and authority to enter into
and perform its obligations under this Agreement and the Underwriter's Warrant
Agreement (as hereinafter defined). The execution and delivery of this Agreement
and the Underwriter's Warrant Agreement have been duly authorized by all
necessary corporate action on the part of the Company and this Agreement and the
Underwriter's Warrant Agreement have each been duly executed and delivered by
the Company and each is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other similar laws affecting creditors'
rights generally and by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and except as
rights to indemnity and contribution under this Agreement may be limited by
applicable law. The issuance, offering and sale by the Company to the
Underwriters of the Securities pursuant to this Agreement or the Underwriter's
Securities pursuant to the Underwriter's Warrant Agreement, the compliance by
the Company with the provisions of this Agreement and the Underwriter's Warrant
Agreement, and the consummation of the other transactions contemplated by this
Agreement and the Underwriter's Warrant Agreement do not (i) require the
consent, approval, authorization, registration or qualification of or with any
court or governmental or regulatory authority, except such as have been obtained
or may be required under state securities or blue sky laws and, if the
registration statement filed with respect to the Securities (as amended) is not
effective under the Act as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this Agreement) under the Act, or
(ii) conflict with or result in a breach or violation of, or constitute a
default under, any material contract, indenture, mortgage, deed of trust, loan
agreement, note, lease or other material agreement or instrument to which the
Company is a party or by which the Company or any of its property is bound or
subject, or the certificate of incorporation or by-laws of the Company, or any
statute or any rule, regulation, judgment, decree or order of any court or other
governmental or regulatory authority or any arbitrator applicable to the
Company.
(m) No legal or governmental proceedings are pending to which the
Company is a party or to which the property of the Company is subject, and no
such proceedings have been threatened against the Company or with respect to any
of its property, except such as are described in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). No
contract or other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein (and, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) or filed as required.
(n) The Company is not in (i) violation of its certificate of
incorporation, by-laws
5
<PAGE>
or other governing documents, (ii) violation in any material respect of any law,
statute, regulation, ordinance, rule, order, judgment or decree of any court or
any governmental or regulatory authority applicable to it, or (iii) other than
as described in the Prospectus, default in any material respect in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material contract, indenture, mortgage, deed of trust, loan
agreement, note, lease or other material agreement or instrument to which it is
a party or by which it or any of its property may be bound or subject, and no
event has occurred which with notice or lapse of time or both would constitute
such a default.
(o) The Company currently owns or possesses adequate rights to use
all intellectual property, including all trademarks, service marks, trade names,
copyrights, inventions, know-how, trade secrets, proprietary technologies,
processes and substances, or applications or licenses therefor, that are
described in the Prospectus (and if the Prospectus is not in existence, the most
recent Preliminary Prospectus), and any other rights or interests in items of
intellectual property as are necessary for the conduct of the business now
conducted or proposed to be conducted by them as described in the Prospectus
(or, such Preliminary Prospectus), and, except as disclosed in the Prospectus
(and such Preliminary Prospectus), the Company is not aware of the granting of
any patent rights to, or the filing of applications therefor by, others, nor is
the Company aware of, nor has the Company received notice of, infringement of or
conflict with asserted rights of others with respect to any of the foregoing.
All such intellectual property rights and interests are (i) valid and
enforceable and (ii) to the best knowledge of the Company, not being infringed
by any third parties.
(p) The Company possesses adequate licenses, orders, authorizations,
approvals, certificates or permits issued by the appropriate federal, state or
foreign regulatory agencies or bodies necessary to conduct its business as
described in the Registration Statement and the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), and,
except as disclosed in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there are no pending or, to
the best knowledge of the Company, threatened, proceedings relating to the
revocation or modification of any such license, order, authorization, approval,
certificate or permit.
(q) The Company has good and marketable title to all of the
properties and assets reflected in the Company's financial statements or as
described in the Registration Statement and the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), subject
to no lien, mortgage, pledge, charge or encumbrance of any kind, except those
reflected in such financial statements or as described in the Registration
Statement and the Prospectus (and such Preliminary Prospectus). Except as
disclosed in the Prospectus, the Company occupies its leased properties under
valid and enforceable leases conforming to the description thereof set forth in
the Registration Statement and the Prospectus (and such Preliminary Prospectus).
(r) The Company is not and does not intend to conduct its business
in a manner
6
<PAGE>
in which it would be an "investment company" as defined in Section 3(a) of the
Investment Company Act of 1940 (the "Investment Company Act").
(s) The Company has obtained and delivered to the Underwriter the
agreements (the "Lock-up Agreements") with the officers, directors and principal
shareholders of the Company substantially to the effect that, among other
things, each such person will not, commencing on the date that the Registration
Statement is declared effective by the SEC (the "Effective Date") and continuing
for a period of eighteen (18) months thereafter, without the prior written
consent of the Underwriter, directly or indirectly, publicly sell, offer or
contract to sell or grant any option to purchase, transfer, assign or pledge, or
otherwise encumber, or dispose of any shares of Common Stock now or hereafter
owned by such person and that the purchaser or transferee in any private sale
agrees to be bound by the Lock-Up Agreement.
(t) No labor dispute with the employees of the Company exists, is
threatened or, to the best of the Company's knowledge, is imminent that could
result in a material adverse change in the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Company, except
as described in or contemplated by the Prospectus (and, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
(u) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which it is engaged; the Company has not been
refused any insurance coverage sought or applied for; and the Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition (financial or
otherwise), business, prospects, net worth or results of operations of the
Company, except as described in or contemplated by the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(v) The Underwriter's Warrant (as hereinafter defined) will conform
to the description thereof in the Registration Statement and in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and, when sold to and paid for by the Underwriter in accordance with
the Underwriter's Warrant Agreement, will have been duly authorized and validly
issued and will constitute valid and binding obligations of the Company entitled
to the benefits of the Underwriter's Warrant Agreement. The shares of Common
Stock issuable upon exercise of the Underwriter's Warrant (the "Underwriter's
Warrant Shares") have been duly authorized and reserved for issuance upon
exercise of the Underwriter's Warrant by all necessary corporate action on the
part of the Company and, when issued and delivered and paid for upon such
exercise in accordance with the terms of the Underwriter's Warrant Agreement and
the Underwriter's Warrant, respectively, will be validly issued, fully paid,
nonassessable and free of preemptive rights and will conform to the description
thereof in the Prospectus (and, if the Prospectus is not in
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<PAGE>
existence, the most recent Preliminary Prospectus).
(w) No person has acted as a finder in connection with, or is
entitled to any commission, fee or other compensation or payment for services as
a finder for or for originating, or introducing the parties to, the transactions
contemplated herein and the Company will indemnify the Underwriter with respect
to any claim for finder's fees in connection herewith. Except as set forth in
the Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company has no
management or financial consulting agreement with anyone. No promoter, officer,
director or stockholder of the Company is, directly or indirectly, affiliated or
associated with an NASD member and no securities of the Company have been
acquired by an NASD member, except as previously disclosed in writing to the
Underwriter.
(x) The Company has filed all federal, state, local and foreign tax
returns which are required to be filed through the date hereof, or has received
extensions thereof, and has paid all taxes shown on such returns and all
assessments received by it to the extent that the same are material and have
become due.
(y) Neither the Company nor any director, officer, agent, employee
or other person associated with or acting on behalf of the Company has, directly
or indirectly: used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity; made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds;
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended;
or made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment. No transaction has occurred between or among the Company and
any of its officers or directors or any affiliates of any such officer or
director, that is required to be described in and is not described in the
Registration Statement and the Prospectus.
(z) Neither the Company nor any of its officers, directors or
affiliates (as defined in the Regulations), has taken or will take, directly or
indirectly, prior to the completion of the Offering, any action designed to
stabilize or manipulate the price of any security of the Company, or which has
caused or resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any security
of the Company, to facilitate the sale or resale of any of the Securities or the
Option Securities.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND THE UNDERWRITER'S
WARRANTS.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to the Underwriter, and the
Underwriter agrees, to purchase from the Company, the number of Firm Shares as
set forth opposite its name on Schedule 1 annexed hereto, at a purchase price of
8
<PAGE>
$___ per share.
(b) Certificates in definitive form for the Firm Securities that the
Underwriters have agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Underwriters request
upon notice to the Company at least 48 hours prior to the Firm Closing Date,
shall be delivered by or on behalf of the Company to the Underwriter, against
payment by or on behalf of the Underwriters of the purchase prices therefor by
wire transfer of immediately available funds to a bank account specified by the
Company. Such delivery of the Firm Securities shall be made at the offices of
Sichenzia, Ross & Friedman LLP, Counsel for the Underwriter, 135 West 50th
Street, New York, New York 10020 at 9:30 A.M., New York City time on ______,
1999, within ten (10) business days from the Effective Date, or at such other
place, time or date as the Underwriter and the Company may agree upon, such time
and date of delivery against payment being herein referred to as the "Firm
Closing Date". The Company will make such certificates for the Firm Securities
available for checking and packaging by the Underwriter, at such offices as may
be designated by the Underwriter, at least 24 hours prior to the Firm Closing
Date. In lieu of physical delivery, the closing may occur by "DTC" delivery.
(c) For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Securities as contemplated by the
Prospectus, the Company hereby grants to the Underwriter an option to purchase
any or all of the Option Shares, which options are exercisable by the
Underwriter on behalf of and for the account of the Underwriter. The purchase
price to be paid for any of the Option Shares shall be the same price per share
for the Firm Securities set forth above in paragraph (a) of this Section 2. The
option granted hereby may be exercised as to all or any part of the Option
Shares from time to time within 45 calendar days after the Firm Closing Date.
The Underwriter shall not be under any obligation to purchase any of the Option
Shares prior to the exercise of such option. The Underwriter may from time to
time exercise the option granted hereby by giving notice in writing or by
telephone (confirmed in writing) to the Company setting forth the aggregate
number of Option Shares as to which the Underwriter is then exercising the
option and the date and time for delivery of and payment for such Option Shares.
Any such date of delivery shall be determined by the Underwriter but shall not
be earlier than two business days or later than three business days after such
exercise of the option and, in any event, shall not be earlier than the Firm
Closing Date. The time and date set forth in such notice, or such other time on
such other date as the Underwriter and the Company may agree upon, is herein
called the "Option Closing Date" with respect to such Option Shares. Upon
exercise of the option as provided herein, the Company shall become obligated to
sell to the Underwriter, and, subject to the terms and conditions herein set
forth, the Underwriter shall become obligated to purchase from the Company, the
Option Shares as to which the Underwriter is then exercising its option. If the
option is exercised as to all or any portion of the Option Shares, certificates
in definitive form for such Option Shares, and payment therefor, shall be
delivered on the related Option Closing Date in the manner, and upon the terms
and conditions, set forth in paragraph (b) of this Section 2, except that
reference therein to the Firm Securities and the Firm Closing Date shall be
deemed, for purposes of this paragraph (c), to refer to
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<PAGE>
such Option Shares and Option Closing Date, respectively.
(d) On the Firm Closing Date, the Company will further issue and
sell to the Underwriter or, at the direction of the Underwriter, to bona fide
officers of the Underwriter, for an aggregate purchase price of $10, warrants to
purchase Common Stock (the "Underwriter's Warrant") entitling the holders
thereof to purchase an aggregate of 100,000 shares of Common Stock for a period
of four years, such period to commence on the first anniversary of the Effective
Date. The Underwriter's Warrant shall be exercisable at a price equal to 120% of
the public offering price of the Common Stock, and shall contain terms and
provisions more fully described herein below and as set forth more particularly
in the warrant agreement relating to the Underwriter's Warrant to be executed by
the Company on the Effective Date (the "Underwriter's Warrant Agreement"),
including, but not limited to, (i) customary anti-dilution provisions in the
event of stock dividends, split mergers, sales of all or substantially all of
the Company's assets, sales of stock below then prevailing market or exercise
prices and other events, and (ii) prohibitions of mergers, consolidations or
other reorganizations of or by the Company or the taking by the Company of other
action during the five-year period following the Effective Date unless adequate
provision is made to preserve, in substance, the rights and powers incidental to
the Underwriter's Warrant. As provided in the Underwriter's Warrant Agreement,
the Underwriter may designate that the Underwriter's Warrant be issued in
varying amounts directly to bona fide officers of the Underwriter. As further
provided, no sale, transfer, assignment, pledge or hypothecation of the
Underwriter's Warrant shall be made for a period of 12 months from the Effective
Date, except (i) by operation of law or reorganization of the Company, or (ii)
to the Underwriter and bona fide partners, officers of the Underwriter and
selling group members.
3. OFFERING BY THE UNDERWRITER. The Underwriter propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus (the "Offering").
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, to
become effective as promptly as possible. If required, the Company will file the
Prospectus and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rule 424(b) under the Act. During
any time when a prospectus relating to the Securities is required to be
delivered under the Act, the Company (i) will comply with all requirements
imposed upon it by the Act and the rules and regulations of the Commission
thereunder to the extent necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (ii) will not file with the
Commission any prospectus or amendment referred to in the first sentence of
section (a) (i) hereof, any amendment or supplement to such prospectus or any
amendment to the Registration Statement as to which the Underwriter shall not
10
<PAGE>
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Underwriter
shall not have given its consent. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Underwriter or counsel to the Underwriter, any
amendments to the Registration Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities by the Underwriter, and will use its best efforts
to cause any such amendment to the Registration Statement to be declared
effective by the Commission as promptly as possible. The Company will advise the
Underwriter, promptly after receiving notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or declared
effective or the Prospectus or any amendment or supplement thereto as been filed
and will provide evidence satisfactory to the Underwriter of each such filing or
effectiveness.
(b) The Company will advise the Underwriter, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, (ii) the
suspension of the qualification of any Securities for offering or sale in any
jurisdiction, (iii) the institution, threat or contemplation of any proceeding
for any such purpose, or (iv) any request made by the Commission for amending
the Registration Statement, for amending or supplementing the Prospectus or for
additional information. The Company will use its best efforts to prevent the
issuance of any such stop order and, if any such stop order is issued, to obtain
the withdrawal thereof as promptly as possible.
(c) The Company will, in cooperation with counsel to the
Underwriter, arrange for the qualification of the Securities for offering and
sale under the blue sky or securities laws of such jurisdictions as the
Underwriter may designate and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Securities.
(d) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary at
any time to amend or supplement the Prospectus to comply with the Act or the
rules or regulations of the Commission thereunder, the Company will promptly
notify the Underwriter thereof and, subject to Section 4(a) hereof, will prepare
and file with the Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(e) Intentionally left blank.
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<PAGE>
(f) The Company will, without charge, provide to the Underwriter and
to counsel for the Underwriter (i) as many signed copies of the registration
statement originally filed with respect to the Securities and each amendment
thereto (in each case including exhibits thereto) as the Underwriter may
reasonably request, (ii) as many conformed copies of such registration statement
and each amendment thereto (in each case without exhibits thereto) as the
Underwriter may reasonably request, and (iii) so long as a prospectus relating
to the Securities is required to be delivered under the Act, as many copies of
each Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto as the Underwriter may reasonably request.
(g) The Company, as soon as practicable, will make generally
available to its security holders and to the Underwriter an earnings statement
of the Company that satisfies the provisions of Section 11 (a) of the Act and
Rule 158 thereunder.
(h) The Company will reserve and keep available for issuance that
maximum number of authorized but unissued shares of Common Stock which are
issuable upon exercise of any outstanding warrants and the Underwriter's Warrant
(including the underlying securities) outstanding from time to time.
(i) The Company will apply the net proceeds from the sale of the
Securities being sold by it as set forth under "Use of Proceeds" in the
Prospectus.
(j) Intentionally left blank.
(k) Prior to the Closing Date or the Option Closing Date (if any),
the Company will not, directly or indirectly, without prior written consent of
the Underwriter, issue any press release or other public announcement or hold
any press conference with respect to the Company or its activities with respect
to the Offering (other than trade releases issued in the ordinary course of the
Company's business consistent with past practices with respect to the Company's
operations).
(l) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A under the Act, then immediately following the execution of this
Agreement, the Company will prepare, and file or transmit for filing with the
Commission in accordance with Rule 430A and Rule 424(b) under the Act, copies of
the Prospectus including the information omitted in reliance on Rule 430A, or,
if required by such Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted.
(m) The Company will assist the Underwriter in causing the
Securities to be listed on the Nasdaq SmallCap Market on the Effective Date and
to maintain such listing thereafter.
(n) During the period of five years from the Firm Closing Date, the
Company will,
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<PAGE>
as promptly as possible, not to exceed 135 days, after each annual fiscal period
render and distribute reports to its stockholders which will include audited
statements of its operations and changes of financial position during such
period and its audited balance sheet as of the end of such period, as to which
statements the Company's independent certified public accountants shall have
rendered an opinion and shall timely file all reports required to be filed under
the securities laws.
(o) During a period of three years commencing with the Firm Closing
Date, the Company will furnish to the Underwriter, at the Company's expense,
copies of all periodic and special reports furnished to stockholders of the
Company and of all information, documents and reports filed with the Commission.
(p) The Company has appointed [Continental Stock Transfer & Trust
Company] as transfer agent for the Common Stock, subject to the Closing. The
Company will not change or terminate such appointment for a period of three
years from the Firm Closing Date without first obtaining the written consent of
the Underwriter. For a period of three years after the Effective Date, the
Company shall cause the transfer agent to deliver promptly to the Underwriter a
duplicate copy of the daily transfer sheets relating to trading of the
Securities. The Company shall also provide to the Underwriter, on a weekly
basis, copies of the DTC special securities positions listing report.
(q) During the period of 180 days after the date of this Agreement,
the Company will not at any time, directly or indirectly, take any action
designed to or that will constitute, or that might reasonably be expected to
cause or result in, the stabilization of the price of the Common Stock to
facilitate the sale or resale of any of the Securities.
(r) The Company will not take any action to facilitate the sale of
any shares of Common Stock pursuant to Rule 144 under the Act if any such sale
would violate any of the terms of the Lock-up Agreements.
(s) Prior to the 120th day after the Firm Closing Date, the Company
will provide the Underwriter and their designees with four bound volumes of the
transaction documents relating to the Registration Statement and the closing(s)
hereunder, in form and substance reasonably satisfactory to the Underwriter.
(t) The Company shall consult with the Underwriter prior to the
distribution to third parties of any financial information news releases or
other publicity regarding the Company, its business, or any terms of this
offering and the Underwriter will consult with the Company prior to the issuance
of any research report or recommendation concerning the Company's securities.
Copies of all documents that the Company or its public relations firm intend to
distribute will be provided to the Underwriter for review prior to such
distribution.
(u) The Company and the Underwriter will advise each other
immediately in
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<PAGE>
writing as to any investigation, proceeding, order, event or other circumstance,
or any threat thereof, by or relating to the Commission or any other
governmental authority, that could impair or prevent the Offering. Except as
required by law or as otherwise mutually agreed in writing, neither the Company
nor the Underwriter will acquiesce in such circumstances and each will actively
defend any proceedings or orders in that connection.
(v) The Company shall first submit to the Underwriter certificates
representing the Securities for approval prior to printing, and shall, as
promptly as possible, after filing the Registration Statement with the
Commission, obtain CUSIP numbers for the Securities.
(w) The Company will prepare and file a registration statement with
the Commission pursuant to section 12 of the 1934 Act, and will use its best
efforts to have such registration statement declared effective by the Commission
on an accelerated basis on the day after the Effective Date. For this purpose
the Company shall prepare and file with the Commission a General Form of
Registration of Securities (Form 8-A or Form 10).
(x) For so long as the Securities are registered under the 1934 Act,
the Company will hold an annual meeting of stockholders for the election of
directors within 180 days after the end of each of the Company's fiscal years
and within 135 days after the end of each of the Company's fiscal years will
provide the Company's stockholders with the audited financial statements of the
Company as of the end of the fiscal year just completed prior thereto. Such
financial statements shall be those required by Rule 14a-3 under the 1934 Act
and shall be included in an annual report pursuant to the requirements of such
Rule.
(y) The Company will take all necessary and appropriate actions to
be included in Standard and Poor's Corporation Descriptions or other equivalent
manual and to maintain its listing therein for a period of five (5) years from
the Effective Date. Such application shall be made on an accelerated basis no
more than two days following the Effective Date.
(z) On or prior to the Effective Date, the Company will give written
instructions to the transfer agent for the Common Stock directing said transfer
agent to place stop-order restrictions against, and appropriate legends advising
of the Lock-Up Agreements on, the certificates representing the securities of
the Company owned by the persons who have entered into the Lock-up Agreements.
4. EXPENSES
(a) The Company shall pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including all costs and expenses incident to (i)
the preparation, printing and filing or other production of documents with
14
<PAGE>
respect to the transactions, including any costs of printing the Registration
Statement originally filed with respect to the Securities and any amendment
thereto, any Preliminary Prospectus and the Prospectus and any amendment or
supplement thereto, this Agreement, the selected dealer agreement and the other
agreements and documents governing the underwriting arrangements and any blue
sky memoranda, (ii) all reasonable and necessary arrangements relating to the
delivery to the Underwriter of copies of the foregoing documents, and the costs
and expenses of the Underwriter in mailing or otherwise distributing the same
including telephone charges, duplications and other accountable expenses, (iii)
the fees and disbursements of the counsel, the accountants and any other experts
or advisors retained by the Company, (iv) the preparation, issuance and delivery
to the Underwriter of any certificates evidencing the Securities, including
transfer agent's, warrant agent's and registrar's fees or any transfer or other
taxes payable thereon, (v) the qualification of the Securities under state blue
sky or securities laws, including filing fees and fees and disbursements of
counsel relating thereto and any fees and disbursements of local counsel, if
any, retained for such purpose, (vi) the filing fees of the Commission and the
NASD relating to the Securities, (vii) the inclusion of the Securities on The
Nasdaq SmallCap Market and in the Standard and Poor's Corporation Descriptions
Manual, (viii) any "road shows" or other meetings with prospective investors in
the Securities, including transportation, accommodation, meal, conference room,
audio-visual presentation an similar expenses, but not including such expenses
for the Underwriter or their Underwriter or designees in excess of $[ ] and (ix)
the publication of "tombstone advertisements" in newspapers or other
publications selected by the Underwriter, and the manufacture of prospectus
memorabilia. In addition to the foregoing, the Company, shall reimburse the
Underwriter for its expenses on the basis of a non-accountable expense allowance
in the amount of 3.00% of the gross offering proceeds to be received by the
Company. The non-accountable expense allowance, based on the gross proceeds from
the sale of the Firm Securities, shall be deducted from the funds to be paid by
the Underwriter in payment for the Firm Securities, pursuant to Section 2 of
this Agreement, on the Firm Closing Date. To the extent any Option Shares are
sold, any remaining non-accountable expense allowance based on the gross
proceeds from the sale of the Option Shares shall be deducted from the funds to
be paid by the Underwriter in payment for the Option Shares, pursuant to Section
2 of this Agreement, on the Option Closing Date. The Company warrants,
represents and agrees that all such payments and reimbursements will be promptly
and fully made.
(b) Notwithstanding any other provision of this Agreement, if the
Offering is terminated in accordance with the provisions of Section 6 or Section
10(a)(i), the Company agrees that, in addition to the Company paying its own
expenses as described in subparagraph (a) above, the Company shall reimburse the
Underwriter for its actual accountable out-of-pocket expenses (in addition to
blue sky legal fees and expenses referred to in subparagraph (a) above) net of
the $25,000 which has previously been advanced to the Underwriter, up to a
maximum of $75,000. Such expenses shall include, but are not to be limited to,
fees for the services and time of counsel for the Underwriter to the extent not
covered by clause (a) above, plus any additional expenses and fees, including,
but not limited to, travel expenses, postage expenses, duplication expenses,
long-distance telephone expenses, and other expenses incurred by the Underwriter
in connection with the proposed
15
<PAGE>
offering.
5. Intentionally left blank.
6. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Firm Shares shall be subject, in the
Underwriter's sole discretion, to the accuracy of the representations and
warranties of the Company contained herein as of the date hereof and as of the
Firm Closing Date as if made on and as of the Firm Closing Date, to the accuracy
of the statements of the Company's officers made pursuant to the provisions
hereof, to the performance by the Company of its covenants and agreements
hereunder and to the following additional conditions:
(a) If the Registration Statement, as heretofore amended, has not
been declared effective as of the time of execution hereof, the Registration
Statement, as heretofore amended or as amended by an amendment thereto to be
filed prior to the Firm Closing Date, shall have been declared effective not
later than 5:30 P.M., New York City time, on the date on which the amendment to
such Registration Statement containing information regarding the initial public
offering price of the Securities has been filed with the Commission, or such
later time and date as shall have been consented to by the Underwriter; if
required, the Prospectus and any amendment or supplement thereto shall have been
filed with the Commission in the manner and within the time period required by
Rule 424(b) under the Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of the
Company or the Underwriter, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Underwriter shall have received an opinion, dated the Firm
Closing Date, of Schifino & Fleisher, P.A., counsel to the Company,
substantially to the effect that:
(1) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its organization and is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of each other jurisdiction in
which its ownership or leasing of any properties or the conduct of its business
requires such qualification, except where the failure to be in good standing or
so qualify would not have a materially adverse effect upon the Company;
(2) the Company has full corporate power and authority to own
or lease its property and conduct its business as it is now being conducted and
as it is proposed to be conducted, as described in the Registration Statement
and the Prospectus, and the Company has full corporate power and authority to
enter into this Agreement and the Underwriter's Warrant Agreement and to carry
out all the terms and provisions hereof and thereof to be carried out by it;
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<PAGE>
(3) to the knowledge of such counsel, there are no outstanding
options, warrants or other rights granted by the Company to purchase shares of
its Common Stock, preferred stock or other securities other than as described in
the Prospectus; the Shares have been duly authorized and the Underwriter's
Warrant Shares have been duly reserved for issuance by all necessary corporate
action on the part of the Company and the Shares when issued and delivered to
and paid for by the Underwriter, pursuant to this Agreement, the Underwriter's
Warrant when issued and delivered and paid for in accordance with this Agreement
and the Underwriter's Warrant Agreement by the Underwriter, and the
Underwriter's Warrant Shares when issued upon payment of the exercise price
specified in the Underwriter's Warrant, will be validly issued, fully paid,
nonassessable and free of preemptive rights and will conform to the description
thereof in the Prospectus; to the knowledge of such counsel, no holder of
outstanding securities of the Company is entitled as such to any preemptive or
other right to subscribe for any of the Shares or the Underwriter's Warrant
Shares; and to the knowledge of such counsel, no person is entitled to have
securities registered by the Company under the Registration Statement or
otherwise under the Act other than as described in the Prospectus;
(4) the execution and delivery of this Agreement and the
Underwriter's Warrant Agreement have been duly authorized by all necessary
corporate action on the part of the Company and this Agreement and the
Underwriter's Warrant Agreement have been duly executed and delivered by the
Company, and each is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other similar laws affecting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law) and except as rights to indemnity and
contribution under this Agreement and the Underwriter's Warrant Agreement may be
limited by applicable securities laws and the public policy underlying such
laws;
(5) the Underwriter's Warrant is duly authorized and upon
payment of the purchase price therefore specified in Section 2(d) of this
Agreement will be validly issued and constitute valid and binding obligations of
the Company; and the certificates representing the Securities are in due and
proper form under law;
(6) the statements set forth in the Prospectus under the
caption "Description of Securities@ insofar as those statements purport to
summarize the terms of the capital stock and warrants of the Company, provide a
fair summary of such terms; to the knowledge of such counsel, the statements set
forth in the Prospectus describing statutes and regulations and the descriptions
of the consequences to the Company under such statutes and regulations are fair
summaries of the information set forth therein and are accurate in all material
respects; to the knowledge of such counsel, the statements in the Prospectus,
insofar as those statements constitute summaries of the contracts, instruments,
leases or licenses referred to therein, constitute a fair summary in all
material respects of those contracts, instruments, leases or licenses and
include all
17
<PAGE>
material terms thereof, as applicable;
(7) none of (A) the execution and delivery of this Agreement
and the Underwriter's Warrant Agreement, (B) the issuance, offering and sale by
the Company to the Underwriter of the Securities pursuant to this Agreement and
the Underwriter's Warrant Shares pursuant to the Underwriter's Warrant
Agreement, or (C) the compliance by the Company with the other provisions of
this Agreement and the Underwriter's Warrant Agreement and the consummation of
the transactions contemplated hereby and thereby, to the knowledge of such
counsel (1) requires the consent, approval, authorization, registration or
qualification of or with any court or governmental authority known to us, except
such as have been obtained and such as may be required under state blue sky or
securities laws as to which we express no opinion or (2) conflicts with or
results in a breach or violation of, or constitutes a default under, any
material contract, indenture, mortgage, deed of trust, loan agreement, note,
lease or other material agreement or instrument known to such counsel to which
the Company is a party or by which the Company or any of its property is bound
or subject, or the certificate of incorporation or by-laws of the Company, or
any material statute or any judgment, decree, order, rule or regulation of any
court or other governmental or regulatory authority known to us applicable to
the Company;
(8) to the knowledge of such counsel, (A) no legal or
governmental proceedings are pending to which the Company is a party or to which
the property of the Company is subject except those arising in the ordinary
course of business and fully covered by insurance and (B) no contract or other
document is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that is
not described therein or filed as required;
(9) to the knowledge of such counsel, the Company possesses
adequate licenses, orders, authorizations, approvals, certificates or permits
issued by the appropriate federal, state or local regulatory agencies or bodies
necessary to conduct its business as described in the Registration Statement and
the Prospectus, and, there are no pending or threatened proceedings relating to
the revocation or modification of any such license, order, authorization,
approval, certificate or permit, except as disclosed in the Registration
Statement and the Prospectus, which would have a material adverse effect on the
Company;
(10) The Company is not in violation or breach of, or in
default with respect to, any term of its certificate of incorporation or
by-laws, and to the knowledge of such counsel, the Company is not in (i)
violation in any material respect of any law, statute, regulation, ordinance,
rule, order, judgment or decree of any court or any governmental or regulatory
authority applicable to it, or (ii) default in any material respect in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material contract, indenture, mortgage, deed of trust, loan
agreement, note, lease or other material agreement or instrument to which it is
a party or by which it or any of its property may be bound or subject, and no
event has occurred which with notice, lapse
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of time or both would constitute such a default;
(11) the Shares have been approved for inclusion on the Nasdaq
SmallCap Market;
(12) the Registration Statement is effective under the Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); and to our
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued, and no proceedings for that
purpose have been instituted or threatened or, to the best knowledge of such
counsel, are contemplated by the Commission;
(13) the Registration Statement originally filed with respect
to the Securities and each amendment thereto and the Prospectus (in each case,
other than the financial statements, the notes, schedules and other financial
and statistical information contained therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
applicable requirements of the Act and the rules and regulations of the
Commission thereunder; and
(14) the Company is not an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940 and, if the Company conducts
its business as set forth in the Prospectus, it will not become an Investment
company" and will not be required to register under the Investment Company.
Such counsel also shall state in its opinion that it has participated
in the preparation of the Registration Statement and the Prospectus and that
nothing has come to its attention that has caused it to believe that the
Registration Statement, at the time it became effective (including the
information deemed to be a part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus, as of its date or as of the Firm Closing Date, contained an
untrue statement of material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials, copies of which certificates will
be provided to the Underwriter, and, as to matters of the laws of certain
jurisdictions, on the opinions of other counsel to the Company, which opinions
shall also be delivered to the Underwriter, in form and substance acceptable to
the Underwriter, if such other counsel expressly authorize such reliance and
counsel to the Company expressly states in their opinion that such counsel's and
the Underwriter's reliance upon such opinion is justified.
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(c). A. At the time this Agreement is executed, the Underwriter
shall have received a letter, dated such date, addressed to the Underwriter in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriter and Underwriter's counsel, from [ ]:
i. confirming that it is a independent certified public
accountant with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
ii. stating that it is their opinion that the financial
statements of the Company as included in the Registration Statement comply as to
form in all material respects with the applicable accounting requirements of the
Act and the Rules and Regulations thereunder and that the Underwriter may rely
upon the opinion of [ ] with respect to the financial statements included in the
Registration Statement;
iii. stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company, a reading of the latest available minutes of the
stockholders and board of directors and the various committees of the boards of
directors of the Company, consultations with officers and other employees of the
Company responsible for financial and accounting matters and other specified
procedures and inquiries (which, as to the interim financial statements included
in the Registration Statement, shall constitute a review as described in SAS No.
71, Interim Financial Statements), nothing has come to [ ] attention which
would lead them to believe that (A) the unaudited financial statements of the
Company included in the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
Rules and Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than five (5) days
prior to the Effective Date, there has been any change in the capital stock or
long-term debt of the Company, or any decrease in the stockholders' equity or
net current assets or net assets of the Company as compared with amounts shown
in the December 31, 1998 consolidated balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any change or decrease, setting forth the amount of
such change or decrease, and (C) during the period from December 31, 1998 to a
specified date not more than five (5) days prior to the Effective Date, there
was any decrease (increase) in net revenues, net income (loss) or in net
earnings (loss) per common share of the Company, in each case as compared with
the corresponding period December 31, 1998 beginning, other than as set forth in
or contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease (increase);
iv. setting forth, at a date not later than five (5) days
prior to the Effective Date, the amount of liabilities of the Company;
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v. stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
vi. statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may request.
B. At the Firm Closing Date and the Option Closing Date, if
any, the Underwriter shall have received from Simontacchi & Co. LLP, a letter,
dated as of the Firm Closing Date or the Option Closing Date, as the case may
be, to the effect that it reaffirms that statements made in the letter furnished
pursuant to subsection A of this Section 6(c), except that the specified date
referred to shall be a date not more than five (5) days prior to the Firm
Closing Date or the Option Closing Date, as the case may be, and, if the Company
has elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that they have carried out procedures as specified in clause (v) of
subsection A of this Section 6(c) with respect to certain amounts, percentages
and financial information as specified by the Underwriter and deemed to be a
part of the Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and financial information to be in agreement with the
records specified in such clause (v).
(d) The representations and warranties of the Company contained in
this Agreement shall be true and correct as if made on and as of the Firm
Closing Date; the Registration Statement shall not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein in order to make the statements therein not misleading, and the
Prospectus, as amended or supplemented as of the Firm Closing Date, shall not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company shall
have performed all covenants and agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to the Firm Closing Date.
(e) No stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no proceedings
for that purpose shall have been instituted or threatened or contemplated by the
Commission.
(f) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall not have
been any material adverse change, or any development involving a prospective
material adverse change, in the business, operations,
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condition (financial or otherwise), earnings or prospects of the Company, except
in each case as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto).
(g) The Underwriter shall have received a certificate, dated the
Firm Closing Date, of the Chief Executive Officer and the Secretary of the
Company to the effect set forth in subparagraphs (d) through (f) above.
(h) The Common Stock shall be qualified in such jurisdictions as the
Underwriter may reasonably request pursuant to Section 4(c), and each such
qualification shall be in effect and not subject to any stop order or other
proceeding on the Firm Closing Date.
(i) The Company shall have executed and delivered to the Underwriter
the Underwriter's Warrant Agreement and a certificate or certificates evidencing
the Underwriter's Warrant, in each case in a form acceptable to the Underwriter.
(i) The Underwriter shall have received Lock-up Agreements executed
by the persons listed on Schedule 2 annexed hereto.
(j) On or before the Firm Closing Date, the Underwriter and counsel
for the Underwriter shall have received such further certificates, documents,
letters or other information as they may have reasonably requested from the
Company and other security holders of the Company.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriter and counsel
for the Underwriter. The Company shall furnish to the Underwriter such conformed
copies of such opinions, certificates, letters and documents in such quantities
as the Underwriter and counsel for the Underwriter shall reasonably request.
The obligation of the Underwriter to purchase and pay for any Option
Shares shall be subject, in its discretion, to each of the foregoing conditions,
except that all references to the Firm Securities and the Firm Closing Date
shall be deemed to refer to such Option Shares and the related Option Closing
Date, respectively.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20 of the 1934 Act against any
losses, claims, damages, or liabilities, joint or several, to which the
Underwriter, or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
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<PAGE>
(1) any untrue statement or alleged untrue statement of any material
fact contained in (A) the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or (B) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Securities under the Blue Sky or securities laws thereof or filed with the
Commission or any securities association or securities exchange (each an
"Application"), or
(2) the omission or alleged omission to state in such Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, the Underwriter and such
controlling person for any legal or other expenses reasonably incurred by the
Underwriter or such controlling person in connection with investigating or
defending against any loss, claim, damage, liability, action, investigation,
litigation or proceeding; PROVIDED, HOWEVER, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such Registration Statement or any
amendment thereto, any Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto, or any Application in reliance upon and in conformity
with written information furnished to the Company by the Underwriter,
specifically for use therein. This indemnity agreement will be in addition to
any liability which the Company may otherwise have. The Company will not,
without the prior written consent of the Underwriter, or controlling person,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought hereunder (whether or not the Underwriter or any person who
controls the Underwriter or within the meaning of Section 15 of the Act or
Section 20 of the 1934 Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
(b) The Underwriter will indemnify and hold harmless the Company, each
of its directors, each of its officers who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the 1934 Act against, any losses, claims, damages
or liabilities to which the Company or any such director, officer, or
controlling person may become subject under the Act or otherwise, but only
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement or
any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or any Application, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application, or
necessary to make the statements therein not misleading, in each case to the
23
<PAGE>
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
specifically for use therein; and, subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses reasonably incurred by the Company or any such director, officer,
or controlling person in connection with investigating or defending against any
such loss, claim, damage, liability, action investigation, litigation or
proceedings, in respect thereof. This indemnity agreement will be in addition to
any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 7. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
PROVIDED, HOWEVER, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 7 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence or (ii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the indemnifying party.
(d) In circumstances in which the indemnity obligation provided for in
the preceding paragraphs of this Section 7 is unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative
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<PAGE>
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities, or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company on
the one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total proceeds from the Offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriter. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriter, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and the other equitable considerations
appropriate in the circumstances. The Company and the Underwriter agree tat it
would not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the first sentence
of this paragraph (d). Notwithstanding any other provision of this paragraph
(d), the Underwriter shall not be obligated to make contributions hereunder that
in the aggregate exceed the total public offering price of the Securities
purchased by the Underwriter under this Agreement, less the aggregate amount of
any damages that the Underwriter has otherwise been required to pay in respect
of the same or any substantially similar claim, and no person guilty of
fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls an Underwriter within the meaning of Section 15 of the Act
or Section 20 of the 1934 Act shall have the same rights to contribution as the
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the 1934
Act, shall have the same rights to contribution as the Company.
8. SUBSTITUTION OF UNDERWRITER.
If any Underwriter shall for any reason not permitted hereunder cancel its
obligations to purchase the Firm Securities hereunder, or shall fail to take up
and pay for the number of Firm Securities set forth opposite names in Schedule 1
hereto upon tender of such Firm Securities in accordance with the terms hereof,
then:
(a) If the aggregate number of Firm Securities which such
Underwriter or Underwriter agreed but failed to purchase does not exceed 10% of
the total number of Firm Securities, the other Underwriter shall be obligated to
purchase the Firm Securities which such
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defaulting Underwriter agreed but failed to purchase.
(b) If any Underwriter so defaults and the agreed number of Firm
Securities with respect to which such default or defaults occurs is more than
10% of the total number of Firm Securities, the remaining Underwriter shall have
the right to take up and pay for the Firm Securities which the defaulting
Underwriter agreed but failed to purchase. If such remaining Underwriter do not,
at the Firm Closing Date, take up and pay for the Firm Securities which the
defaulting Underwriter agreed but failed to purchase, the time for delivery of
the Firm Securities shall be extended to the next business day to allow the
remaining Underwriter the privilege of substituting within twenty-four hours
(including nonbusiness hours) another underwriter or Underwriter satisfactory to
the Company. If no such underwriter or Underwriter shall have been substituted
as aforesaid, within such twenty-four hour period, the time of delivery of the
Firm Securities may, at the option of the Company, be again extended to the next
following business day, if necessary, to allow the Company the privilege of
finding within twenty-four hours (including nonbusiness hours) another
underwriter or Underwriter to purchase the Firm Securities which the defaulting
Underwriter or Underwriter agreed but failed to purchase. If it shall be
arranged for the remaining Underwriter or substituted Underwriter to take up the
Firm Securities of the defaulting Underwriter as provided in this section, (i)
the Company or the Underwriter shall have the right to postpone the time of
delivery for a period of not more than seven business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other document or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
numbers of Firm Securities to be purchased by the remaining Underwriter or
substituted Underwriter shall be takenas the basis of the underwriting
obligation for all purposes of this agreement.
If in the event of a default by any Underwriter and the remaining
Underwriter shall not take up and pay for all the Firm Securities agreed to be
purchased by the defaulting Underwriter or substitute another underwriter or
Underwriter as aforesaid, the Company shall not find or shall not elect to seek
another underwriter or Underwriter for such Firm Securities as aforesaid, then
this Agreement shall terminate.
If, following exercise of the option provided in Section 2(c) hereof,
any Underwriter or Underwriter shall for any reason not permitted hereunder
cancel their obligations to purchase Option Shares at the Option Closing Date,
or shall fail to take up and pay for the number of Option Shares, which it
became obligated to purchase at the Option Closing Date upon tender of such
Option Shares in accordance with the terms hereof, then the remaining
Underwriter or substituted Underwriter may take up and pay for the Option Shares
of the defaulting Underwriter in the manner provided in Section 8(b) hereof. If
the remaining Underwriter or substituted Underwriter shall not take up and pay
for all such Option Shares, the Underwriter shall be entitled to purchase the
number of Option Shares for which there is no default or, at their election, the
option shall terminate, the exercise thereof shall be of no effect.
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As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any non-defaulting Underwriter to the
Company, provided that the provisions of this Section 8 shall not in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
9. SURVIVAL. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, any of its officers
or directors and the Underwriter set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Underwriter or any
controlling person referred to in Section 7 hereof, and (ii) delivery of and
payment for the Securities. The respective agreements, covenants, indemnities
and other statements set forth in Sections 4 and 7 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
10. TERMINATION.
(a) This Agreement may be terminated with respect to the Firm
Securities or any Option Shares in the sole discretion of the Underwriter by
notice to the Company given prior to the Firm Closing Date or the related Option
Closing Date, respectively, in the event that the Company shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied under Section 6 hereunder at or prior
thereto or if at or prior to the Firm Closing Date or such Option Closing Date,
respectively. Termination of this Agreement pursuant to this Section 10 shall be
without liability of any party to any other party, except as provided in Section
5(b) and Section 7 hereof.
11. INFORMATION SUPPLIED BY THE UNDERWRITER. The statements set forth
in the first paragraph on page 41, (as to the underwriting commitment of the
Underwriter) and the fourth paragraph under the heading "Underwriting" in any
Preliminary Prospectus or the Prospectus (to the extent such statements relate
to the Underwriter) constitute the only information furnished by the Underwriter
to the Company for the purposes of Section 7(b) hereof. The Underwriter confirms
that such statements (to such extent) are correct.
12. NOTICES. All notice hereunder to or upon either party hereto shall
be deemed to have been duly given for all purposes if in writing and (i)
delivered in person or by messenger or an overnight courier service against
receipt, or (ii) sent by certified or registered mail, postage paid, return
receipt requested, or (iii) sent by telegram, facsimile, telex or similar means,
provided that a written copy thereof is sent on the same day by postage paid
first-class mail, to such party at the following address:
To the Company: Nutriceuticals.Com
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6950 Bryan Dairy Road
Largo Florida 33777
Attn: Stephen M. Waters, President
To the Underwriter: Kasner Davidson Securities Corporation
77 South Palm Avenue
Sarasota, Florida 34326
with a copy to:
Sichenzia, Ross & Freidman, LLP
135 West 50th Street, 20th Floor
New York, New York 10020
Attn: Gregory Sichenzia, Esq.
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving of any such notice shall be, in the case of clause (i), the
date of the receipt; in the case of clause (ii), five business days after such
notice or demand is sent; and, in the case of clause (iii), the business day
next following the date such notice is sent.
13. AMENDMENT. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective, unless in writing and signed by or
on behalf of the parties hereto.
14. WAIVER. No course of dealing or omission or delay on the part of
either party hereto in asserting or exercising any right hereunder shall
constitute or operate as a waiver of any such right. No waiver of any provision
hereof shall be effective, unless in writing and signed by or on behalf of the
party to be charged therewith. No waiver shall be deemed a continuing waiver or
waiver in respect of any other or subsequent breach or default, unless expressly
so stated in writing.
15. APPLICABLE LAW. This agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of New York
without regard to principles of choice of law or conflict of laws.
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16. JURISDICTION. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the Supreme Court of the
State of New York and the United States District Court for the Southern District
of New York in connection with any suit, action or other proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby, waives
any objection to venue in the County of New York, State of New York, or such
District and agrees that service of any summons, complaint, notice or other
process relating to such suit, action or other proceeding may be effected in the
manner provided by clause (ii) of Section 12.
17. REMEDIES. In the event of any actual or prospective breach or
default by either party hereto, the other party shall be entitled to equitable
relief, including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive, and
nothing herein shall be deemed to prohibit or limit either party from pursuing
any other remedy or relief available at law or in equity for such actual or
prospective breach or default, including the recovery of damages.
18. ATTORNEYS' FEES. The prevailing party in any suit, action or other
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, shall be entitled to recover its costs and reasonable
attorneys' fees.
19. SEVERABILITY. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
20. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and which together shall constitute one and
the same agreement.
21. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Company and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provisions herein contained,
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company contained in
Section 7 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the 1934 Act, and (ii) the indemnities of the Underwriter
contained in Section 7 of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the Act or Section 20 of the 1934 Act. No
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purchaser of Securities from the Underwriter shall be deemed a successor because
of such purchase.
22. TITLES AND CAPTIONS. The titles and captions of the articles and
sections of this Agreement are for convenience of reference only and do not in
any way define or interpret the intent of the parties or modify or otherwise
affect any of the provisions hereof.
23. GRAMMATICAL CONVENTIONS. Whenever the context so requires, each
pronoun or verb used herein shall be construed in the singular or the plural
sense and each capitalized term defined herein and each pronoun used herein
shall be construed in the masculine, feminine or neuter sense.
24. REFERENCES. The terms "herein," "hereto," "hereof," "hereby," and
"hereafter," and other terms of similar import, refer to this Agreement as a
whole, and not to any Article, Section or other part hereof.
25. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, commitment or arrangement relating thereto.
[SIGNATURES ON FOLLOWING PAGE]
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If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company, and the
Underwriter.
Very truly yours,
NUTRICEUTICALS.COM
By:____________________________________
Name: Stephen M. Watters
Title: President
The foregoing agreement is hereby confirmed and accepted as of the date first
above written.
KASHNER DAVIDSON SECURITIES CORPORATION
By:______________________________________
Name: Matthew Miester
Title: CEO
31
EXHIBIT 1.2
NUTRICEUTICALS.COM
AND
KASHNER DAVIDSON SECURITIES CORPORATION
UNDERWRITERS
WARRANT AGREEMENT
UNDERWRITER'S WARRANT AGREEMENT dated as of _________, 1999 by and
between NUTRICEUTICALS.COM CORPORATION (the "Company") and KASHNER DAVIDSON
SECURITIES CORPORATION ("Underwriter" or "Kashner") individually (an
"Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter 100,000
warrants (each a "Underwriter's Warrant") each to purchase a share of the
Company's common stock, par value $.001 per share (the "Common Stock").
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated ______, 1999, by and between the
Underwriter and the Company, to act as the Underwriter in connection with the
Company's proposed public offering (the "Public Offering") of 1,000,000 shares
of Common Stock (the "Offering Securities"); and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this
Agreement will be issued on Closing Date I (as such term is defined in the
Underwriting Agreement) by the Company to the Underwriter in consideration for,
and as part of, the Underwriter's compensation in connection with the
Underwriter's acting as the Underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of Ten Dollars ($10.00), the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. GRANT. The Holder (as defined in Section 3 below) is hereby granted
the right to purchase, at any time from _________, 2000 until 5:00 p.m., New
York time, _______, 2004, up to 100,000 shares of Common Stock, at an initial
purchase price (subject to adjustment as provided in Section 8 hereof) of $____
per share of Common Stock (120% of the per share public offering price), subject
to the terms and conditions of this Agreement. The securities issuable upon
exercise of the Underwriter's Warrant are sometimes referred to herein as the
"Underwriter's Securities."
<PAGE>
2. WARRANT CERTIFICATES. The warrant certificate (the "Underwriter's
Warrant Certificate") to be delivered pursuant to this Agreement shall be in the
form set forth in Exhibit A attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. EXERCISE OF UNDERWRITER'S WARRANT.
(a) The Underwriter's Warrant is exercisable during the term set forth
in Section 1 hereof payable by certified or cashier's check or money order in
lawful money of the United States. Upon surrender of Underwriter's Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Underwriter's Securities (and such other amounts, if any, arising pursuant to
Section 4 hereof) at the Company's principal office currently located at 6950
Bryan Dairy Road, Largo, Florida 33777, the registered holder of a Underwriter's
Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the Underwriter's Securities so purchased. The
purchase rights represented by each Underwriter's Warrant Certificate are
exercisable at the option of the Holder or Holders thereof, in whole or in part
as to Underwriter's Securities. The Underwriter's Warrant may be exercised to
purchase all or any part of the Underwriter's Securities represented thereby. In
the case of the purchase of less than all the Underwriter's Securities
purchasable on the exercise of the Underwriter's Warrant represented by a
Underwriter's Warrant Certificate, the Company shall cancel the Underwriter's
Warrant Certificate represented thereby upon the surrender thereof and shall
execute and deliver a new Underwriter's Warrant Certificate of like tenor for
the balance of the Underwriter's Securities purchasable thereunder.
(b) In lieu of the payment of cash upon exercise of the Underwriter's
Warrant as provided in Section 3(a), the Holder may exercise the Underwriter's
Warrant by surrendering the Underwriter's Warrant Certificate at the principal
office of the Company, accompanied by a notice stating (i) the Holder's intent
to effect such exercise by an exchange, (ii) Common Stock to be issued upon the
exchange, (iii) whether Underwriter's Warrants are to be surrendered in
connection with the exchange, and (iv) the date on which the Holder requests
that such exchange is to occur. The Purchase Price for the Underwriter's
Securities to be acquired in the exchange shall be paid by the surrender as
indicated in the notice, of Underwriter's Warrants, having a "Value", as defined
below, equal to the Purchase Price. "Value" as to each Underwriter's Warrant
shall mean the difference between the "Market Price", as hereinafter defined, of
a share of Common Stock and the then Purchase Price for a share of Common Stock.
By way of example of the application of the formula, assume that the
Market Price of the Common Stock is $8.00, the Purchase Price of the
Underwriter's Warrant is $6.00. On such assumptions, the Value of a
Underwriter's Warrant is $2.00 ($8.00-$6.00) and therefore for each three
Underwriter's Warrants surrendered, the Holder could acquire one share of Common
Stock in the exchange. Notwithstanding the example, the Holder shall not be
limited to exchanging Underwriter's Warrants for Common Stock.
The Warrant Exchange shall take place on the date specified in the
notice or if the date the notice is received by the Company is later than the
date specified in the notice, on the date the notice
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is received by the Company.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Underwriter's
Warrant and payment of the Purchase Price therefor, the issuance of certificates
representing the Underwriter's Securities or other securities, properties or
rights underlying such Underwriter's Warrant, shall be made forthwith (and in
any event within five (5) business days thereafter) without further charge to
the Holder thereof, and such certificates shall (subject to the provisions of
Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Underwriter's Warrant Certificates and the certificates representing the
Underwriter's Securities or other securities, property or rights (if such
property or rights are represented by certificates) shall be executed on behalf
of the Company by the manual or facsimile signature of the then present Chairman
or Vice Chairman of the Board of Directors or President or Vice President of the
Company, attested to by the manual or facsimile signature of the then present
Secretary or Assistant Secretary or Treasurer or Assistant Treasurer of the
Company. The Underwriter's Warrant Certificates shall be dated the date of
issuance thereof by the Company upon initial issuance, transfer or exchange.
5. RESTRICTION ON TRANSFER OF UNDERWRITER'S WARRANT. The Holder of an
Underwriter's Warrant Certificate (and its Permitted Transferee, as defined
below), by its acceptance thereof, covenants and agrees that the Underwriter's
Warrant may be sold, transferred, assigned, hypothecated or otherwise disposed
of, in whole or in part, until _______, 2000 (one year following the effective
date of the Public Offering), only to officers and partners of the Underwriters,
or any Public Offering selling group member and their respective officers and
partners, (APermitted Transferees@). Thereafter the Underwriter's Warrant may be
transferred, assigned, hypothecated or otherwise disposed of in compliance with
applicable law.
6. PURCHASE PRICE.
(a) INITIAL AND ADJUSTED PURCHASE PRICE. Except as otherwise provided
in Section 8 hereof, the initial purchase price of the Underwriter's Securities
shall be $____ per share of Common Stock (120% of the per share public offering
price). The adjusted purchase price shall be the price which shall result from
time to time from any and all adjustments of the initial purchase price in
accordance with the provisions of Section 8 hereof.
(b) PURCHASE PRICE. The term "Purchase Price" herein shall mean the
initial
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<PAGE>
purchase price or the adjusted purchase price, depending upon the context.
7. REGISTRATION RIGHTS.
(a) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS AMENDED ("ACT").
The Underwriter's Warrant may have not been registered under the Act. The
Underwriter's Warrant Certificates may bear the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act"), and may not be offered for sale or
sold except pursuant to (i) an effective registration statement under the Act,
or (ii) an opinion of counsel, if such opinion and counsel shall be reasonably
satisfactory to counsel to the issuer, that an exemption from registration under
the Act is available@.
(b) DEMAND REGISTRATION. (1) At any time commencing on the first
anniversary of and expiring on the fifth anniversary of the effective date of
the Company's Registration Statement relating to the Public Offering (the
"Effective Date"), the Holders of a Majority (as hereinafter defined) in
interest of the Underwriter's Warrant, or the Majority in interest of the
Underwriter's Securities (assuming the exercise of all of the Underwriter's
Warrant) shall have the right, exercisable by written notice to the Company, to
have the Company prepare and file with the U.S. Securities and Exchange
Commission (the "Commission"), on one (1) occasion, a registration statement on
Form SB-2, S-1 or other appropriate form, and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale, of the Underwriter's Securities by
such Holders and any other Holders of the Underwriter=s Warrant and/or the
Underwriter's Securities who notify the Company within fifteen (15) business
days after receipt of the notice described in Section 7(b)(2). The Holders of
the Underwriter's Warrant may demand registration prior to exercising the
Underwriter's Warrant, and may pay such exercise price from the proceeds of such
public offering.
(2) The Company covenants and agrees to give written notice of any
registration request under this Section 7(b) by any Holders to all other
registered Holders of the Underwriter's Warrant and the Underwriter's Securities
within ten (10) calendar days from the date of the receipt of any such
registration request.
(3) For purposes of this Agreement, the term "Majority" in reference to
the Holders of the Underwriter's Warrant or Underwriter's Securities, shall mean
in excess of fifty percent (50%) of the then outstanding Underwriter's Warrant
or Underwriter's Securities that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their respective
affiliates, members of their family, persons acting as nominees or in
conjunction therewith, or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act.
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<PAGE>
(c) PIGGYBACK REGISTRATION. (1) If, at any time within the period
commencing on the first anniversary and expiring on the sixth anniversary of the
Effective Date, the Company should file a registration statement with the
Commission under the Act (other than in connection with a merger or other
business combination transaction or pursuant to Form S-8), it will give written
notice at least twenty (20) calendar days prior to the filing of each such
registration statement to the Underwriter and to all other Holders of the
Underwriter's Warrant and/or the Underwriter's Securities of its intention to do
so. If an Underwriter or other Holders of the Underwriter's Warrant and/or the
Underwriter's Securities notify the Company within fifteen (15) calendar days
after receipt of any such notice of its or their desire to include any
Underwriter's Securities in such proposed registration statement, the Company
shall afford the Underwriter and such Holders of the Underwriter's Warrant
and/or Underwriter's Securities the opportunity to have any such Underwriter's
Securities registered under such registration statement. Notwithstanding the
provisions of this Section 7(c)(1) and the provisions of Section 7(d), the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7(c)(1) (irrespective of whether a written
request for inclusion of any such securities shall have been made) to elect not
to file any such proposed registration statement, or to withdraw the same after
the filing but prior to the effective date thereof.
(2) If the managing underwriter of an offering to which the above
piggyback rights apply, in good faith and for valid business reasons, objects to
such rights, such objection shall preclude such inclusion.
(d) COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registrations under Sections 7(b) and 7(c) hereof, the
Company covenants and agrees as follows:
(1) The Company shall use its best efforts to file a registration
statement within thirty (30) calendar days of receipt of any demand therefor
pursuant to Section 7(b); provided, however, that the Company shall not be
required to produce audited or unaudited financial statements for any period
prior to the date such financial statements are required to be filed in a report
on Form 10-KSB or Form 10-QSB, as the case may be. The Company shall use its
best efforts to have any registration statement declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell
Underwriter's Securities such number of prospectuses as shall reasonably be
requested.
(2) The Company shall pay all costs (excluding fees and expenses of
Holders' counsel and any underwriting discounts or selling fees, expenses or
commissions), fees and expenses in connection with any registration statement
filed pursuant to Sections 7(b) and 7(c) hereof including, without limitation,
the Company's legal and accounting fees, printing expenses, blue sky fees and
expenses.
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<PAGE>
(3) The Company will use its best efforts to qualify or register
the Underwriter's Securities included in a registration statement for offering
and sale under the securities or blue sky laws of such states as reasonably are
requested by the Holders, provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.
(4) The Company shall indemnify the Holders of the Underwriter's
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement, but only to the same
extent and with the same effect as the provisions pursuant to which the Company
has agreed to indemnify the Underwriter contained in Section 8 of the
Underwriting Agreement.
(5) The Holders of the Underwriter's Securities to be sold pursuant
to a registration statement, and their successors and assigns, shall indemnify
the Company, its officers and directors and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 8 of the
Underwriting Agreement pursuant to which the Underwriter has agreed to indemnify
the Company.
(6) Nothing contained in this Agreement shall be construed as
requiring the Holders to exercise their Underwriter's Warrant prior to the
initial filing of any registration statement or the effectiveness thereof,
provided that such Holders have made arrangements reasonably satisfactory to the
Company to pay the exercise price from the proceeds of such offering.
(7) The Company shall furnish to each Underwriter for the offering,
if any, such documents as such Underwriter may reasonably require.
(8) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
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<PAGE>
(9) The Company shall deliver promptly to each Holder participating
in the offering requesting the correspondence described below and any managing
Underwriter copies of all correspondence between the Commission and the Company,
its counsel or auditors with respect to the registration statement and permit
each Holder and Underwriter to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(10) The Company shall enter into an underwriting agreement with
the managing underwriter selected for such underwriting by Holders holding a
Majority of the Underwriter's Securities requested to be included in such
underwriting, provided, however that such managing underwriter shall be
reasonably acceptable to the Company, except that in connection with an offering
for which the Holders have piggyback rights, the Company shall have the sole
right to select the managing underwriter or underwriters. Such underwriting
agreement shall be satisfactory in form and substance to the Company, a Majority
of such Holders (in respect of a registration under Section 7(b) only) and such
managing underwriter, and shall contain such representations, warranties and
covenants by the Company and such other terms as are customarily contained in
agreements of that type. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Underwriter's Securities.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
8. ADJUSTMENTS TO PURCHASE PRICE AND NUMBER OF SECURITIES.
(a) COMPUTATION OF ADJUSTED PURCHASE PRICE. Except as hereinafter
provided, in case the Company shall at any time after the date hereof issue or
sell any shares of Common Stock (other than the issuances referred to in Section
8(g) hereof), including shares held in the Company's treasury, for a
consideration per share less than the "Market Price" (as defined in Section
8(a)(6) hereof) per share of Common Stock on the date immediately prior to the
issuance or sale of such shares, or without consideration, then forthwith upon
any such issuance or sale, the Purchase Price of the Common Stock shall (until
another such issuance or sale) be reduced to the price (calculated to the
nearest full cent) determined by dividing (1) the product of (a) the Purchase
Price in effect immediately before such issuance or sale and (b) the sum of (i)
the total number of shares of Common Stock outstanding immediately prior to such
issuance or sale, and (ii) the number of shares determined by dividing (A) the
aggregate consideration, if any, received by the Company upon such sale or
issuance, by (B) the Market Price, and by (2) the total number of shares of
Common Stock outstanding immediately after such issuance or sale provided,
however, that in no event shall the Purchase Price be adjusted pursuant to this
computation to an amount in excess of the
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Purchase Price in effect immediately prior to such computation, except in the
case of a combination of outstanding shares of Common Stock, as provided by
Section 8(c) hereof.
For the purposes of this Section 8, the term "Purchase Price" shall
mean the Purchase Price of the Common Stock forming a part of the Underwriter's
Securities set forth in Section 6 hereof, as adjusted from time to time pursuant
to the provisions of this Section 8.
For the purposes of any computation to be made in accordance with this
Section 8(a), the following provisions shall be applicable:
(1) In case of the issuance or sale of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if such securities shall
be sold to Underwriters or dealers for public offering without a subscription
offering, the initial public offering price) before deducting therefrom any
compensation paid or discount allowed in the sale, underwriting or purchase
thereof by Underwriters or dealers or others performing similar services, or any
expenses incurred in connection therewith.
(2) In case of the issuance or sale (otherwise than as a dividend or other
distribution on any stock of the Company, and otherwise than on the exercise of
options, rights or warrants or the conversion or exchange of convertible or
exchangeable securities) of shares of Common Stock (or of other securities
deemed hereunder to involve the issuance or sale of shares of Common Stock) for
a consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company.
(3) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(4) The reclassification of securities of the Company other than shares of
Common Stock into securities including shares of Common Stock shall be deemed to
involve the issuance of such shares of Common Stock for a consideration other
than cash immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such shares of Common Stock shall be
determined as provided in Section 8(a)(2).
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(5) The number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares of Common Stock issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights or warrants and upon the conversion or exchange of convertible
or exchangeable securities.
(6) As used herein in the phrase "Market Price" at any date shall be deemed
to be the last reported sale price, or, in the case no such reported sale takes
place on such day, the average of the last reported sales prices for the last
three (3) trading days, in either case as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, the average closing bid price as furnished by the NASD
through the NASD Automated Quotation System ("NASDAQ") or similar organization
if NASDAQ is no longer reporting such information, or if the Common Stock is not
quoted on NASDAQ, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
(b) OPTIONS, RIGHTS, WARRANT AND CONVERTIBLE AND EXCHANGEABLE
SECURITIES. Except in the case of the Company issuing rights to subscribe for
shares of Common Stock distributed to all the stockholders of the Company and
Holders of Underwriter's Warrant pursuant to Section 8(i) hereof, if the Company
shall at any time after the date hereof issue options, rights or warrants to
purchase shares of Common Stock, or issue any securities convertible into or
exchangeable for shares of Common Stock (other than the issuances referred to in
Section 8(g) hereof), (i) for a consideration per share less than the Market
Price (including the issuance thereof without consideration such as by way of
dividend or other distribution), or (ii) without consideration, the Purchase
Price in effect immediately prior to the issuance of such options, rights or
warrants, or such convertible or exchangeable securities, as the case may be,
shall be reduced to a price determined by making a computation in accordance
with the provisions of Section 8(a) hereof, provided that:
(1) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable under such options, rights or warrants
(assuming exercise in full even if not then currently exercisable or currently
exercisable in full) shall be deemed to be issued and outstanding at the time
such options, rights or warrants were issued, and for a consideration equal to
the minimum purchase price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration (determined in the same
manner as consideration received on the issue or sale of shares in accordance
with the terms of the Underwriter's Warrant), if any, received by the Company
for such options, rights or warrants; provided, however, that upon the
expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this Section 8(b)(1) (and for
the purposes of Section 8(a)(5) hereof) shall be reduced by such number of
shares as to which options, warrants and/or rights shall have expired or
terminated unexercised, and such number of shares shall no longer be deemed to
be issued and outstanding, and the Purchase Price
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then in effect shall forthwith be readjusted and thereafter be the price which
it would have been had adjustment been made on the basis of the issuance only of
shares actually issued or issuable upon the exercise of those options, rights or
warrants as to which the exercise rights shall not be expired or terminated
unexercised.
(2) The aggregate maximum number of shares of Common Stock
issuable upon conversion or exchange of any convertible or exchangeable
securities (assuming conversion or exchange in full even if not then currently
convertible or exchangeable in full) shall be deemed to be issued and
outstanding at the time of issuance of such securities, and for a consideration
equal to the consideration (determined in the same manner as consideration
received on the issue or sale of shares of Common Stock in accordance with the
terms of the Underwriter's Warrant) received by the Company for such securities,
plus the minimum consideration, if any, receivable by the Company upon the
conversion or exchange thereof; provided, however, that upon the expiration or
other termination of the right to convert or exchange such convertible or
exchangeable securities (whether by reason or redemption or otherwise), the
number of shares deemed to be issued and outstanding pursuant to this Section
8(b)(2) (and for the purpose of Section 8(a)(5) hereof) shall be reduced by such
number of shares as to which the conversion or exchange rights shall have
expired or terminated unexercised, and such number of shares shall no longer be
deemed to be issued and outstanding and the Purchase Price then in effect shall
forthwith be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of the shares actually
issued or issuable upon the conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange rights shall not
have expired or terminated unexercised.
(3) If any change shall occur in the price per share provided for
in any of the options, rights or warrants referred to in Section 8(b)(1), or in
the price per share at which the securities referred to in Section 8(b)(2) are
convertible or exchangeable, and if a change in the Purchase Price has not
occurred by reason of the event giving rise to the change in the price per share
of such other options, rights, warrants, or convertible or exchangeable
securities, such options, rights or warrants or conversion or exchange rights,
as the case may be, to the extent not theretofore exercised, the shall be deemed
to have expired or terminated on the date when such price change became
effective in respect of shares not theretofore issued pursuant to the exercise
or conversion or exchange thereof, and the Company shall be deemed to have
issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
(c) SUBDIVISION AND COMBINATION. In case the Company shall at any time
issue any shares of Common Stock in connection with a stock dividend in shares
of Common Stock or subdivide or combine the outstanding shares of Common Stock,
the Purchase Price shall forthwith be proportionately decreased in the case of a
stock dividend or a subdivision or increased in the case
10
<PAGE>
of combination.
(d) ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the
Purchase Price pursuant to the provisions of this Section 8, the number of
Underwriter's Securities issuable upon the exercise of the Underwriter's Warrant
shall be adjusted to the nearest whole share by multiplying a number equal to
the Purchase Price in effect immediately prior to such adjustment by the number
of Underwriter's Securities issuable upon exercise of the Underwriter's Warrant
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Purchase Price.
(e) DEFINITION OF COMMON STOCK. For the purpose of this Agreement, the
term "Common Stock" shall mean the class of stock designated as Common Stock in
the Certificate of Incorporation, of the Company as it may be amended as of the
date hereof.
(f) RECLASSIFICATION, MERGER OR CONSOLIDATION. The Company will not
merge, reorganize or take any other action which would terminate the
Underwriter's Warrant without first making adequate provision for the
Underwriter's Warrant. In case of any reclassification or change of the
outstanding shares of Common Stock issuable upon exercise of the outstanding
warrants (other than a change in par value to no par value, or from nor par
value to par value, or as a result of a subdivision or combination), or in case
of any consolidation of the Company with, or merger of the Company with, or
merger of the Company into, another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which does not
result in any reclassification or change of the outstanding Common Stock except
a change as a result of a subdivision or combination of such shares or a change
in par value, as aforesaid), or in the case of a sale or conveyance to another
corporation or other entity of the property of the Company as an entirety or
substantially as an entirety, the Holders of each Underwriter's Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Underwriter's Warrant) to purchase, upon exercise of such
Underwriter's Warrant, the kind and number of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holders were the owner of
the shares of Common Stock underlying the Underwriter's Warrant immediately
prior to any such events at a price equal to the product of (x) the number of
shares issuable upon exercise of the Underwriter's Warrant and (y) the Purchase
Price in effect immediately prior to the record date for such reclassification,
change, consolidation, merger, sale or conveyance, as if such Holders had
exercised the Underwriter's Warrant. In the event of a consolidation, merger,
sale or conveyance of property, the corporation formed by such consolidation or
merger, or acquiring such property, shall execute and deliver to the Holders a
supplemental Underwriter's warrant agreement to such effect. Such supplemental
Underwriter's warrant agreement shall provide for adjustments which shall be
identical to the adjustment provided for in this Section 8. The provisions of
this Section 8(f) shall similarly apply to successive consolidations or mergers.
(g) NO ADJUSTMENT OF PURCHASE PRICE IN CERTAIN CASES. No adjustment of
11
<PAGE>
the Purchase Price shall be made:
(1) Upon the issuance or sale of (i) the Underwriter's Warrant or
the securities underlying the Underwriter's Warrant, (ii) the securities sold
pursuant to the Public Offering (including those sold upon exercise of the
Underwriter's over-allotment option), or (iii) the shares issuable pursuant to
the options, warrants, rights, stock purchase agreements or convertible or
exchangeable securities outstanding or in effect on the date hereof as described
in the prospectus relating to the Public Offering.
(2) If the amount of said adjustments shall aggregate less than
two ($.02) cents for one (1) share of Common Stock; provided, however, that in
such case any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment so carried forward,
shall aggregate at least two ($.02) cents for one (1) share of Common Stock. In
addition, Registered Holders shall not be entitled to cash dividends paid by the
Company prior to the exercise of any warrant or warrants held by them.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Underwriter's
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holders at the principal executive office of the Company, for
a new Underwriter's Warrant Certificate of like tenor and date representing in
the aggregate the right to purchase the same number of Underwriter's Securities
in such denominations as shall be designated by the Holders thereof at the time
of such surrender.
10. LOSS, THEFT ETC. OF CERTIFICATES Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Underwriter's Warrant Certificate, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Underwriter's Warrant Certificates, if
mutilated, the Company will make and deliver a new Underwriter's Warrant
Certificate of like tenor, in lieu thereof.
11. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Underwriter's Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests; provided, however, that
if a Holder exercises all Underwriter's Warrant held of record by such Holder
the fractional interests shall be eliminated by rounding any fraction to the
nearest whole number of shares of Common Stock or other securities, properties
or rights.
12. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Underwriter's
Warrant, such number of shares of Common Stock or other
12
<PAGE>
securities and properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of Underwriter's
Warrant and payment of the Purchase Price therefor, all the shares of Common
Stock issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Underwriter's Warrant shall be outstanding, the Company shall use
its best efforts to cause the Common Stock to be listed (subject to official
notice of issuance) on all securities exchanges on which the Common Stock issued
to the public in connection herewith may then be listed or quoted.
13. NOTICES TO UNDERWRITER'S WARRANT HOLDERS. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Underwriter's Warrant and their exercise, any of
the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) calendar days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
14. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or five days after being mailed by registered or certified mail,
return receipt requested:
If to the registered Holders of the Underwriter's Warrant, to the address of
such Holders as shown
13
<PAGE>
on the books of the Company; or
(a) If to the Company to 6950 Bryan Dairy Road, Largo Florida
33777, or to such other address as the Company may designate by notice to the
Holders, with a courtesy copy to Schifino & Fleisher P.A.
15. SUPPLEMENTS AND AMENDMENTS. The Company and the Underwriter may
from time to time supplement or amend this Agreement without the approval of any
Holders of Underwriter's Warrant Certificates (other than the Underwriter) in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provision in regard to matters or questions arising hereunder
which the Company and the Underwriter may deem necessary or desirable and which
the Company and the Underwriter deem shall not adversely affect the interests of
the Holders of Underwriter's Warrant Certificates.
16. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Underwriter,
the Holders and their respective successors and assigns hereunder.
17. TERMINATION. This Agreement shall terminate at the close of
business on _______, 2004. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on the expiration of any applicable statue of limitations.
18. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each
Underwriter's Warrant Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of said state without giving effect to
the rules of said state governing the conflicts of laws.
19. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the
Underwriting Agreement, to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and thereof. This Agreement may not be modified or amended
except by a writing duly signed by the Company and the Holders of a Majority in
Interest of the Underwriter's Securities (for this purpose, treating all then
outstanding Underwriter's Warrants as if they had been exercised).
20. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
21. CAPTIONS. The caption headings of the Sections of this Agreement
are for
14
<PAGE>
convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holders of the Underwriter's Warrant
Certificates or Underwriter's Securities any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Underwriter and any other Holders of
the Underwriter's Warrant Certificates or Underwriter's Securities.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
24. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Company, the Underwriter and their respective successors and
assigns and the Holders from time to time of the Underwriter's Warrant
Certificates or any of them.
[SIGNATURE ON FOLLOWING PAGE]
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
NUTRICEUTICALS.COM
By:_____________________________________
Name: Stephen M. Watters, President
KASHNER DAVIDSON SECURITIES CORP.,
By:_____________________________________
Name: Matthew Miester
Title: CEO
16
<PAGE>
SCHEDULE A
TO
UNDERWRITER'S WARRANT AGREEMENT
BETWEEN
NUTRICEUTICALS.COM
AND
KASHNER DAVIDSON SECURITIES CORPORATION
UNDERWRITER
Kashner Davidson Securities Corp.
17
<PAGE>
NUTRICEUTICALS.COM
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AND MAY NOT BE OFFERED FOR SALE OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR
(ii) AN OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE COMMENCING ___________, 2000 THROUGH
5:00 P.M., NEW YORK TIME ON __________, 2004
Warrant covering 100,000 shares of
Common Stock
No. UW-1
This Warrant Certificate certifies that Kashner Davidson Securities
Corp. or registered assigns, is the registered holder of this Warrant to
purchase initially, at any time from _________, 2000, until 5:00 p.m., New York
time on ________, 2004 (the "Expiration Date"), up to 100,000 shares of Common
Stock, $.001 par value (the "Common Stock") of Nutriceuticals.Com (ACompany@)
exercisable to purchase one share of Common Stock at a purchase price of $____
per share (165% of the per share public offering price) (the "Purchase Price"),
upon the surrender of this Warrant Certificate and payment of the applicable
Purchase Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Underwriter's Warrant Agreement, dated as
of ________, 1999, by and between the Company and Kashner Davidson Securities
Corp. (the "Warrant Agreement"). Payment of the Purchase Price shall be made by
certified or cashier's check or money order payable to the order of the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrant evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrant evidenced by this Warrant Certificate is part of a duly
authorized issue
18
<PAGE>
of Warrants issued pursuant to the Warrant Agreement between the Company and the
Underwriter, which Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Purchase Price and the type and/or number of the Company's securities
issuable upon the exercise of this Warrant, may, subject to certain conditions,
be adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the Purchase Price
and the number and/or type of securities issuable upon the exercise of the
Warrant; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrant shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
___ day of _____, 1999.
NUTRICEUTICALS.COM
By:______________________________________
Stephen M. Watters
CEO
19
<PAGE>
ATTEST:
By:__________________________________
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED___________________________ hereby sells, assigns and
transfers unto _____________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Warrant Certificate on the books of ABLE
Energy, Inc., with full power of substitution.
Dated:
Signature_____________________
(Signature must conform in all respects
to the name of holder as specified on the face of the Warrant Certificate.)
[Signature guarantee] ________________________________
(Insert Social Security or Other
Identifying Number of Holders)
20
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase ______ shares of Common Stock and herewith
tenders in payment for such securities a certified or cashier's check or money
order payable to the order of Nutriceuticals.Com. in the amount of $______, all
in accordance with the terms hereof. The undersigned requests that certificates
for such securities be registered in the name of ___________________________
whose address is _____________________ and that such certificates be delivered
to _____________________________________ whose address is
_________________________________________________________.
Dated:__________________________
Signature_______________________
(Signature must conform in all respects to the name of holder as specified on
the face of the Warrant Certificate.)
___________________________
(Insert Social Security or Other
Identifying Number of Holders)
[Signature guarantee]
21
EXHIBIT 3.1
FILED INVOICE # 45252
IN THE OFFICE OF THE FILING FEE $175.00 K.R
SECRETARY OF STATE OF THE FILED BY; CT CORP
STATE OF NEVADA 815 SUPERIOR AVE N.E.
CLEVELAND OHIO 44114
OCT 18 1993
12813-93 ARTICLES OF INCORPORATION
CHERYL A. LAU
SECRETARY OF STATE OF
NUMED SURGICAL, INC.
No:______________
ARTICLE ONE
The name of the corporation is NuMED SURGICAL, INC.
ARTICLE TWO
The corporation's registered office in the State of Nevada is located
at One East First Street, Reno, Nevada 89501. The name of its resident agent at
that address is The Corporation Trust Company of Nevada.
ARTICLE THREE
The purpose or purposes for which this corporation is organized are:
To engage, without qualification, in any lawful act or activity for
which corporations may be organized under the laws of the State of Nevada.
ARTICLE FOUR
SECTION 4.01. AUTHORIZED CAPITAL STOCK. The total number of shares of
capital stock the corporation is authorized to issue is Fifty Million
(50,000,000) shares, each having a par value of $0.001, of which (i) Forty-Eight
Million (48,000,000) shares shall be designated as "Common Stock and"
(ii) Two Million (2,000,000) shares shall be designated as "Preferred Stock".
SECTION 4.02. COMMON STOCK. Each share of Common Stock issued and
outstanding shall be entitled to one vote on all
<PAGE>
matters. Dividends shall be declared and paid only out of funds legally
available therefor. Shares of such Common Stock may be issued for such
consideration and for such corporate purposes as the Board of Directors may from
time to time determine. Fully paid shares of Common Stock of this corporation
shall not be liable to any further call or assessment.
SECTION 4.03. PREFERRED STOCK. The Board of Directors shall have the
authority to authorize the issuance of the Preferred Stock from time to time in
one or more classes or series, and to state in the resolution or resolutions
from time to time adopted providing for the issuance thereof the following:
(a) Whether or not the class or series shall have voting rights, full
or limited, or will be without voting rights;
(b) The number of shares to constitute the class or series and the
designation thereof;
(c) The preferences and relative, participating, optional or other
special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any class or
series;
(d) Whether or not the shares of any class or series shall be
redeemable and, if redeemable, the redemption price or prices,
and the time or times at which, and the terms and conditions upon
which, such shares shall be redeemable and the manner of
redemption;
(e) Whether or not the shares of a class or series shall be subject
to the operation of retirement or sinking funds to be applied to
the purchase or redemption of such shares for retirement, and if
such retirement or sinking funds shall be established, the annual
amount thereof and the terms and provisions relative to the
operation thereof;
(f) The dividend rate, whether dividends are payable in cash, stock
of the corporation, or other property, the conditions upon which
and the times when such dividends are payable, the preference to
or the relation to the payment of dividends payable on any other
class or
-2-
<PAGE>
classes or series of stock, whether or not such dividend shall be
cumulative or noncumulative, and if cumulative, the date or dates
from which such dividends shall accumulate;
(g) The preferences, if any, and the amounts thereof which the
holders of any class or series thereof are entitled to receive
upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the corporation;
(h) Whether or not the shares of any class or series is convertible
into, or exchangeable for, the shares of any other class or
classes or of any other series of the same or any other class or
classes of stock of the corporation and the conversion price or
prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall be
stated and expressed or provided for in such resolution or
resolutions; and
(i) Such other rights and provisions with respect to any class or
series as may to the Board of Directors seem advisable.
The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any respect. The Board of
Directors may increase the number of shares of the Preferred Stock designated
for any existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The Board of Directors may decrease the number of shares
of the Preferred Stock designated for any existing class or series of the
Preferred Stock and the shares so subtracted shall become authorized, unissued
and undesignated shares of the Preferred Stock.
ARTICLE FIVE
The governing board of this corporation shall be known as directors,
and the number of directors may from time to time be
-3-
<PAGE>
increased or decreased in such manner as shall be provided by the bylaws of this
corporation, provided that the number of directors shall not be reduced to less
than three (3) except that in cases where all the shares of the corporation are
owned beneficially and of record by either one or two stockholders, the number
of directors may be less than three (3) but not less than the number of
stockholders.
The names and business street addresses of the first board of
directors, which shall be five (5) in number, are as follows;
NAME ADDRESS
---- -------
Jugal K. Taneja 6505 Rockside Road, Suite 400
Independence, OH 44131-2342
Michael J. Diroff 6505 Rockside Road, Suite 400
Independence, OH 44131-2342
James P. Witherington 6505 Rockside Road, Suite 400
Independence, OH 44131-2342
Robert P. Ottman 6505 Rockside Road, Suite 400
Independence, OH 44131-2342
Nayan S. Shah 6505 Rockside Road, Suite 400
Independence, OH 44131-2342
The Board of Directors shall be limited in number to no less than three
(3) nor more than nine (9).
Directors of the corporation need not be residents of the State of
Nevada and need not own shares of the corporation's stock.
ARTICLE SIX
The Capital stock of the corporation, after the amount of the
subscription price has been paid in money, property, or services, as the
directors shall determine, shall not be subject to assessment to pay the debts
of the corporation, nor for any other
-4-
<PAGE>
purpose and no stock issued as fully paid up shall ever be assessable or
assessed, and the Articles of Incorporation shall not be amended in this
particular.
ARTICLE SEVEN
The name and business street addresses of each of the incorporators
signing the Articles of Incorporation are as follows:
NAME ADDRESS
---- -------
James P. Witherington 6505 Rockside Road, Suite 400
Independence, OH 44131-2342
Mark Rowland 6505 Rockside Road, Suite 400
Independence, OH 44131-2342
ARTICLE EIGHT
The corporation is to have perpetual existence.
ARTICLE NINE
In furtherance and not in limitation to the powers conferred by
statute, the board of directors is expressly authorized:
Subject to the bylaws, if any, adopted by the stockholders, to make,
alter or amend the bylaws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and to cause to be executed mortgages and
liens upon the real and personal property of this corporation.
By resolution passed by a majority of the whole board, to designate one
or more committees, each committee to consist of one or more of the directors of
the corporation, which, to the extent provided in the resolution or in the
bylaws of the corporation,
-5-
<PAGE>
shall have and may exercise the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may be
stated in the bylaws of the corporation or as may be determined from time to
time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a stockholders meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the board of directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of directors deems expedient and for the best
interests of the corporation.
ARTICLE TEN
Meetings of the stockholders may be held at such place within or
without the State of Nevada, if the bylaws so provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside the State of Nevada at such place or places as may be designated from
time to time by the board of directors or in the bylaws of the corporation.
-6-
<PAGE>
ARTICLE ELEVEN
This corporation reserves the right to amend, alter, change or repeal
any provision contained in the Articles of Incorporation, in the manner now or
hereafter prescribed by statute, or by the Articles of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this reference.
ARTICLE TWELVE
No shareholder shall be entitled as a matter of right to subscribe for
or receive additional shares of any class of stock of the corporation, whether
now or hereafter authorized, or any bonds, debentures or other securities
convertible into stock, but such additional shares of stock or other securities
convertible into stock may be issued or disposed of by the board of directors to
such persons and on such terms as in its discretion it shall deem advisable.
WE, THE UNDERSIGNED, being each of the incorporators herein-before
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Nevada, do make and file these Articles of
Incorporation, hereby declaring and
(Remainder of page intentionally left blank.)
-7-
<PAGE>
certifying that the facts herein stated are true, and accordingly have
hereunto set our hands this 15th day of October 1993.
/s/ JAMES P. WITHERINGTON
-------------------------
James P. Witherington
/s/ MARK ROWLAND
-------------------------
Mark Rowland
STATE OF OHIO )
:SS
COUNTY OF CUYAHOGA )
On this 15th day of October 1993, before me, a Notary Public,
personally appeared James P. Witherington and Mark Rowland, who severally
acknowledged that they executed the above instrument.
[ILLEGIBLE]
------------------------
Notary Public
My commission expires:
4-17-94
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
BY RESIDENT AGENT
The Corporation Trust Company of Nevada hereby accepts the appointment
as Resident Agent of the above-named corporation.
The Corporation Trust Company of Nevada
By: /s/ MICHAEL P. NELSON
-----------------------------------
Assistant Secretary Michael P. Nelson
Date: October 15, 1993
----------------------------------
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<PAGE>
ARTICLES OF MERGER
OF
NUTRICEUTICALS.COM CORPORATION
AND
NUMED SURGICAL, INC.
To the Secretary of State
State of Nevada:
Pursuant to the provisions of Chapter 92A, Nevada Revised Statutes, the
foreign corporation and the domestic corporation herein named do hereby adopt
the following Articles of Merger.
1. Annexed hereto and made a part hereof is the Plan of Merger for
merging Nutriceuticals.com Corporation, a business corporation organized under
the laws of the State of Florida ("Nutriceuticals.com"), with and into NuMed
Surgical, Inc., a business corporation organized under the laws of the State of
Nevada ("NuMed Surgical"). The said Plan of Merger has been adopted by the Board
of Directors of Nutriceuticals.com and by the Board of Directors of NuMed
Surgical on the l5th day of January, 1999.
2. The merger of Nutriceuticals.com with and into NuMed Surgical is
permitted by the laws of the jurisdiction of organization of Nutriceuticals.com,
and has been authorized in compliance with said laws, by which
Nutriceuticals.com is governed.
3. The said Plan of Merger was submitted to the stockholders of
Nutriceuticals.com upon the recommendation of its Board of Directors pursuant to
the provisions of the laws of the jurisdiction of its organization, and the
manner of approval thereof by said stockholders was as follows:
(i) The said Plan of Merger was approved by the unanimous written
consent of the shareholders of Nutriceuticals.com pursuant to the
provisions of Section 607.0704 of the Florida Business Corporation Act.
<PAGE>
4. The said Plan of Merger was submitted to the stockholders of NuMed
Surgical by its Board of Directors pursuant to the provisions of Chapter 92A,
Nevada Revised Statutes, and the manner of approval thereof by said stockholders
was as follows:
(i) The designation, number of outstanding shares, and the number
of votes entitled to be cast by each class entitled to vote on the said
Plan of Merger is as follows:
(a) Designation of class: Common Stock
(b) Number of outstanding shares of class: 8,826,195 shares
(c) Number of votes entitled to be cast: 8,826,195 votes
(ii) The total number of votes cast for and against the merger
herein provided for by each class entitled to vote on the said Plan of
Merger is as follows:
(a) Designation of class: Common Stock
(b) Number of votes of class cast for Plan of Merger: 5,534,152
votes (60.6%)
(c) Number of votes of class cast against Plan of Merger: 160,165
votes
(iii) The said number of votes cast for the said Plan of Merger
was sufficient for the approval thereof by the said class.
5. When the Merger herein provided for becomes effective, Article I of
the Certificate of Incorporation of NuMed Surgical is amended pursuant to the
annexed Plan of Merger to read as follows:
"The name of the corporation shall be: NUTRICEUTICALS.COM CORPORATION."
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IN WITNESS WHEREOF, these Articles of Merger have been executed on
behalf of the constituent corporations by their authorized officers as of this
15th day of March, 1999.
NUTRICEUTICALS.COM CORPORATION
By: /s/ STEPHEN M. WATTERS
-------------------------
Stephen M. Watters, President
By: /s/ MANDEEP K. TANEJA
-------------------------
Mandeep K. Taneja, Asst. Secretary
NUMED SURGICAL, INC.
By: /s/ JUGAL K. TANEJA
-------------------------------
Jugal K. Taneja, President
By: /s/ JUGAL K. TANEJA
------------------------------
Jugal K. Taneja, Secretary
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EXHIBIT 3.2
BYLAWS
OF
NUMED SURGICAL, INC.
ARTICLE I
NAME OF CORPORATION
Section 1: This corporation shall be known as NuMED SURGICAL, INC.
ARTICLE II
OFFICES
SECTION 1: The initial registered office in the State of Nevada is located at
One East First Street, Reno, Nevada 89501.
ARTICLE III
STOCKHOLDERS
SECTION 1: The annual meeting of the stockholders shall be held in July of each
year, at a date and time to be specified by the Board of Directors. Said meeting
shall be for the purpose of electing directors for the ensuing year and for the
transaction of such other business as may come before the meeting. If the
election of directors shall not be held on the day designated for the annual
meeting of the stockholders, or at any adjournment thereof, and the Board of
Directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter a possible.
SECTION 2: Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by Statute, may be called by the President or by the
Board of Directors and shall be called by the President at the request of the
holders of not less than one-tenth of all the outstanding shares of the
corporation entitled to vote at the meeting.
SECTION 3: The Board of Directors may designate any place within or without the
State of Nevada as the site for any annual or special stockholders meeting. A
waiver of notice signed by all stockholders entitled to vote at a meeting may
designate any place, either within or without the State of Nevada, as the site
for any meeting hereinabove authorized. If no designation is made, the place of
the meeting shall be at the principal office of the corporation in the State of
Nevada.
<PAGE>
SECTION 4: Written or printed notice stating the site, date and time of the
meeting an, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) days nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction and over the signature of the President, or the Secretary,
or the officer or person calling the meeting, to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the stockholder
at this address as it appears on the stock transfer books of the corporation,
with postage thereon prepaid.
SECTION 5: For the purpose of determining stockholders entitled to notice of or
to vote at any meeting of stockholders, or any adjournment thereof, or
stockholders entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors of the corporation may provide that the stock transfer books shall be
closed for a stated period, not to exceed twenty (20) days. In lieu of closing
the stock transfer books, THE BOARD OF DIRECTORS MAY FIX IN ADVANCE A DATE AS
THE RECORD DATE FOR ANY SUCH DETERMINATION OF STOCKHOLDER, SUCH DATE IN ANY CASE
TO BE NOT MORE THAN SIXTY (60) DAYS AND, IN CASE OF A MEETING OF STOCKHOLDERS,
NOT LESS THAN FIFTEEN (15) DAYS PRIOR TO THE DATE ON WHICH THE PARTICULAR ACTION
REQUIRING SUCH DETERMINATION OF STOCKHOLDERS IS TO BE TAKEN. If the stock
transfer books are not closed and no record dates fixed for the determination of
stockholders entitled to notice of or to vote, or entitled to receive payment of
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
stockholders. When determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except where the determination has been
made through the closing of the stock transfer books and the stated period of
closing was expired.
SECTION 6: The officer or agent having charge of the stock transfer books for
the share of the corporation shall make, at least ten (10) days before each
meeting of stockholders, a complete list of the stockholders entitled to vote at
such meeting, or any adjournment thereof, arranged in alphabetical order, with
the address of, and the number of shares held by, each, which list, for a period
of ten (10) days prior to such meeting, shall be kept on file at the principal
office of the corporation and shall be subject to the inspection of any
stockholder during the meeting.
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SECTION 7: A majority of the outstanding shares of the corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of stockholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 8: At all meetings of stockholders, a stockholder may vote by proxy
which shall be executed in writing by the stockholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
six (6) months from the date of its execution, unless otherwise provided in the
proxy in the proxy or coupled with an interest.
SECTION 9: Each outstanding share otherwise entitled to vote shall be entitled
to one (1) vote upon each matter submitted to a vote at a meeting of
stockholders. A majority vote of those shares present and voting at a duly
organized meeting shall suffice to defeat or enact any proposal unless the
Statutes of the State of Nevada require a greater-than-majority vote, in which
event the higher vote shall be required for the action to constitute the action
of the corporation.
SECTION 10: Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without the transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority to do so be contained in
an appropriate order of the Court by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such shares
until the shares are transferred into the name of the pledgee, and thereafter
the pledgee shall be entitled to vote the share so transferred.
Shares of its own stock belonging to the corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
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SECTION 11: An action required to be taken at a meeting of the stockholders, or
any other action which may be taken at a meeting of the stockholders, may be
taken without a meeting, if a consent in writing, setting forth the action so
taken, shall be signed by a majority of the stockholders, entitled to vote with
respect to the subject matter thereof, unless a greater-than-majority vote would
be required at a duly organized meeting, in which event said
greater-than-majority stockholder approval must be obtained. Such consent shall
be filed with the Minutes of Proceedings.
SECTION 12: The following order of business shall be observed at all meetings of
the stockholder, so far as practicable:
(a) Calling the roll:
(b) Reading, correcting and approving of minutes of previous meeting:
(c) Reports of officers;
(d) Reports of Committees;
(e) Election of Directors;
(f) Unfinished business;
(g) New business; and
(h) Adjournment.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1: The business and affairs of the corporation shall be managed by its
Board of Directors.
SECTION 2: As provided in the Articles of Incorporation, the BOARD OF DIRECTORS
SHALL CONSIST OF FIVE (5) PERSONS, but may be increased by resolution of the
Board of Directors. The directors shall hold office until the next annual
meeting of stockholder and until their successor shall have been elected and
qualified. Directors need not be residents of the State of Nevada or
stockholders of the corporation.
SECTION 3: DIRECTORS SHALL BE ELECTED AT AN ANNUAL OR SPECIAL STOCKHOLDERS'
MEETING by secret ballot of those stockholders present and entitled to vote, a
plurality of the vote being cast being required to elect. Each stockholder shall
be entitled to one (1) vote for each share of stock owned. If there is but one
(1) nominee for any office, it shall be in order to move that the Secretary cast
the elective ballot to elect the nominee.
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<PAGE>
SECTION 4: A regular meeting of the Board of Directors shall be held without
notice, other than this By-Law immediately after, and at the same place as, the
annual meeting of stockholders. The Board of Directors may provide, by
resolution, the day, time and place for the holding of additional regular
meetings without other notice than such resolution. The Secretary of the
corporation shall serve as Secretary for the Board of Directors and shall issue
notices for all meetings as required by the By-Laws: shall keep a record of the
minutes of the proceedings of the meetings of directors; and shall perform such
other duties as may be properly required of him by the Board of Directors.
SECTION 5: Special meetings of the Board of Directors may be called by or at the
request of the President or any director. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, within or
without the State of Nevada, as the place for holding any special meeting of the
Board of Directors called by them.
SECTION 6: Notice of any special meeting shall be given at least two (2) days
prior thereto by written notice delivered personally or mailed to each director
at his business address, or by telegram. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail so addressed, with
postage prepaid thereon. If notice be given by telegram, such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph company.
Any director may waive notice of any meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice or
waiver of such meeting.
SECTION 7: A MAJORITY OF THE NUMBER OF DIRECTORS FIXED according to Section 2 of
this Article IV SHALL CONSTITUTE A QUORUM for the transaction of business at any
meeting of the Board of Directors, but IF LESS THAN SUCH MAJORITY IS PRESENT at
a meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice. Once a quorum has been established at a duly
organized meeting, the Board of Directors may continue to transact corporate
business until adjournment, notwithstanding the withdrawal of enough members to
leave less than a quorum.
SECTION 8: The act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors unless the
Statutes of the State of Nevada require a greater-than-majority vote, in which
case, such greater vote shall be required for the act to be that of the Board of
Directors.
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SECTION 9: Any vacancy occurring in the Board of Directors may be filled by the
affirmative note of a majority of the remaining directors, though less than a
quorum of the Board of Directors. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship to
be filled by reason of an increase in the number of directors shall be filled by
election at an annual meeting or at a special meeting of the stockholders called
for that purpose.
SECTION 10: By resolution of the Board of Directors, the directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors,
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 11: A director of the corporation who is present at a meeting of the
Board of Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the Secretary of the meeting before the adjournment
thereof or shall express such dissent by written notice sent by registered mail
to the Secretary of the corporation within one (1) day after the adjournment of
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
SECTION 12: Any action required to be taken at a meeting of the Board of
Directors, or any other action which may be taken at a meeting of the Board of
Directors, may be taken without meeting if a written consent thereto is signed
by all the members of the Board. Such written consent shall be filed with the
minutes of proceedings of the Board. Any meeting of the Board of Directors may
be held by conference telephone call, with minutes thereof duly prepared and
entered into the Minute Book.
ARTICLE V
OFFICERS
SECTION 1: The officers of the corporation shall be a President, a
Vice-President, a Secretary, a Treasurer, and a Resident Agent, each of whom
shall be elected by the Board of Directors. Other officers and assistant
officers may be authorized and elected or appointed by the Board of Directors.
Any two (2) or more offices may be held by the same person.
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<PAGE>
SECTION 2: The officers of the corporation shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the stockholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified or until his death or until he shall
resign or shall be been removed in the manner hereinafter provided. Each officer
shall serve for a term of one (1) year, or until his successor is chosen and
qualified.
SECTION 3: Any officer or agent elected or appointed by the Board of Directors
may be removed by the Board of Directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
SECTION 4: A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by majority vote of the Board of
Directors for the unexpired portion of the terms of such office.
SECTION 5: The President shall preside at all meetings of the directors and the
stockholders and shall have general charge and control over the affairs of the
corporation subject to the Board of Directors. He shall sign or countersign all
certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors and shall perform such other duties as are incident to
his office or are required of him by the Board of Directors.
SECTION 6: The Vice-President shall exercise the functions of the President, in
the President's absence, and shall have such powers and duties as may be
assigned to him from time to time by the Board of Directors.
SECTION 7: The Secretary shall issue notices for all meeting as required by the
By-Laws, shall keep a record of the minutes of the proceedings of the meetings
of stockholders and directors, shall have charge of the Seal and of the
corporate books, and shall make such reports and perform such other duties as
are incident to his office, or properly required of him by the Board of
Directors.
SECTION 8: The Treasurer shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall disburse the
funds of the corporation in payment of the just demands against the corporation,
or as may be
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<PAGE>
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, from time to time as
may be required of him, an account of all his transactions as Treasurer and of
the financial condition of the corporation. He shall perform all duties incident
to this office or which are properly required of him by the Board of Directors.
SECTION 9: The Resident Agent shall be in charge of the corporation's registered
office, upon whom process against the corporation may be served, an shall
perform all duties required of him by statute.
SECTION 10: The salaries of all officers shall be fixed by the Board of
Directors, and may be changed from time to time by a majority vote of the Board
of Directors.
ARTICLE VI
AGREEMENTS AND FINANCES
SECTION 1: The Board of Directors may authorize any officer or officers, agent
or agents, to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the corporation, and such authority may be general
or confined to specific instances.
SECTION 2: No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
SECTION 3: All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation shall be
signed by such duly authorized officer or officers, or agent or agents of the
corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION4: All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the Board of Directors may select.
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<PAGE>
ARTICLE VII
CERTIFICATE OF SHARES
SECTION 1: Certificates representing shares of the corporation shall be in such
form as shall be determined by the Board of Directors. Such certificates shall
be signed by the President and by the Secretary. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address of
the person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except in
case of a lost, destroyed or mutilated certificate, a new one may be issued
therefor upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
SECTION 2: Transfer of shares of the corporation shall be made only on the stock
transfer books of the corporation by the holder of record thereof or by his
legal representative, who shall furnish proper evidence of authority to
transfer, or by his attorney authorized by power of attorney duly executed and
filed with the Secretary of the corporation, and on surrender for cancellation
of the certificate for such shares. The person in who name shares stand on the
books of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes, unless otherwise notified by such person in writing.
ARTICLE VIII
FISCAL YEAR
SECTION 1: The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors.
ARTICLE IX
SEAL
SECTION 1: The Corporation may or may not have a corporate seal, as may from
time to time be determined by resolution of the Board of Directors. If a
corporate seal is adopted, it shall have inscribed thereon the name of the
corporation and the words "Corporate Seal" and "Nevada". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
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ARTICLE X
AMENDMENTS
SECTION 1: Those By-Laws may be amended by a majority vote of all the stock
issued and outstanding and entitled to vote at any annual or special meeting of
the stockholders, provided notice of intention to amend shall have been
contained in the notice of the meeting.
SECTION 2: The Board of Directors, by a majority vote of the entire Board of any
meeting, may amend these By-Laws, including By-Laws adopted by the stockholders.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1: Every person who was or is a party to, or is threatened to be made a
part to, or is involved in any action, suit or proceedings, whether civil,
criminal, administrative or investigative, by reason of the fact that he or a
person of whom he is the legal representative is or was a director or officer of
the corporation or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless to the fullest extent legally permissible under the laws of the
State of Nevada from time to time against all expenses, liability and loss,
including attorneys' fee, judgments, fines and amounts paid or to be paid in
settlement, reasonable incurred or suffered by him in connection therewith,
pursuant to NRS 78.151. Such right of indemnification shall be a contract right
which may be enforced in any manner desired by such person
This indemnification is intended to provide at all times the fullest
indemnification permitted by the laws of the State of Nevada and the corporation
may purchase and maintain insurance on behalf of any person who is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such person.
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EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of April 1, 1999
by Nutriceuticals.com Corp., a Nevada corporation (the "Employer"), and Stephen
M. Watters (the "Executive").
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
"AGREEMENT" -- this Employment Agreement, as amended from time to time.
"BASIC COMPENSATION" -- Salary and Benefits.
"BENEFITS" -- as defined in Section 3.1(b).
"BOARD OF DIRECTORS" -- the board of directors of the Employer.
"CONFIDENTIAL INFORMATION" -- any and all:
(a) trade secrets concerning the business and affairs of the
Employer, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples, inventions
and ideas, past, current, and planned research and development, current and
planned manufacturing or distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object code and source
code), computer software and database technologies, systems, structures, and
architectures (and related formulae, compositions, processes, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information, and any other information, however documented, that is a trade
secret within the meaning of Chapter 688, Florida Statutes;
(b) information concerning the business and affairs of the Employer
(which includes historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and plans, the
names and backgrounds of key personnel, personnel training and techniques and
materials, however documented;
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based, in whole or in
part, on any information included in the foregoing, and
(d) any and all of the foregoing as it relates to Nutriceuticals.com
Corp., a Nevada corporation and any of its affiliates.
<PAGE>
"DISABILITY" -- as defined in Section 5.2.
"EFFECTIVE DATE" -- the date stated in the first paragraph of the
Agreement.
"EMPLOYEE INVENTION" -- any idea, invention, technique, modification,
process, or improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or encoded, that is
suitable to be fixed, embedded or programmed in a semiconductor product (whether
recordable or not), and any work of authorship (whether or not copyright
protection may be obtained for it) created, conceived, or developed by the
Executive, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Employer, and any such item created
by the Executive, either solely or in conjunction with others, following
termination of the Executive's employment with the Employer, that is based upon
or uses Confidential Information.
"EMPLOYMENT PERIOD" -- the term of the Executive's employment under this
Agreement.
"FISCAL YEAR" -- the Employer's fiscal year, as it exists on the effective
date or is changed from time to time.
"FOR CAUSE" -- as defined in Section 5.3.
"FOR GOOD REASON" -- as defined in Section 5.4.
"INCENTIVE COMPENSATION" -- as defined in Section 3.2.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.
"POST-EMPLOYMENT PERIOD" -- as defined in Section 7.2.
"PROPRIETARY ITEMS" -- as defined in Section 6.2(a)(iv).
"SALARY" -- as defined in Section 3.1(a).
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT. The Employer hereby employs the Executive, and the
Executive hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 6, the term of the
Executive's employment under this Agreement will be three years, beginning on
the Effective Date and ending on the third anniversary of the Effective Date.
This Agreement will be renewed
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automatically thereafter for successive periods of one year, unless not less
than 30 days prior to the end of the initial three year period or prior to the
end of any one-year renewal period, one of the parties sends written notice to
the other party of its intent to terminate this Agreement at the end of such
period.
2.3 DUTIES. The Executive will have such duties as are assigned or
delegated to the Executive by the Board of Directors and will initially serve as
the President of the Employer. The Executive will devote his entire business
time, attention, skill, and energy to the business of the Employer. The
Executive will, however, use his best efforts to promote the success of the
Employer's business, and will cooperate fully with the Board of Directors in the
advancement of the best interests of the Employer.
3. COMPENSATION
3.1 BASIC COMPENSATION.
(a) SALARY. The Executive will be paid an annual salary of
$150,000, (the "Salary"), which will be accrued until company has raised capital
then will be payable in equal periodic installments according to the Employer's
customary payroll practices. The Executive's base salary shall increase annually
by an amount to be determined in the sole discretion of the Board of Directors
based on the Board's review of the Executive's performance and the financial
performance of the Employer.
(b) BENEFITS. The Executive will, during the Employment
Period, be permitted to participate in such pension, profit sharing, bonus, life
insurance, hospitalization, major medical, and other employee benefit plans of
the Employer that may be in effect from time to time, to the extent the
Executive is eligible under the terms of those plans (collectively, the
"Benefits"). The Employer will pay 100% of the monthly health and disability
insurance benefits (including major medical and dental) for the Executive and
his immediate family members.
3.2 INCENTIVE COMPENSATION. As additional compensation (the
"Incentive Compensation") for the services to be rendered by the Executive
pursuant to this Agreement, the Employer will pay the Executive an annual bonus
as determined in the sole discretion of the Board of Directors based on the
Board=s evaluation of the Executive's performance and the financial performance
of the Employer.
3.3 STOCK OPTIONS. The Executive shall be eligible for the grant of
stock options in accordance with the provisions of the Company's 2000 Stock
Option Plan, as determined by the Administrator of such Plan.
4. FACILITIES AND EXPENSES
The Employer will furnish the Executive office space, equipment, supplies,
and such other facilities and personnel as the Employer deems necessary or
appropriate for the performance of the Executive's duties under this Agreement.
The Employer will pay on behalf of
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the Executive (or reimburse the Executive for) reasonable expenses incurred by
the Executive at the request of, or on behalf of, the Employer in the
performance of the Executive's duties pursuant to this Agreement, and in
accordance with the Employer's employment policies. The Executive must file
expense reports with respect to such expenses in accordance with the Employer's
policies.
5. TERMINATION
5.1 EVENTS OF TERMINATION. The Employment Period, the Executive's
Basic Compensation and Incentive Compensation, and any and all other rights of
the Executive under this Agreement or otherwise as an employee of the Employer
will terminate (except as otherwise provided in this Section 5):
(a) upon the death of the Executive;
(b) upon the disability of the Executive (as defined in
Section 5.2) immediately upon notice from either party to the other;
(c) for cause (as defined in Section 5.3), immediately upon
notice from the Employer to the Executive, or at such later time as such notice
may specify; or
(d) for good reason (as defined in Section 5.4) upon not less
than thirty days' prior notice from the Executive to the Employer.
5.2 DEFINITION OF DISABILITY. For purposes of Section 5.1, the
Executive will be deemed to have a "disability" if, for physical or mental
reasons, the Executive is unable to perform the Executive's duties under this
Agreement for 30 consecutive days, or 90 days during any twelve month period, as
determined in accordance with this Section 5.2. The disability of the Executive
will be determined by a medical doctor selected by written agreement of the
Employer and the Executive upon the request of either party by notice to the
other. If the Employer and the Executive cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Executive has a disability. The determination of the medical doctor selected
under this Section 5.2 will be binding on both parties. The Executive must
submit to a reasonable number of examinations by the medical doctor making the
determination of disability under this Section 5.2, and the Executive hereby
authorizes the disclosure and release to the Employer of such determination and
all supporting medical records. If the Executive is not legally competent, the
Executive's legal guardian or duly authorized attorney-in-fact will act in the
Executive's stead, under this Section 5.2, for the purposes of submitting the
Executive to the examinations, and providing the authorization of disclosure,
required under this Section 5.2.
5.3 DEFINITION OF "FOR CAUSE." For purposes of Section 5.1, the
phrase "for cause" means: (a) the Executive's material breach of this Agreement
(b) the Executive's failure to adhere to any written Employer policy if the
Executive has been given a reasonable opportunity to comply with such policy or
cure his failure to comply (which reasonable opportunity must be granted during
the ten-day period preceding termination of this Agreement);
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(c) the appropriation (or attempted appropriation) of a material business
opportunity of the Employer (it being understood that the sale of products
through the internet is not an opportunity of the Employer), including
attempting to secure or securing any personal profit in connection with any
transaction entered into on behalf of the Employer; (d) the misappropriation (or
attempted misappropriation) of any of the Employer's funds or property; or (e)
the conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony, the
equivalent thereof, or any other crime with respect to which imprisonment is a
possible punishment.
5.4 DEFINITION OF "FOR GOOD REASON." For purposes of Section 5.1,
the phrase "for good reason" means the Employer's material breach of this
Agreement.
5.5 TERMINATION PAY. Effective upon the termination of this
Agreement, the Employer will be obligated to pay the Executive (or, in the event
of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 5.5, and in lieu of all other
amounts and in settlement and complete release of all claims the Executive may
have against the Employer. For purposes of this Section 5.5, the Executive's
designated beneficiary will be such individual beneficiary or trust, located at
such address, as the Executive may designate by notice to the Employer from time
to time or, if the Executive fails to give notice to the Employer of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence, the
Employer will have no duty, in any circumstances, to attempt to open an estate
on behalf of the Executive, to determine whether any beneficiary designated by
the Executive is alive or to ascertain the address of any such beneficiary, to
determine the existence of any trust, to determine whether any person or entity
purporting to act as the Executive's personal representative (or the trustee of
a trust established by the Executive) is duly authorized to act in that
capacity, or to locate or attempt to locate any beneficiary, personal
representative, or trustee.
(a) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. If the
Executive terminates this Agreement for good reason, the Employer will pay the
Executive (i) the Executive's Salary for the remainder, if any, of the calendar
month in which such termination is effective and for three consecutive calendar
months thereafter, and (ii) that portion of the Executive's Incentive
Compensation (including the number of shares included in the option provided for
herein), if any, for the year during which the termination is effective,
prorated through the date of termination based on the number of days in the
year.
(b) TERMINATION BY THE EMPLOYER FOR CAUSE. If the Employer
terminates this Agreement for cause, the Executive will be entitled to receive
his Salary only through the date such termination is effective, but will not be
entitled to any Incentive Compensation for the year during which such
termination occurs or any subsequent year.
(c) TERMINATION UPON DISABILITY. If this Agreement is
terminated by either party as a result of the Executive's disability, as
determined under Section 5.2, the Employer will pay the Executive his Salary
through the remainder of the calendar month during which such termination is
effective and for the lesser of (i) six consecutive months thereafter, or
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(ii) the period until disability insurance benefits commence under the
disability insurance coverage furnished by the Employer to the Executive.
(d) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Executive's death, the Executive will be entitled to receive his
Salary through the end of the calendar month in which his death occurs, and that
part of the Executive's Incentive Compensation (including the number of shares
included in the option provided for herein), if any, for the year during which
his death occurs, prorated through the end of the month during which his death
occurs.
(e) BENEFITS. The Executive's accrual of, or participation in
plans providing for, the Benefits will cease at the effective date of the
termination of this Agreement, and the Executive will be entitled to accrued
Benefits pursuant to such plans only as provided in such plans. The Executive
will not receive, as part of his termination pay pursuant to this Section 5, any
payment or other compensation for any vacation, holiday, sick leave, or other
leave unused on the date the notice of termination is given under this
Agreement.
6. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
6.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges
that (a) during the Employment Period and as a part of his employment, the
Executive will be afforded access to Confidential Information; (b) public
disclosure of such Confidential Information could have an adverse effect on the
Employer and its business; (c) because the Executive possesses substantial
technical expertise and skill with respect to the Employer's business, the
Employer desires to obtain exclusive ownership of each Employee Invention, and
the Employer will be at a substantial competitive disadvantage if it fails to
acquire exclusive ownership of each Employee Invention; (d) the provisions of
this Section 6 are reasonable and necessary to prevent the improper use or
disclosure of Confidential Information and to provide the Employer with
exclusive ownership of all Employee Inventions.
6.2 AGREEMENTS OF THE EXECUTIVE. In consideration of the
compensation and benefits to be paid or provided to the Executive by the
Employer under this Agreement, the Executive covenants as follows:
(a) CONFIDENTIALITY.
(i) During and following the Employment Period, the
Executive will hold in confidence the Confidential Information and will not
disclose it to any person except with the specific prior written consent of the
Employer or except as otherwise expressly permitted by the terms of this
Agreement.
(ii) Any trade secrets of the Employer will be
entitled to all of the protections and benefits under Chapter 688, Florida
Statutes and any other applicable law. If any information that the Employer
deems to be a trade secret is found by a court of competent jurisdiction not to
be a trade secret for purposes of this Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of this
Agreement. The
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Executive hereby waives any requirement that the Employer submit proof of the
economic value of any trade secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that the Executive
demonstrates was or became generally available to the public other than as a
result of a disclosure by the Executive.
(iv) The Executive will not remove from the
Employer's premises (except to the extent such removal is for purposes of the
performance of the Executive's duties at home or while traveling, or except as
otherwise specifically authorized by the Employer) any document, record,
notebook, plan, model, component, device, or computer software or code, whether
embodied in a disk or in any other form (collectively, the "Proprietary Items").
The Executive recognizes that, as between the Employer and the Executive, all of
the Proprietary Items, whether or not developed by the Executive, are the
exclusive property of the Employer. Upon termination of this Agreement by either
party, or upon the request of the Employer during the Employment Period, the
Executive will return to the Employer all of the Proprietary Items in the
Executive's possession or subject to the Executive's control, and the Executive
shall not retain any copies, abstracts, sketches, or other physical embodiment
of any of the Proprietary Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Employer. The Executive acknowledges that all of the
Executive's writing, works of authorship, and other Employee Inventions are
works made for hire and the property of the Employer, including any copyrights,
patents, or other intellectual property rights pertaining thereto. If it is
determined that any such works are not works made for hire, the Executive hereby
assigns to the Employer all of the Executive's right, title, and interest,
including all rights of copyright, patent, and other intellectual property
rights, to or in such Employee Inventions. The Executive covenants that he will
promptly:
(i) disclose to the Employer in writing any Employee
Invention;
(ii) assign to the Employer or to a party designated
by the Employer, at the Employer's request and without additional compensation,
all of the Executive's right to the Employee Invention for the United States and
all foreign jurisdictions;
(iii) execute and deliver to the Employer such
applications, assignments, and other documents as the Employer may request in
order to apply for and obtain patents or other registrations with respect to any
Employee Invention in the United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out
the above obligations; and
(v) give testimony and render any other assistance
in support of the Employer's rights to any Employee Invention.
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6.3 DISPUTES OR CONTROVERSIES. The Executive recognizes that should
a dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Employer, the Executive, and their respective attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
7. NON-COMPETITION AND NON-INTERFERENCE
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges
that: (a) the services to be performed by him under this Agreement are of a
special, unique, unusual, extraordinary, and intellectual character; (b) the
Employer's business is national in scope and its products are marketed
throughout the United States; (c) the Employer competes with other businesses
that are or could be located in any part of the United States; (d) the
provisions of this Section 7 are reasonable and necessary to protect the
Employer's business.
7.2 COVENANTS OF THE EXECUTIVE. In consideration of the
acknowledgments by the Executive, and in consideration of the compensation and
benefits to be paid or provided to the Executive by the Employer, the Executive
covenants that he will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or invest
in, own, manage, operate, finance, control, or participate in the ownership,
management, operation, financing, or control of, be employed by, associated
with, or in any manner connected with, lend the Executive's name or any similar
name to, lend Executive's credit to or render services or advice to, any
business whose products or activities compete in whole or in part with the
products or activities of the Employer anywhere within the United States;
provided, however, that the Executive may purchase or otherwise acquire up to
(but not more than) one percent of any class of securities of any enterprise
(but without otherwise participating in the activities of such enterprise) if
such securities are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the Securities Exchange Act of 1934;
(b) whether for the Executive's own account or for the account
of any other person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type being
carried on by the Employer, from any person known by the Executive to be a
customer of the Employer, whether or not the Executive had personal contact with
such person during and by reason of the Executive's employment with the
Employer;
(c) whether for the Executive's own account or the account of
any other person (i) at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an employee,
independent contractor, or otherwise, any person who is or was an employee of
the Employer at any time during the Employment Period or in any manner induce or
attempt to induce any employee of the Employer to terminate his
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employment with the Employer; or (ii) at any time during the Employment Period
and for three years thereafter, interfere with the Employer's relationship with
any person, including any person who at any time during the Employment Period
was an employee, contractor, supplier, or customer of the Employer; or
(d) at any time during or after the Employment Period,
disparage the Employer or any of its shareholders, directors, officers,
employees, or agents.
For purposes of this Section 7.2, the term "Post-Employment Period"
means the three year period beginning on the date of termination of the
Executive's employment with the Employer.
If any covenant in this Section 7.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.
The period of time applicable to any covenant in this Section 7.2
will be extended by the duration of any violation by the Executive of such
covenant.
The Executive will, while the covenant under this Section 7.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's employer. The Buyer or the
Employer may notify such employer that the Executive is bound by this Agreement
and, at the Employer's election, furnish such employer with a copy of this
Agreement or relevant portions thereof.
8. GENERAL PROVISIONS
8.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Executive
acknowledges that the injury that would be suffered by the Employer as a result
of a breach of the provisions of this Agreement (including any provision of
Sections 6 and 7) would be irreparable and that an award of monetary damages to
the Employer for such a breach would be an inadequate remedy. Consequently, the
Employer will have the right, in addition to any other rights it may have, to
obtain injunctive relief to restrain any breach or threatened breach or
otherwise to specifically enforce any provision of this Agreement, and the
Employer will not be obligated to post bond or other security in seeking such
relief. Without limiting the Employer's rights under this Section 8 or any other
remedies of the Employer, if the Executive breaches any of the provisions of
Section 6 or 7, the Employer will have the right to cease making any payments
otherwise due to the Executive under this Agreement.
8.2 COVENANTS OF SECTIONS 6 AND 7 ARE ESSENTIAL AND INDEPENDENT
COVENANTS. The covenants by the Executive in Sections 6 and 7 are essential
elements of this Agreement, and without the Executive's agreement to comply with
such covenants, the Buyer would not have purchased the Assets and the Employer
would not have entered into this Agreement or employed or continued the
employment of the Executive. The Employer and the
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Executive have independently consulted their respective counsel and have been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Employer.
The Executive's covenants in Sections 6 and 7 are independent
covenants and the existence of any claim by the Executive against the Employer
under this Agreement, will not excuse the Executive's breach of any covenant in
Section 6 or 7.
If the Executive's employment hereunder expires or is terminated,
this Agreement will continue in full force and effect as is necessary or
appropriate to enforce the covenants and agreements of the Executive in Sections
6 and 7.
8.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE. The Executive
represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the
Executive's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Executive; or (b) conflict with, result in the breach of any provisions of or
the termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound.
8.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the
Employer hereunder, including its obligation to pay the compensation provided
for herein, are contingent upon the Executive's performance of the Executive's
obligations hereunder.
8.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
8.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors, assigns, heirs, and legal representatives,
including any entity with which the Employer may merge or consolidate or to
which all or substantially all of its assets may be transferred. The duties and
covenants of the Executive under this Agreement, being personal, may not be
delegated.
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8.7 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nation-ally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by notice to the other parties):
If to Employer: Nutriceuticals.com Corp.
6950 Bryan Dairy Road
Largo, FL 33777
Attention: Jugal K. Taneja
Facsimile No.: (813) 548-1916
With a copy to: Schifino & Fleischer, P.A.
201 North Franklin Street
Suite 2700
Tampa, FL 33602
Attention: William J. Schifino, Esq.
Facsimile No.: (813) 223-3070
If to the Executive: Stephen M. Watters
6950 Bryan Dairy Road
Largo, FL 33777
Facsimile No.: (727) 548-1916
8.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, between
the parties hereto with respect to the subject matter hereof. This Agreement may
not be amended orally, but only by an agreement in writing signed by the parties
hereto.
8.9 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Nevada without regard to conflicts of laws principles.
8.10 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Florida,
County of Pinellas, or, if it has or can acquire jurisdiction, in the United
States District Court for the Middle District of Florida, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any
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such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on either party anywhere in the world.
8.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement unless otherwise
specified. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
8.12 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
8.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
8.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE A
JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date above first written above.
EMPLOYER: EXECUTIVE:
NUTRICEUTICALS.COM CORP.
By:_____________________
As:_____________________ __________________________
Stephen M. Watters
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EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of April 1, 1999
by Nutriceuticals.com Corp., a Nevada corporation (the "Employer"), and Jugal K.
Taneja (the "Executive").
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
"AGREEMENT" -- this Employment Agreement, as amended from time to time.
"BASIC COMPENSATION" -- Salary and Benefits.
"BENEFITS" -- as defined in Section 3.1(b).
"BOARD OF DIRECTORS" -- the board of directors of the Employer.
"CONFIDENTIAL INFORMATION" -- any and all:
(a) trade secrets concerning the business and affairs of the
Employer, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples, inventions
and ideas, past, current, and planned research and development, current and
planned manufacturing or distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object code and source
code), computer software and database technologies, systems, structures, and
architectures (and related formulae, compositions, processes, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information, and any other information, however documented, that is a trade
secret within the meaning of Chapter 688, Florida Statutes;
(b) information concerning the business and affairs of the Employer
(which includes historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and plans, the
names and backgrounds of key personnel, personnel training and techniques and
materials, however documented;
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based, in whole or in
part, on any information included in the foregoing, and
(d) any and all of the foregoing as it relates to Nutriceuticals.com
Corp., a Nevada corporation and any of its affiliates.
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"DISABILITY" -- as defined in Section 5.2.
"EFFECTIVE DATE" -- the date stated in the first paragraph of the
Agreement.
"EMPLOYEE INVENTION" -- any idea, invention, technique, modification,
process, or improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or encoded, that is
suitable to be fixed, embedded or programmed in a semiconductor product (whether
recordable or not), and any work of authorship (whether or not copyright
protection may be obtained for it) created, conceived, or developed by the
Executive, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Employer, and any such item created
by the Executive, either solely or in conjunction with others, following
termination of the Executive's employment with the Employer, that is based upon
or uses Confidential Information.
"EMPLOYMENT PERIOD" -- the term of the Executive's employment under
this Agreement.
"FISCAL YEAR" -- the Employer=s fiscal year, as it exists on the effective
date or is changed from time to time.
"FOR CAUSE" -- as defined in Section 5.3.
"FOR GOOD REASON" -- as defined in Section 5.4.
"INCENTIVE COMPENSATION" -- as defined in Section 3.2.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.
"POST-EMPLOYMENT PERIOD" -- as defined in Section 7.2.
"PROPRIETARY ITEMS" -- as defined in Section 6.2(a)(iv).
"SALARY" -- as defined in Section 3.1(a).
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT. The Employer hereby employs the Executive, and the
Executive hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 6, the term of the
Executive's employment under this Agreement will be three years, beginning on
the Effective Date and ending on the third anniversary of the Effective Date.
This Agreement will be renewed
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automatically thereafter for successive periods of one year, unless not less
than 30 days prior to the end of the initial three year period or prior to the
end of any one-year renewal period, one of the parties sends written notice to
the other party of its intent to terminate this Agreement at the end of such
period.
2.3 DUTIES. The Executive will have such duties as are assigned or
delegated to the Executive by the Board of Directors and will initially serve as
the Chairman of the Board of the Employer. The Executive will not devote his
entire business time, attention, skill, and energy to the business of the
Employer. The Executive will, however, use his best efforts to promote the
success of the Employer's business, and will cooperate fully with the Board of
Directors in the advancement of the best interests of the Employer.
3. COMPENSATION
3.1 BASIC COMPENSATION.
(a) SALARY. The Executive will be paid an annual salary of
$100,000, (the "Salary"), which will be accrued until company has raised capital
then will be payable in equal periodic installments according to the Employer's
customary payroll practices. The Executive=s base salary shall increase annually
by an amount to be determined in the sole discretion of the Board of Directors
based on the Board=s review of the Executive=s performance and the financial
performance of the Employer.
(b) BENEFITS. The Executive will, during the Employment
Period, be permitted to participate in such pension, profit sharing, bonus, life
insurance, hospitalization, major medical, and other employee benefit plans of
the Employer that may be in effect from time to time, to the extent the
Executive is eligible under the terms of those plans (collectively, the
"Benefits"). The Employer will pay 100% of the monthly health and disability
insurance benefits (including major medical and dental) for the Executive and
his immediate family members.
3.2 INCENTIVE COMPENSATION. As additional compensation (the
"Incentive Compensation") for the services to be rendered by the Executive
pursuant to this Agreement, the Employer will pay the Executive an annual bonus
as determined in the sole discretion of the Board of Directors based on the
Board=s evaluation of the Executive=s performance and the financial performance
of the Employer.
3.3 STOCK OPTIONS. The Executive shall be eligible for the grant of
stock options in accordance with the provisions of the Company=s 2000 Stock
Option Plan, as determined by the Administrator of such Plan.
4. FACILITIES AND EXPENSES
The Employer will furnish the Executive office space, equipment, supplies,
and such other facilities and personnel as the Employer deems necessary or
appropriate for the performance of the Executive's duties under this Agreement.
The Employer will pay on behalf of
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the Executive (or reimburse the Executive for) reasonable expenses incurred by
the Executive at the request of, or on behalf of, the Employer in the
performance of the Executive's duties pursuant to this Agreement, and in
accordance with the Employer's employment policies. The Executive must file
expense reports with respect to such expenses in accordance with the Employer's
policies.
5. TERMINATION
5.1 EVENTS OF TERMINATION. The Employment Period, the Executive's
Basic Compensation and Incentive Compensation, and any and all other rights of
the Executive under this Agreement or otherwise as an employee of the Employer
will terminate (except as otherwise provided in this Section 5):
(a) upon the death of the Executive;
(b) upon the disability of the Executive (as defined in
Section 5.2) immediately upon notice from either party to the other;
(c) for cause (as defined in Section 5.3), immediately upon
notice from the Employer to the Executive, or at such later time as such notice
may specify; or
(d) for good reason (as defined in Section 5.4) upon not less
than thirty days' prior notice from the Executive to the Employer.
5.2 DEFINITION OF DISABILITY. For purposes of Section 5.1, the
Executive will be deemed to have a "disability" if, for physical or mental
reasons, the Executive is unable to perform the Executive's duties under this
Agreement for 30 consecutive days, or 90 days during any twelve month period, as
determined in accordance with this Section 5.2. The disability of the Executive
will be determined by a medical doctor selected by written agreement of the
Employer and the Executive upon the request of either party by notice to the
other. If the Employer and the Executive cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Executive has a disability. The determination of the medical doctor selected
under this Section 5.2 will be binding on both parties. The Executive must
submit to a reasonable number of examinations by the medical doctor making the
determination of disability under this Section 5.2, and the Executive hereby
authorizes the disclosure and release to the Employer of such determination and
all supporting medical records. If the Executive is not legally competent, the
Executive's legal guardian or duly authorized attorney-in-fact will act in the
Executive's stead, under this Section 5.2, for the purposes of submitting the
Executive to the examinations, and providing the authorization of disclosure,
required under this Section 5.2.
5.3 DEFINITION OF "FOR CAUSE." For purposes of Section 5.1, the
phrase "for cause" means: (a) the Executive's material breach of this Agreement
(b) the Executive's failure to adhere to any written Employer policy if the
Executive has been given a reasonable opportunity to comply with such policy or
cure his failure to comply (which reasonable opportunity must be granted during
the ten-day period preceding termination of this Agreement);
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(c) the appropriation (or attempted appropriation) of a material business
opportunity of the Employer (it being understood that the sale of products
through the internet is not an opportunity of the Employer), including
attempting to secure or securing any personal profit in connection with any
transaction entered into on behalf of the Employer; (d) the misappropriation (or
attempted misappropriation) of any of the Employer's funds or property; or (e)
the conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony, the
equivalent thereof, or any other crime with respect to which imprisonment is a
possible punishment.
5.4 DEFINITION OF "FOR GOOD REASON." For purposes of Section 5.1,
the phrase "for good reason" means the Employer's material breach of this
Agreement.
5.5 TERMINATION PAY. Effective upon the termination of this
Agreement, the Employer will be obligated to pay the Executive (or, in the event
of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 5.5, and in lieu of all other
amounts and in settlement and complete release of all claims the Executive may
have against the Employer. For purposes of this Section 5.5, the Executive's
designated beneficiary will be such individual beneficiary or trust, located at
such address, as the Executive may designate by notice to the Employer from time
to time or, if the Executive fails to give notice to the Employer of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence, the
Employer will have no duty, in any circumstances, to attempt to open an estate
on behalf of the Executive, to determine whether any beneficiary designated by
the Executive is alive or to ascertain the address of any such beneficiary, to
determine the existence of any trust, to determine whether any person or entity
purporting to act as the Executive's personal representative (or the trustee of
a trust established by the Executive) is duly authorized to act in that
capacity, or to locate or attempt to locate any beneficiary, personal
representative, or trustee.
(a) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. If the
Executive terminates this Agreement for good reason, the Employer will pay the
Executive (i) the Executive's Salary for the remainder, if any, of the calendar
month in which such termination is effective and for three consecutive calendar
months thereafter, and (ii) that portion of the Executive's Incentive
Compensation (including the number of shares included in the option provided for
herein), if any, for the year during which the termination is effective,
prorated through the date of termination based on the number of days in the
year.
(b) TERMINATION BY THE EMPLOYER FOR CAUSE. If the Employer
terminates this Agreement for cause, the Executive will be entitled to receive
his Salary only through the date such termination is effective, but will not be
entitled to any Incentive Compensation for the year during which such
termination occurs or any subsequent year.
(c) TERMINATION UPON DISABILITY. If this Agreement is
terminated by either party as a result of the Executive's disability, as
determined under Section 5.2, the Employer will pay the Executive his Salary
through the remainder of the calendar month during which such termination is
effective and for the lesser of (i) six consecutive months thereafter, or
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(ii) the period until disability insurance benefits commence under the
disability insurance coverage furnished by the Employer to the Executive.
(d) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Executive's death, the Executive will be entitled to receive his
Salary through the end of the calendar month in which his death occurs, and that
part of the Executive's Incentive Compensation (including the number of shares
included in the option provided for herein), if any, for the year during which
his death occurs, prorated through the end of the month during which his death
occurs.
(e) BENEFITS. The Executive's accrual of, or participation in
plans providing for, the Benefits will cease at the effective date of the
termination of this Agreement, and the Executive will be entitled to accrued
Benefits pursuant to such plans only as provided in such plans. The Executive
will not receive, as part of his termination pay pursuant to this Section 5, any
payment or other compensation for any vacation, holiday, sick leave, or other
leave unused on the date the notice of termination is given under this
Agreement.
6. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
6.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges
that (a) during the Employment Period and as a part of his employment, the
Executive will be afforded access to Confidential Information; (b) public
disclosure of such Confidential Information could have an adverse effect on the
Employer and its business; (c) because the Executive possesses substantial
technical expertise and skill with respect to the Employer's business, the
Employer desires to obtain exclusive ownership of each Employee Invention, and
the Employer will be at a substantial competitive disadvantage if it fails to
acquire exclusive ownership of each Employee Invention; (d) the provisions of
this Section 6 are reasonable and necessary to prevent the improper use or
disclosure of Confidential Information and to provide the Employer with
exclusive ownership of all Employee Inventions.
6.2 AGREEMENTS OF THE EXECUTIVE. In consideration of the
compensation and benefits to be paid or provided to the Executive by the
Employer under this Agreement, the Executive covenants as follows:
(a) CONFIDENTIALITY.
(i) During and following the Employment Period, the
Executive will hold in confidence the Confidential Information and will not
disclose it to any person except with the specific prior written consent of the
Employer or except as otherwise expressly permitted by the terms of this
Agreement.
(ii) Any trade secrets of the Employer will be
entitled to all of the protections and benefits under Chapter 688, Florida
Statutes and any other applicable law. If any information that the Employer
deems to be a trade secret is found by a court of competent jurisdiction not to
be a trade secret for purposes of this Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of this
Agreement. The
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Executive hereby waives any requirement that the Employer submit proof of the
economic value of any trade secret or post a bond or other security.
(iii) None of the foregoing obligations and
restrictions applies to any part of the Confidential Information that the
Executive demonstrates was or became generally available to the public other
than as a result of a disclosure by the Executive.
(iv) The Executive will not remove from the
Employer's premises (except to the extent such removal is for purposes of the
performance of the Executive's duties at home or while traveling, or except as
otherwise specifically authorized by the Employer) any document, record,
notebook, plan, model, component, device, or computer software or code, whether
embodied in a disk or in any other form (collectively, the "Proprietary Items").
The Executive recognizes that, as between the Employer and the Executive, all of
the Proprietary Items, whether or not developed by the Executive, are the
exclusive property of the Employer. Upon termination of this Agreement by either
party, or upon the request of the Employer during the Employment Period, the
Executive will return to the Employer all of the Proprietary Items in the
Executive's possession or subject to the Executive's control, and the Executive
shall not retain any copies, abstracts, sketches, or other physical embodiment
of any of the Proprietary Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Employer. The Executive acknowledges that all of the
Executive's writing, works of authorship, and other Employee Inventions are
works made for hire and the property of the Employer, including any copyrights,
patents, or other intellectual property rights pertaining thereto. If it is
determined that any such works are not works made for hire, the Executive hereby
assigns to the Employer all of the Executive's right, title, and interest,
including all rights of copyright, patent, and other intellectual property
rights, to or in such Employee Inventions. The Executive covenants that he will
promptly:
(i) disclose to the Employer in writing any
Employee Invention;
(ii) assign to the Employer or to a party designated
by the Employer, at the Employer's request and without additional compensation,
all of the Executive's right to the Employee Invention for the United States and
all foreign jurisdictions;
(iii) execute and deliver to the Employer such
applications, assignments, and other documents as the Employer may request in
order to apply for and obtain patents or other registrations with respect to any
Employee Invention in the United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out
the above obligations; and
(v) give testimony and render any other assistance
in support of the Employer's rights to any Employee Invention.
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6.3 DISPUTES OR CONTROVERSIES. The Executive recognizes that should
a dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Employer, the Executive, and their respective attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
7. NON-COMPETITION AND NON-INTERFERENCE
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges
that: (a) the services to be performed by him under this Agreement are of a
special, unique, unusual, extraordinary, and intellectual character; (b) the
Employer's business is national in scope and its products are marketed
throughout the United States; (c) the Employer competes with other businesses
that are or could be located in any part of the United States; (d) the
provisions of this Section 7 are reasonable and necessary to protect the
Employer's business.
7.2 COVENANTS OF THE EXECUTIVE. In consideration of the
acknowledgments by the Executive, and in consideration of the compensation and
benefits to be paid or provided to the Executive by the Employer, the Executive
covenants that he will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or invest
in, own, manage, operate, finance, control, or participate in the ownership,
management, operation, financing, or control of, be employed by, associated
with, or in any manner connected with, lend the Executive's name or any similar
name to, lend Executive's credit to or render services or advice to, any
business whose products or activities compete in whole or in part with the
products or activities of the Employer anywhere within the United States;
provided, however, that the Executive may purchase or otherwise acquire up to
(but not more than) one percent of any class of securities of any enterprise
(but without otherwise participating in the activities of such enterprise) if
such securities are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the Securities Exchange Act of 1934;
(b) whether for the Executive's own account or for the account
of any other person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type being
carried on by the Employer, from any person known by the Executive to be a
customer of the Employer, whether or not the Executive had personal contact with
such person during and by reason of the Executive's employment with the
Employer;
(c) whether for the Executive's own account or the account of
any other person (i) at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an employee,
independent contractor, or otherwise, any person who is or was an employee of
the Employer at any time during the Employment Period or in any manner induce or
attempt to induce any employee of the Employer to terminate his
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employment with the Employer; or (ii) at any time during the Employment Period
and for three years thereafter, interfere with the Employer's relationship with
any person, including any person who at any time during the Employment Period
was an employee, contractor, supplier, or customer of the Employer; or
(d) at any time during or after the Employment Period,
disparage the Employer or any of its shareholders, directors, officers,
employees, or agents.
For purposes of this Section 7.2, the term "Post-Employment Period"
means the three year period beginning on the date of termination of the
Executive's employment with the Employer.
If any covenant in this Section 7.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.
The period of time applicable to any covenant in this Section 7.2
will be extended by the duration of any violation by the Executive of such
covenant.
The Executive will, while the covenant under this Section 7.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's employer. The Buyer or the
Employer may notify such employer that the Executive is bound by this Agreement
and, at the Employer's election, furnish such employer with a copy of this
Agreement or relevant portions thereof.
8. GENERAL PROVISIONS
8.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Executive
acknowledges that the injury that would be suffered by the Employer as a result
of a breach of the provisions of this Agreement (including any provision of
Sections 6 and 7) would be irreparable and that an award of monetary damages to
the Employer for such a breach would be an inadequate remedy. Consequently, the
Employer will have the right, in addition to any other rights it may have, to
obtain injunctive relief to restrain any breach or threatened breach or
otherwise to specifically enforce any provision of this Agreement, and the
Employer will not be obligated to post bond or other security in seeking such
relief. Without limiting the Employer's rights under this Section 8 or any other
remedies of the Employer, if the Executive breaches any of the provisions of
Section 6 or 7, the Employer will have the right to cease making any payments
otherwise due to the Executive under this Agreement.
8.2 COVENANTS OF SECTIONS 6 AND 7 ARE ESSENTIAL AND INDEPENDENT
COVENANTS. The covenants by the Executive in Sections 6 and 7 are essential
elements of this Agreement, and without the Executive's agreement to comply with
such covenants, the Buyer would not have purchased the Assets and the Employer
would not have entered into this Agreement or employed or continued the
employment of the Executive. The Employer and the
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Executive have independently consulted their respective counsel and have been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Employer.
The Executive's covenants in Sections 6 and 7 are independent
covenants and the existence of any claim by the Executive against the Employer
under this Agreement, will not excuse the Executive's breach of any covenant in
Section 6 or 7.
If the Executive's employment hereunder expires or is terminated,
this Agreement will continue in full force and effect as is necessary or
appropriate to enforce the covenants and agreements of the Executive in Sections
6 and 7.
8.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE. The Executive
represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the
Executive's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Executive; or (b) conflict with, result in the breach of any provisions of or
the termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound.
8.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the
Employer hereunder, including its obligation to pay the compensation provided
for herein, are contingent upon the Executive's performance of the Executive's
obligations hereunder.
8.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
8.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors, assigns, heirs, and legal representatives,
including any entity with which the Employer may merge or consolidate or to
which all or substantially all of its assets may be transferred. The duties and
covenants of the Executive under this Agreement, being personal, may not be
delegated.
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8.7 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nation-ally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by notice to the other parties):
If to Employer: Nutriceuticals.com Corp.
6950 Bryan Dairy Road
Largo, FL 33777
Attention: Stephen M. Watters
Facsimile No.: (813) 544-4386
With a copy to: Schifino & Fleischer, P.A.
201 North Franklin Street
Suite 2700
Tampa, FL 33602
Attention: William J. Schifino, Esq.
Facsimile No.: (813) 223-3070
If to the Executive: Jugal K. Taneja
6950 Bryan Dairy Road
Largo, FL 33777
Facsimile No.: (727) 548-1917
8.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, between
the parties hereto with respect to the subject matter hereof. This Agreement may
not be amended orally, but only by an agreement in writing signed by the parties
hereto.
8.9 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Nevada without regard to conflicts of laws principles.
8.10 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Florida,
County of Pinellas, or, if it has or can acquire jurisdiction, in the United
States District Court for the Middle District of Florida, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any
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such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on either party anywhere in the world.
8.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement unless otherwise
specified. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
8.12 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
8.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
8.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE A
JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date above first written above.
EMPLOYER: EXECUTIVE:
NUTRICEUTICALS.COM CORP.
By:______________________ ________________________
As:______________________ Jugal K. Taneja
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EXHIBIT 10.3
CONSULTING AGREEMENT AND AGREEMENT REGARDING
OWNERSHIP OF COMPUTER SOFTWARE
THIS AGREEMENT ("Agreement") is entered into as of March 31, 1999 by and
between Healthseek.com Corp., a Massachusetts corporation ("HSC"), and Eric
Egnet ("Consultant").
Background Statements:
I. HSC has recently acquired a business which consists of owning and
operating a site on the world wide web under the Healthseek.com domain name.
II. Prior to its acquisition by HSC, Consultant operated and maintained
the Healthseek.com website as a sole proprietor.
III. HSC is in need of the services of Consultant to operate and
maintain the Healthseek.com. Website. The Healthseek.com Website is referred
together herein as the "Website."
IV. It is the intention of the parties hereto to confirm that the
Consultant is retained to maintain and operate the Website and that the Website
and any software, drawings, working papers, programs, manuals, and all source
access and other codes and documents of any kind (collectively referred to
herein as the "Work") prepared by the Consultant within the scope of this
Agreement are intended by the parties to be works for hire and intended that the
author/owner of all rights in the Work be HSC.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. SERVICES TO BE PROVIDED BY CONSULTANT. HSC has retained the services
of the Consultant to provide all expertise and take all action to operate and
maintain the Website. The Consultant shall devote 6 hours per week to providing
such services, including implementation of the matters described in Schedule 1
hereto. HSC hereby acknowledges and understands that implementation of the
enhancements referenced in Schedule 1 will occur over a reasonable time frame;
may require the involvement of third parties including other Consultants (i.e.,
graphic designers, etc.); and will, in some cases, require HSC's investment in
new technology and the payment of additional costs and expenses to enhance and
maintain the Website. Any additional services will be the subject of a
separately negotiated contract between the parties hereto, and to implement the
matters described in Schedule 1 hereto.
2. TERM. The term of this Agreement shall be for one year, commencing on
the date hereof. On March 31, 2000, and on the last day of the same each year
thereafter, the term of this Consulting Agreement shall be automatically
extended one additional year unless, prior to such date, either party shall have
delivered to the other written notice that the term of this Agreement shall not
be extended.
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3. INITIAL PAYMENT. As an inducement for Consultant to enter into this
Agreement and to sell his stock in HSC, HSC shall pay the Consultant $10,000
upon the signing of this Agreement.
4. COMPENSATION. For such services, HSC shall pay the Consultant $40,000
per year, payable monthly, with the first payment due on May 1, 1999.
5. RELATIONSHIP OF THE PARTIES. It is the intent of the parties hereto
that the Consultant has been retained in the capacity of an independent
contractor only. Neither the Consultant nor HSC consider the Consultant to be an
agent or employee of HSC for any purpose. HSC is interested only in the results
obtained under this Agreement. The manner and means of performing the services
required of Consultant hereunder are subject to the Consultant's sole control.
6. WORK FOR HIRE/ASSIGNMENT. The Consultant agrees any Work created
solely or jointly by Consultant pursuant to this Agreement shall be deemed "work
made for hire" as that term is used in 17 U.S.C. ss.201(b). To the extent that
the Work is not deemed to be a "work for hire" under the Federal Copyright Laws,
Consultant hereby assigns, conveys and transfers all rights, title and interest
to the copyright in the Work and any claims associated with the Work to HSC. HSC
shall be owner of the Work and deemed the author of the Work with full right to
apply for a copyright in the Work in the United States and all foreign
countries. If so requested by HSC, the Consultant shall cooperate with HSC in
executing all such assignments, oaths, declarations, and other documents as may
be prepared by HSC to effect the foregoing.
7. LICENSE. The Consultant hereby grants, bargains, sells, assigns,
licenses, transfers, conveys and sets over (all herein called "grants") to HSC
all of his full and unlimited right, title and interest in any pre-existing
copyrighted and/or proprietary work which is incorporated into the Work by the
Consultant. This grant shall be for an unlimited duration. The Consultant shall
not be entitled to any additional compensation for such grant. If so requested
by HSC, the Consultant shall cooperate with HSC in executing all such
assignments, oaths, declarations, and other documents as may be prepared by HSC
to effect the foregoing.
8. RECORDS. All records, drawings, programs, websites, website
databases, manuals, reports, and other documentation created in connection with
Consultant's services shall be and remain the sole property of HSC. The
Consultant shall deliver to HSC all copies of such documents on request by HSC.
9. LAW GOVERNING. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without regard to conflicts of
law principles.
10. TITLES AND CAPTIONS. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor affect the interpretation of this Agreement.
11. PRONOUNS AND PLURALS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
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12. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
13. AGREEMENT BINDING; ASSIGNMENT. This Agreement shall be binding upon
the heirs, executors, administrators, successors and assigns of the parties
hereto. This Agreement is not assignable by the Consultant.
14. AMENDMENT. This Agreement may be amended only by the written
agreement by the parties hereto.
15. PRESUMPTION. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said
party.
16. FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
17. COUNTERPARTS. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the parties
hereto even though all the parties are not signatories to the original or the
same counterpart.
18. PARTIES IN INTEREST. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
19. SAVINGS CLAUSE. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
20. REPRESENTATIONS OF CONSULTANT. Consultant represents and warrants
that Consultant is not a party to any agreement which precludes Consultant from
entering into this Agreement or from rendering the services provided for
hereunder.
21. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
21.1 ACKNOWLEDGMENTS BY THE CONSULTANT. The Consultant
acknowledges that (a) during the term hereof (including any extended terms) and
as a part of his engagement, the Consultant will be afforded access to
Confidential Information; (b) public disclosure of such Confidential Information
could have an adverse effect on HSC, Nutriceutricals.com Corporation, a Nevada
corporation (the "Parent"), and their businesses; (c) the parent of HSC has
required that the Consultant make the covenants in this Section 21 as a
condition to its purchase of the stock of HSC; and (d) the provisions of this
Section 21 are reasonable and necessary to prevent the improper use or
disclosure of Confidential Information and to provide HSC with exclusive
ownership of all Employee Inventions. For purposes hereof, the term
"Confidential Information" means any and all:
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(a) trade secrets concerning the business and affairs
of the HSC, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples, inventions
and ideas, past, current, and planned research and development, current and
planned manufacturing or distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object code and source
code), computer software and database technologies, systems, structures, and
architectures (and related formulae, compositions, processes, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information, and any other information, however documented, that is a trade
secret within the meaning of Chapter 688, Florida Statutes;
(b) information concerning the business and affairs of
the Employer (which includes historical financial statements, financial
projections and budgets, historical and projected sales, capital spending
budgets and plans, the names and backgrounds of key personnel, personnel
training and techniques and materials, however documented;
(c) notes, analysis, compilations, studies, summaries, and
other material prepared by or for the HSC containing or based, in whole or in
part, on any information included in the foregoing, and
(d) any and all of the foregoing as it relates to
Nutriceuticals.com Corporation, a Nevada corporation (the "Parent") and any of
its affiliates.
21.2 AGREEMENTS OF THE CONSULTANT. In consideration of the
compensation to be paid to the Consultant by HSC under this Agreement, the
Consultant covenants as follows:
(a) During and following the term hereof, the
Consultant will hold in confidence the Confidential Information and will not
disclose it to any person except with the specific prior written consent of HSC
or except as otherwise expressly permitted by the terms of this Agreement.
(b) Any trade secrets of HSC or Parent will be entitled to
all of the protections and benefits under Chapter 688, Florida Statutes and any
other applicable law. If any information that HSC deems to be a trade secret is
found by a court of competent jurisdiction not to be a trade secret for purposes
of this Agreement, such information will, nevertheless, be considered
Confidential Information for purposes of this Agreement. The Consultant hereby
waives any requirement that HSC submit proof of the economic value of any trade
secret or post a bond or other security.
(c) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that the Consultant
demonstrates was or became generally available to the public other than as a
result of a disclosure by the Consultant.
(d) Consultant will not remove from HSC's premises (except
to the extent such removal is for purposes of the performance of the
Consultant's duties at home or while traveling, or except as otherwise
specifically authorized by HSC) any HSC document, record, notebook, plan, model,
component, device, or computer software or code, whether embodied in a disk or
in any other form (collectively, the "Proprietary Items"). Consultant recognizes
that, as between HSC and the Consultant, all of the Proprietary Items, whether
or not
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<PAGE>
developed by the Consultant, are the exclusive property of HSC. Upon termination
of this Agreement or upon the request of HSC during the term hereof, Consultant
will return to HSC all of the Proprietary Items in Consultant's possession or
subject to Consultant's control, and Consultant shall not retain any copies,
abstracts, sketches, or other physical embodiment of any of the Proprietary
Items.
21.3 DISPUTES OR CONTROVERSIES. Consultant recognizes that should
a dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by HSC,
Consultant, and their respective attorneys and experts, who will agree, in
advance and in writing, to receive and maintain all such information in secrecy,
except as may be limited by them in writing.
22. NON-COMPETITION AND NON-INTERFERENCE
22.1 ACKNOWLEDGMENTS BY CONSULTANT. Consultant acknowledges that:
(a) the services to be performed by him under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) HSC's and
Parent's businesses are international in scope; (c) HSC and Parent compete with
other businesses that are or could be located in any part of the world; (d)
Parent has required that Consultant make the covenants set forth in this Section
22 as a condition to Parent's purchase of the Assets; and (e) the provisions of
this Section 22 are reasonable and necessary to protect HSC's and Parent's
businesses.
22.2 COVENANTS OF CONSULTANT. In consideration of the
acknowledgments by Consultant, and in consideration of the compensation to be
paid or provided to Consultant by HSC, Consultant covenants that he will not,
directly or indirectly:
(a) during the term hereof, except in the course of his
services hereunder, and during the Post-Term Period, engage or invest in, own,
manage, operate, finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with, or in any
manner connected with, lend Consultant's name or any similar name to, lend
Consultant's credit to or render services or advice to, any health related
business whose activities compete in whole or in part with the activities of HSC
or the Parent anywhere within the world; provided, however, that Consultant may
purchase or otherwise acquire up to (but not more than) one percent of any class
of securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934;
(b) whether for Consultant's own account or for the
account of any other person, at any time during the term hereof and the
Post-Term Period, solicit business of the same or similar type being carried on
by HSC, from any person known by Consultant to be a customer of HSC, whether or
not Consultant had personal contact with such person during and by reason of
Consultant's employment with HSC;
(c) whether for Consultant's own account or the account
of any other person (i) at any time during the term hereof and the Post-Term
Period, solicit, employ, or
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otherwise engage as an employee, independent contractor, or otherwise, any
person who is or was an employee of HSC or Parent at any time during the term
hereof or in any manner induce or attempt to induce any employee of HSC or
Parent to terminate his employment with HSC or Parent; or (ii) at any time
during the term hereof and the Post-Term Period, interfere with HSC's or
Parent's relationship with any person, including any person who at any time
during the term hereof was an employee, contractor, supplier, or customer of HSC
or Parent; or
(d) at any time during or after the term hereof, disparage
HSC or Parent or any of its shareholders, directors, officers, employees, or
agents.
For purposes of this Section 22.2, the term "Post-Term Period"
means the one-year period beginning on the date of termination or expiration of
this Agreement.
If any covenant in this Section 22.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against Consultant.
The period of time applicable to any covenant in this Section
22.2 will be extended by the duration of any violation by Consultant of such
covenant.
Consultant will, while the covenant under this Section 22.2 is in
effect, give notice to HSC, within ten days after accepting any employment other
than Consultant's current employer, of the identity of Consultant's employer.
HSC may notify such employer that Consultant is bound by this Agreement and, at
HSC's election, furnish such employer with a copy of this Agreement or relevant
portions thereof.
22.3 Notwithstanding any other provision of this Agreement HSC
acknowledges that it has been informed and otherwise understands that Consultant
is currently employed and intends to remain employed, on a full time basis, by
TravCorps Corporation ("TravCorps"), and further, that TravCorps is currently in
the healthcare staffing, outsourcing, and physician consulting business; and
nothing in this Agreement shall limit or otherwise prohibit Consultant from
providing any and all services requested of him by TravCorps. In the event that
TravCorps requests or otherwise requires Consultant to engage in activities that
directly compete with the activities of HSC or the parent, then, either party
may terminate this Agreement without liability to the other for said
termination, and the above referenced noncompetition provisions shall lapse and
otherwise be of no effect. In no event will HSC or the parent contact TravCorps
without Consultant's express written consent.
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23. GUARANTY OF PARENT CORPORATION. Nutriceuticals.com Corp.
guarantees the performance of HSC's obligations to Consultant hereunder.
24. GENERAL PROVISIONS
24.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. Consultant
acknowledges that the injury that would be suffered by HSC and Parent as a
result of a breach of the provisions of this Agreement would be irreparable and
that an award of monetary damages to HSC or Parent for such a breach would be an
inadequate remedy. Consequently, HSC or Parent will have the right, in addition
to any other rights they may have, to obtain injunctive relief to restrain any
breach or threatened breach or otherwise to specifically enforce any provision
of this Agreement, and HSC and Parent will not be obligated to post bond or
other security in seeking such relief. Without limiting HSC's and Parent's
rights under this Section 24 or any other remedies of HSC or Parent, if
Consultant breaches any of the provisions of Section 21 or 22, HSC will have the
right to cease making any payments otherwise due to Consultant under this
Agreement.
24.2 COVENANTS OF SECTIONS 21 AND 22 ARE ESSENTIAL AND
INDEPENDENT COVENANTS. The covenants by Consultant in Sections 21 and 22 are
essential elements of this Agreement, and without Consultant's agreement to
comply with such covenants, the Parent would not have purchased the stock of HSC
and HSC would not have entered into this Agreement or engaged the Consultant.
The HSC, Parent, and the Consultant have independently consulted their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by HSC and Parent.
Consultant's covenants in Sections 21 and 22 are independent
covenants and the existence of any claim by Consultant against HSC under this
Agreement, will not excuse Consultant's breach of any covenant in Section 21 or
22.
If Consultant's engagement hereunder expires or is terminated,
this Agreement will continue in full force and effect as is necessary or
appropriate to enforce the covenants and agreements of Consultant in Sections 21
and 22.
HEALTHSEEK.COM CORPORATION,
a Massachusetts corporation
By:__________________________
Its:_________________________
_____________________________
Eric Egnet
GUARANTOR:
NUTRICEUTICALS.COM CORP.,
a Nevada corporation
By:___________________________
Jugal K. Taneja, CEO
7
STRATEGIC ALLIANCE AGREEMENT
THIS STRATEGIC ALLIANCE AGREEMENT drafted this 13th day of April, 1999
is by and between INDIGOCITY.COM, INC. (ICI), and NUTRICEUTICALS.COM, CORP.
(NCC).
WHEREAS ICI is able to provide technology and expertise for the
Internet and provide NCC feature sections and spotlight articles on the ICI Web
site to sell and cross promote NCC products and services on the ICI Web site;
and
WHEREAS NCC is to provide ICI the NCC Web site (NutriCeuticals.com),
and all content contained therein, as well as additional health related products
services, articles and reviews for the ICI Web site, and cross promote ICI's Web
site. NCC will also give ICI the IndigoHealth.com domain name for consideration
contained within this agreement.
HERETOFORE, ICI and NCC wish to form a strategic alliance in order to
create a working relationship in which NCC will provide the above content,
advertising and cross promotional opportunities to ICI; and ICI will incorporate
said content within ICI's Web site, and feature NCC as a premier strategic
alliance partner. Both entities will utilize hyper-linked corporate logos to
drive site traffic to the ICI Web site.
1. STRATEGIC ALLIANCE. Pursuant to this Strategic Alliance Agreement, the
parties hereby formally acknowledge a Strategic Alliance whereby each
entity will perform various tasks to be described herein.
2. COMPETITION. The spirit of this Strategic Alliance is to complement and
cross promote NCC's products and services.
3. ICI RESPONSIBILITIES. ICI will incorporate the NCC site contents into
feature sections and spotlight articles on the ICI Web site to sell and
cross promote NCC products and services. ICI will also host the NCC
site for one hundred fifty dollars ($150.00) monthly hosting fee to be
paid by NCC. ICI will build an ICI banner and/or logo that NCC will
place on its home page, viewable by visitors that come from ICI's Web
site, that will allow visitors that come from ICI's Web site to return
to ICI's Web site, while they are inside NCC's Web site. ICI will use
best efforts to cross promote NCC's products and services on an ongoing
basis.
<PAGE>
4. NCC RESPONSIBILITIES. NCC is to provide ICI NCC's Nutriceuticals.com
Web site, and other valuable content in the form of products, services,
articles, reviews and the IndigoHealth.com domain name, for the ICI Web
site. NCC will allow ICI banners and/or logos that will allow visitors
to NCC's Web site to enter ICI's Web site. The ICI logo/banner size on
NCC's site will be the same size or larger than any vendor on NCC's
site. NCC will use best efforts to promote ICI's Web site on an ongoing
basis.
5. REVENUE SHARING. For all NCC products sold via the IndigoCity.com
project, the parties agree that Gross Margins for products
that are sold via this Agreement shall be distributed with fifty (50%)
percent distributed to NCC and fifty (50%) percent distributed to ICI.
Gross Margin is defined as the gross revenue earned per item by NCC
minus the cost that NCC paid for that item minus returns, the hard
shipping costs to deliver that item to the end user or consumer. NCC
will provide an accurate list of product costs, and keep accurate
accounting of revenue distributions to ICI, and ICI shall have
reasonable audit rights to the books of NCC that relate to said
distributions. NCC, at its discretion may pay more than fifty percent
(50%) gross revenues on select items or promotions NCC creates and
offers to ICI. NCC will also use best efforts to cross promote ICI's
products and services on an ongoing basis. Above revenues are to be
paid to ICI on a monthly basis, by the fifth of each month, for sales
generated from the prior month.
6. CONTROL PERSONS. Each party hereto will appoint a single Control Person
who is responsible for all communication to and from the other party.
The initial NCC Control Person is Stephen Watters and the initial ICI
Control Person is John Armbruster. These Control Persons may be changed
from time to time as deemed necessary. It is the Control Person's
responsibility to communicate the other party's request to his own
organization, to provide reports to the other party as necessary, to
provide a backup Control Person in his own absence and to track
projects for deadline and completion purposes.
7. CUSTOMER SERVICE. The parties hereto will develop Customer Service
procedures as this Strategic Alliance progresses. Complaints from any
visitor will be
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immediately communicated to both parties for timely solutions. At no
time shall one party be liable or responsible for the products or
services produced by the other party.
8. ORDER PROCESSING. NCC will be responsible for shipping, invoicing,
collecting and distributing, in a timely fashion, all NCC products and
services sold to visitors that come from ICI's Web site and purchase
NCC's products and services.
9. FEES. No up front fees are to be exchanged pursuant to this agreement,
without express written consent of both parties.
10. WEEKLY COMMUNICATION. On a weekly basis the Control Persons, and others
as deemed appropriate, shall effectively communicate the status of the
alliance.
11. MONTHLY REPORTS. On a monthly basis NCC shall prepare and present an
electronic and paper report detailing the state of the strategic
alliance, with an accounting of ICI sales of NCC products and services,
as well as results that are being generated from all cross promotional
efforts described in this document.
12. CAPTIONS. The captions, headings and arrangements used in this
Strategic Alliance Agreement are for convenience only and do not in any
way affect, limit, amplify, or modify the terms and provisions proposed
herein.
13. ASSIGNMENT. This Strategic Alliance is not assignable by either party
unless agreed to in writing by both parties.
14. TERM AND TERMINATION. The term of this Strategic Alliance shall be
structured in such a fashion as to exist in perpetuity, or as close to
this definition as is allowed by law. Either party may terminate this
Strategic Alliance Agreement with thirty (30) days written notice to
the other party at any time.
15. DEFAULTS AND REMEDIES. In the case of default, or upon the institution
of suit to enforce the rights and remedies by either party, then a
mediator shall immediately be appointed, with the usual powers of
mediators in such cases, to continue to act
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for such period of time as the mediator or the Court appointed said
mediator may deem just and proper.
The parties hereto have read and understand the terms and conditions
outlined herein and sign below to indicate their acceptance.
NurtiCeuticals.com, Inc. IndigoCity.com, Inc.
/s/ STEPHEN M. WATTERS /s/ JOHN ARMBRUSTER
- -------------------------------- ------------------------------
By: Stephen M. Watters, President By: John Armbruster, General Manager
4
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
NUMED SURGICAL, INC.
AND
NUTRICEUTICAL.COM CORPORATION
DATED AS OF JANUARY 15, 1999
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into this 15th day of January, 1999, by and among NuMed Surgical, Inc., a Nevada
corporation ("NuMed"), and Nutriceuticals.com Corporation, a Florida corporation
("Nutriceuticals.com").
W I T N E S S E T H:
WHEREAS, NuMed desires to acquire all of the 2,400,000 issued and
outstanding shares of the common stock, no par value, of Nutriceuticals.com,
through the merger of Nutriceuticals.com with and into NuMed pursuant to the
terms hereinafter set forth (the "Merger");
WHEREAS, the respective Boards of Directors of NuMed and
Nutriceuticals.com deem it advisable and to the advantage and welfare of their
respective corporations and stockholders, that Nutriceuticals.com be merged with
and into NuMed upon the terms and conditions hereinafter specified;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained in this Agreement, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I
DESCRIPTION OF TRANSACTION
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3 herein),
in accordance with this Agreement and the relevant provisions of the Nevada
General Corporations Law (the "Nevada GCL") and the Florida Business
Corporations Act (the "FBCA"), Nutriceuticals.com shall be merged with and into
NuMed. NuMed shall be the surviving corporation of the Merger and NuMed shall
continue, and be deemed to continue, for all purposes after the Merger, and the
existence of Nutriceuticals.com shall cease at the Effective Time. At the
Effective Time (as defined in Section 1.3) each issued and outstanding share of
the common stock, no par value, of Nutriceuticals.com ("Nutriceuticals Common
Stock") shall be converted into the right to receive one (1) share of common
stock, $.001 par value per share, of NuMed ("NuMed Common Stock").
1.2 SURVIVING CORPORATION; CERTIFICATE OF INCORPORATION OF SURVIVING
CORPORATION. Following the Merger, NuMed shall continue to exist under, and be
governed by, the laws of the State of Nevada. The Articles of Incorporation of
NuMed, as in effect on the Closing Date (as defined in Section 1.4 herein),
shall continue in full force and effect as the Articles of Incorporation of
NuMed, except that upon the Merger the Articles of Incorporation of NuMed shall
be amended to change the name of the corporation to "Nutriceuticals.com
Corporation".
1.3 EFFECTIVE DATE OF THE MERGER. This Agreement shall be submitted to the
stockholders of NuMed and to the stockholders of Nutriceuticals.com, as provided
in Sections 6.5 and 7.5 hereof, for approval as soon as practicable after the
execution of this Agreement. Upon the authorization, approval and adoption of
(i) this Agreement by (a) the affirmative vote of the holders of at least a
majority of the outstanding shares of NuMed Common Stock entitled to vote
thereon as provided by Nevada GCL, and (b) the affirmative vote of the holders
<PAGE>
of at least a majority of the outstanding shares of Nutriceuticals Common Stock
entitled to vote thereon as provided by the FBCA; and (ii) the Reverse Stock
Split (as defined below in this Section 1.4) by the affirmative vote of the
holders of at least a majority of the outstanding shares of NuMed Common Stock
entitled to vote thereon as provided by Nevada GCL; a Plan and Articles of
Merger (the "Articles of Merger") meeting the requirements of the Nevada GCL and
meeting the requirements of the FBCA shall be executed, verified and
acknowledged as required by the provisions of said laws, and such Articles of
Merger shall be delivered to the Department of State of Nevada and to the
Department of State of Florida (the "Departments of State") for filing (the time
of the latter of such filings being the "Effective Time", and the date of the
latter of such filings being the "Effective Date"). The term "Reverse Stock
Split" shall mean a one-for-fifty reverse split of the outstanding shares of
NuMed Common Stock and the delivery of an amendment of NuMed's Articles of
Incorporation to the Nevada Department of State, said amendment reflecting said
stock split.
1.4 PROCEDURE FOR CLOSING. Subject to the satisfaction or appropriate
waiver of all conditions precedent thereto, there shall be a closing (the
"Closing") at the offices of Schifino & Fleischer, P.A., One Tampa City Center,
201 North Franklin Street, Suite 2700, Tampa, Florida 33602, at 10:00 a.m., or
at such other place, date and time as the parties to this Agreement may
otherwise agree (the "Closing Date"). At the Closing, the parties to this
Agreement will take all actions as may be necessary to cause the filing of the
Articles with the Departments of State.
1.5 CONVERSION OF STOCK. Upon the filing of the Articles by the
Departments of State, each issued and outstanding share of Nutriceuticals Common
Stock, other than any share with respect to which a dissenting stockholder shall
have demanded fair payment for such share in accordance with the FBCA, shall be
converted immediately into one (1) share of NuMed Common Stock, as provided in
Section 1.1 hereof.
1.6 DIRECTORS AND OFFICERS. The directors of NuMed, after the Effective
Date of the Merger, who shall hold office until the next annual meeting of
shareholders and until their successors are chosen and qualified are as follows:
NAME
----
Jugal K. Taneja
Stephen M. Watters
William L. LaGamba
Mandeep K. Taneja
Paul A. Santostasi
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The principal officers of NuMed, after the Effective Date of the Merger,
who shall hold office until their successors are chosen and qualified are as
follows:
NAME POSITION
- ---- --------
Stephen M. Watters President
William L. LaGamba Secretary
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF NUMED
Except as disclosed in Exhibit "B" to this Agreement, NuMed represents and
warrants to Nutriceuticals.com the following:
2.1 ORGANIZATION AND STANDING. NuMed is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has the corporate power and authority to carry on its business as it is now
being conducted. A true and correct copy of (i) its Articles of Incorporation
together with all amendments thereto, certified by the Secretary of the State of
Nevada, and (ii) its by-laws, certified by the Secretary of such corporation,
each as then in effect, has been delivered to Nutriceuticals.com.
2.2 CAPITALIZATION. The authorized capital stock of NuMed consists of
48,000,000 shares of common stock, par value $.001 per share, and as of the date
of this Agreement there are outstanding 8,775,685 shares, all of which have been
validly issued and are fully paid and non-assessable.
2.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution of this Agreement
by NuMed and the delivery of this Agreement to Nutriceuticals.com have been duly
authorized by the Board of Directors of NuMed, and no further corporate or other
action is necessary on their part to make this Agreement valid and binding upon
and enforceable against NuMed in accordance with the terms hereof or to carry
out the transaction contemplated hereby.
2.4 FINANCIAL STATEMENTS. Attached to this Agreement as Exhibit "C" are
the Form 10-KSB Report for the year ended March 31, 1998 and the Form 10-QSB for
the six months ended September 30, 1998 containing the financial statements of
NuMed for the fiscal year ended March 31, 1998 and September 30, 1998,
respectively. Except as contemplated by this Agreement and the transactions
contemplated by this Agreement, those statements (i) are in accordance with the
books and records of NuMed; (ii) have been prepared in accordance with generally
accepted accounting principles, applied on a consistent basis; and (iii) fairly
present the results of operations and financial condition of NuMed for the
periods covered by the statements.
2.5 NO MATERIALLY ADVERSE CHANGE. Subsequent to the period covered by the
financial statements described in Section 2(d) of this Agreement, except as
contemplated by this Agreement or the transactions contemplated by this
Agreement, NuMed has not experienced any materially adverse change in its
financial condition, assets, liabilities, or results of operations.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NUTRICEUTICALS.COM
Except as disclosed in Exhibit "D" to this Agreement, Nutriceuticals.com
hereby represents and warrants to NuMed the following:
3.1 ORGANIZATION AND STANDING. Nutriceuticals.com is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida, and has the corporate power and authority to carry on its business as
it is now being conducted.
3.2 CAPITALIZATION. The authorized capital stock of Nutriceuticals.com
consists of 1,000,000 shares of preferred stock, no par value; and 9,000,000
shares of common stock, no par value. As of the date of this Agreement there are
outstanding 2,400,000 shares common stock only, all of which have been validly
issued and are fully paid and non-assessable.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution and delivery of
this Agreement by Nutriceuticals.com has been duly authorized by its Board of
Directors, and no further corporate action will be necessary on their part to
make this Agreement valid and binding upon each of them and enforceable against
them in accordance with the terms of this Agreement, or to carry out the actions
contemplated by this Agreement.
3.4 FINANCIAL STATEMENTS. Attached to this Agreement as Exhibit "E" are
the financial statements of Nutriceuticals.com at October 31, 1998 and for the
period from September 8, 1998 (date of inception) through October 31, 1998.
3.5 NO MATERIALLY ADVERSE CHANGE. Subsequent to the period covered by the
financial statements described in Section 3.4 herein, except as contemplated by
this Agreement or the transactions contemplated by this Agreement,
Nutriceuticals.com has not experienced any materially adverse change in its
financial condition, assets, liabilities, or results of operations.
ARTICLE IV
COVENANTS OF NUMED
NuMed hereby covenants the following:
4.1 APPROVAL BY STOCKHOLDERS. Prior to the Closing, the shareholders of
NuMed, shall have approved the Merger in accordance with the provisions of the
Nevada GCL.
4.2 CONDUCT OF THE BUSINESS UNTIL CLOSING. Except as Nutriceuticals.com
may otherwise consent in writing, prior to the Closing NuMed will not conduct
any operations and will use its best efforts to preserve the present business
organization intact.
4.3 CORPORATE ACTION; APPROVALS AND CONSENTS. NuMed will take all
corporate and other action and use its best efforts to obtain in writing as
promptly as possible all approvals and consents required to be obtained in order
to effectuate the consummation of the transactions contemplated by this
Agreement.
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4.4 ADVICE OF CHANGES. Between the date of this Agreement and the Closing,
NuMed will promptly advise Nutriceuticals.com in writing of any fact which, if
existing or known at the date of this Agreement, would have been required to be
set forth in or disclosed pursuant to this Agreement.
4.5 ACCESS TO PROPERTIES AND RECORDS, ETC. NuMed will give
Nutriceuticals.com and its counsel, accountants, and other representatives full
access during normal business hours to all of the properties, personnel, books,
tax returns, contracts, commitments and records of NuMed.
4.6 MERGER PROXY OR INFORMATION STATEMENT. NuMed will prepare the Merger
Proxy or Information Statement and, at the time when mailed to the stockholders
of NuMed and at all times up to the date of approval of the Merger by the
stockholders of NuMed, the Merger Proxy or Information Statement will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated or necessary to be included by or in the Merger Proxy or
Information Statement in order to make the Merger Proxy or Information Statement
and the statements therein not misleading; and the Merger Proxy or Information
Statement will comply in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
ARTICLE V
COVENANTS OF NUTRICEUTICALS.COM
Nutriceuticals.com hereby jointly and severally covenants the following:
5.1 APPROVAL BY STOCKHOLDERS. Prior to the Closing, the shareholders of
Nutriceuticals.com, shall approve the Merger in accordance with the provisions
of the FBCA.
5.2 CONDUCT OF THE BUSINESS UNTIL CLOSING. Except as NuMed may otherwise
consent in writing, prior to the Closing Nutriceuticals.com will not conduct any
operations and will use its best efforts to preserve the present business
organization intact.
5.3 CORPORATE ACTIONS, APPROVALS AND CONSENTS. Nutriceuticals.com will
take all corporate and other actions and use their best efforts to obtain in
writing as promptly as possible all approvals and consents required to be
obtained in order to effectuate the consummation of the Merger and the
transactions contemplated hereby.
5.4 ADVICE OF CHANGES. Between the date of this Agreement and the Closing,
Nutriceuticals.com will promptly advise NuMed in writing of any fact which, if
existing or known at the date of this Agreement, would have been required to be
set forth in or disclosed pursuant to this Agreement.
5.5 ACCESS TO PROPERTIES AND RECORDS, ETC. Nutriceuticals.com will give
NuMed and its counsel, accountants, and other representatives full access during
normal business hours to all of the properties, personnel, books, tax returns,
contracts, commitments and records of Nutriceuticals.com.
5.6 MERGER PROXY OR INFORMATION STATEMENT. Nutriceuticals.com will
cooperate with and will provide all information reasonably requested in writing
by NuMed in connection with the preparation by NuMed of any proxy or information
statements to be sent to the shareholders of NuMed in connection with the
Merger; and Nutriceuticals.com will use its best efforts to assure that any such
information provided in writing to NuMed, at the time when provided and at all
times up to the date of approval of the Merger by the
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stockholders of NuMed, does not and will not contain any untrue statement of a
material fact required to be stated or necessary in order to make such
information not misleading.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF NUMED
The obligations of NuMed under this Agreement are subject to the
satisfaction, at or prior to the Closing, or each of the following conditions
(the fulfillment of any of which may be waived in writing by NuMed).
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties and statements of Nutriceuticals.com contained in this Agreement, all
exhibits to this Agreement and any documents delivered in connection with this
Agreement, shall not only have been true and complete as of the date of this
Agreement and when made but shall also be true and complete as though again made
on the Closing Date, except to the extent that they are incorrect as of the
Closing Date by reason of events occurring after the date of this Agreement in
compliance with the terms of this Agreement.
6.2 COMPLIANCE. Nutriceuticals.com shall have performed and complied with
all agreements, covenants and conditions required by this Agreement and all
exhibits to this Agreement to be performed and complied with by it at or prior
to the Closing.
6.3 GOOD STANDING CERTIFICATES. NuMed shall have received a certificate
executed by the Secretary of State of the State of Florida dated within ten (10)
days prior to the Closing Date certifying that Nutriceuticals.com is a
corporation in good standing under the laws of the State of Florida.
6.4 CERTIFICATE. NuMed shall have received a certificate executed by the
President of Nutriceuticals.com, attested to by the Secretary of such
corporation under its corporate seal, dated the Closing Date, satisfactory in
form and substance to NuMed and its counsel, certifying as to (i) the
fulfillment of matters set forth in Section 6.1 through 6.3 of this Agreement,
(ii) the resolutions adopted by the Board of Directors of Nutriceuticals.com
approving the execution of this Agreement and the consummation of the
transactions contemplated hereby; (iii) the resolutions adopted by the
stockholders of Nutriceuticals.com approving the Merger; (iv) the incumbent
officers of Nutriceuticals.com and the authenticity of the signatures of each;
and (v) the information, if any, required to be furnished to Nutriceuticals.com
pursuant to Section 4(c) of this Agreement.
6.5 STOCKHOLDER APPROVAL. Holders of a majority of the outstanding shares
of common stock of Nutriceuticals.com entitled to vote on the Merger shall have
approved the Merger in accordance with the provisions of the FBCA.
6.6 DISSENTERS' RIGHTS. There shall not be holders of more than five
percent (5%) of the issued and outstanding shares of NuMed Common Stock and/or
Nutriceuticals.com Common Stock, collectively, who exercise dissenter's rights
under the Nevada GCL or the FBCA, respectively.
6.7 STOCKHOLDER LIST. Nutriceuticals.com shall have delivered to NuMed a
list of the stockholders of record as of the close of business on the last
business day immediately preceding the Closing.
6.8 CONSUMMATION OF THE MERGER. The Merger shall have been consummated on
or before April 30, 1999.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF NUTRICEUTICALS.COM
The Obligations of Nutriceuticals.com under this Agreement are subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (the fulfillment of any of which may be waived in writing by
Nutriceuticals.com):
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties and statements of NuMed contained in this Agreement, all exhibits to
this Agreement and any documents delivered in connection with this Agreement,
shall not only have been true and complete on the date of this Agreement and
when made but shall also be true and complete as though again made on the
Closing Date, except to the extent that they are incorrect as of the Closing
Date by reason of events occurring after the date of this Agreement in
compliance with the terms of this Agreement.
7.2 COMPLIANCE. NuMed shall have performed and complied with all
agreements, covenants and conditions required by this Agreement and all exhibits
to this Agreement to be performed and complied with by them at or prior to the
Closing.
7.3 GOOD STANDING CERTIFICATES. Nutriceuticals.com shall have received a
certificate executed by the Department of the State of Nevada dated within ten
(10) days prior to the Closing Date certifying that NuMed is a corporation in
good standing under the laws of the State of Nevada.
7.4 CERTIFICATE. Nutriceuticals.com shall have received a certificate
executed by the President of NuMed and attested to by its Secretary under its
corporate seal, dated the Closing Date, and certifying as to (i) the fulfillment
of the matters mentioned in Section 7.1 through 7.3 of this Agreement; (ii) the
resolutions adopted by the Board of Directors of NuMed approving the execution
of this Agreement and the consummation of the transactions contemplated hereby;
(iii) the resolutions adopted by the shareholders, of the capital stock of
NuMed, approving the Merger and this Agreement and the transactions contemplated
by this Agreement; (iv) the incumbent officers of the respective corporation and
the authenticity of the signatures of each; and (v) the information, if any,
required to be furnished to Nutriceuticals.com pursuant to Section 5(d) of this
Agreement.
7.5 STOCKHOLDER APPROVAL. Holders of a majority of the outstanding shares
of common stock of NuMed entitled to vote on the Merger shall have approved the
Merger in accordance with the provisions of the Nevada GCL.
7.6 DISSENTERS' RIGHTS. There shall not be holders of more than five
percent (5%) of the issued and outstanding shares of NuMed Common Stock and/or
Nutriceuticals Common Stock, collectively, who exercise dissenter's rights under
the Nevada GCL or the FBCA, respectively.
7.7 STOCKHOLDER LIST. NuMed shall have delivered to Nutriceuticals.com a
list of the stockholders of record as of the close of business on the last
business day immediately preceding the Closing.
7.8 CONSUMMATION OF THE MERGER. The Merger shall have been consummated on
or before April 30, 1999.
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ARTICLE VIII
ADDITIONAL TERMS OF TERMINATION
8.1 INDEMNIFICATION. After the Effective Time, NuMed shall indemnify,
defend and hold harmless the current and former directors and officers of NuMed
and Nutriceuticals.com against all losses, expenses, claims, damages, or
liabilities arising out of actions or omissions occurring at or prior to the
Effective Time to the fullest extent permitted under Nevada law and by the NuMed
Articles of Incorporation and the NuMed Bylaws as in effect on the date of the
Merger Agreement, including provisions relating to advances of expenses incurred
in defense of any litigation.
8.2 MUTUAL TERMINATION. In addition to the provisions of Articles 6 and 7
of this Agreement, this Agreement may be terminated before the Closing by mutual
written agreement of the Boards of Directors of the parties to this Agreement.
ARTICLE IX
GENERAL
9.1 WAIVERS. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained in this Agreement or in any document
delivered in connection with this Agreement. The waiver by any party to this
Agreement of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
9.2 SPECIFIC PERFORMANCE; REMEDIES. The parties to this Agreement
acknowledge that the performance of their respective obligations under this
Agreement is essential to the consummation of the transactions contemplated by
this Agreement. Each of them further acknowledges that neither party will have
an adequate remedy at law if the other party fails to perform its obligations
under this Agreement. In such event, each party shall have the right, in
addition to any other rights it may have, to compel specific performance of this
Agreement.
9.3 EXPENSES. Each of the parties to this Agreement shall pay its own
expenses in connection with this Agreement and the transactions contemplated by
this Agreement, including the fees and expenses of its counsel and its certified
public accountants and other experts.
9.4 CONFIDENTIALITY. If the transactions contemplated by this Agreement
are not consummated and are terminated pursuant to Articles VI, VII, or VIII of
this Agreement, then each of the parties to this Agreement agrees to keep
confidential and shall not use for its own benefit any of the information
(unless in the public domain) obtained from any other party and shall promptly
return to such other parties all schedules, documents or other written
information (without retaining copies thereof) previously obtained from such
other parties.
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9.5 NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if personally delivered or if mailed, first
class mail, postage prepaid, to:
If to NuMed:
NuMed Surgical, Inc.
7270 Sawgrass Point Drive
Pinellas Park, Florida 33782
If to Nutriceuticals.com:
Nutriceuticals.com Corporation
6950 Bryan Dairy Road
Largo, Florida 33777
or to such other address as such party shall have specified by notice in writing
to the other parties.
9.6 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the exhibits to
this Agreement and all documents and papers delivered pursuant to this Agreement
and any written amendments to this Agreement executed by the parties to this
Agreement) constitutes the entire agreement, and supercedes all prior agreements
and understandings, oral and written, among the parties to this Agreement with
respect to the subject matter of this Agreement.
9.7 ASSIGNABILITY. This Agreement shall not be assignable by any of the
parties to this Agreement without the prior written consent of all other parties
to this Agreement.
9.8 VENUE; PROCESS. The parties to this Agreement agree that jurisdiction
and venue shall properly lie in the Thirteenth Judicial Circuit of the State of
Florida, in and for Hillsborough County, Tampa, Florida, or in the United States
District for the Middle District of Florida (Tampa Division), with respect to
any legal proceedings arising from this Agreement. Such jurisdiction and venue
are merely permissive; and, jurisdiction and venue would otherwise be proper.
The parties further agree that the mailing of any process shall constitute valid
and lawful process against them.
9.9 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
9.10 SECTION AND OTHER HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
9.11 GOVERNING LAW. This Agreement has been negotiated and prepared and
will be performed in the State of Florida, and the validity, construction and
enforcement of, and the remedies under, this Agreement shall be governed in
accordance with the laws of the State of Florida (except any choice of law
provision of Florida law shall not apply if the law or state or jurisdiction
other than Florida would apply thereby).
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IN WITNESS WHEREOF, this Agreement has been signed by an officer of each
of the parties to this Agreement and duly authorized and attested under the
corporate seal by the Secretary of each of such parties, all on the date first
above written.
ATTEST: NUTRICEUTICALS.COM CORPORATION
(Corporate Seal)
By:
- ----------------------- --------------------------
Secretary President
ATTEST: NUMED SURGICAL, INC.
(Corporate Seal)
By:
- ----------------------- ---------------------------
Secretary President
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") dated as of March
31, 1999, is by and between Nutriceuticals.com Corporation, a Nevada corporation
("Buyer"), and Eric Egnet ("Seller") the sole stockholder of Healthseek.com
Corp., a Massachusetts corporation (the "Company").
BACKGROUND:
The Seller has created and has operated as a sole proprietorship a site on
the World Wide Web under the Healthseek.com domain name. The Seller has, or
will, simultaneously with the execution of this Agreement transfer to the
Company all assets used or useful in the ownership and operation of such
Website.
The Seller owns 100 Shares of voting common stock, no par value, of the
Company, constituting all of the issued and outstanding capital stock of the
Company (the "Shares"). The Buyer desires to acquire all of the Shares, and the
Seller desires to exchange all of the Shares for 100,000 Shares of voting common
stock, par value $.001 per Share, of the Buyer, in an exchange that qualifies
under Sections 354 and 368 of the Internal Revenue Code of 1986, as amended.
This Agreement is being entered into for the purpose of implementing the
foregoing desires, and sets forth the terms and conditions pursuant to which the
Seller is selling to the Buyer, and the Buyer is purchasing from the Seller
solely in exchange for Shares of voting common stock of the Buyer, all of the
Shares.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement; and its Exhibits and Schedules the
following terms have the meanings specified or referred to in this Section 1:
"ASSETS"-- All tangible and intangible property owned or used by
Seller or the Company in the operation of the Website, including, but not
limited to those assets described in Schedule 1.1 hereto.
"APPLICABLE CONTRACT" -- any Contract (a) under which the Company
has or may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the Company or any of
the assets owned or used by it is or may become bound, including, without
limitation all contracts assigned by Seller to the Company, which Contracts
constitute all Contracts relating in any way to the Website, which Contracts are
listed in Schedule 1.2 hereto.
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform
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or comply with, such representation, warranty, covenant, obligation, or other
provision, or (b) any claim (by any Person) or other occurrence or circumstance
that is or was inconsistent with such representation, warranty, covenant,
obligation, or other provision, and the term "Breach" means any such inaccuracy,
breach, failure, claim, occurrence, or circumstance.
"BUYER" -- as defined in the first paragraph of this Agreement.
"BUYER'S SHARES" -- as defined in Section 2.2.
"CLOSING" -- as defined in Section 2.3.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"COMPANY" -- as defined in the first paragraph of this Agreement.
"CONSENT" -- any approval, Consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONSULTING AGREEMENT" - as defined in Section 2.4(b).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated
by this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement; and
(c) Buyer's acquisition and ownership of the Shares and
exercise of control over the Company.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" -- as defined in Section 5.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement.
"ENCUMBRANCE" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"GOVERNMENTAL AUTHORIZATION" -- any approval, Consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any:
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(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.12.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if
(a) such individual is actually aware of such fact or other
matter; or.
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation concerning the existence of such fact
or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation, minutes of organization meetings, and the bylaws of a
corporation; and (b) any amendment to any of the foregoing.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
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(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"REPRESENTATIVE" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SELLER" -- as defined in the first paragraph of this Agreement.
"SELLER'S RELEASE" -- as defined in Section 2.4.
"SHARES" -- as defined in the Background to this Agreement.
"WEBSITE" - the WorldWide Web Internet site operated under the
Healthseek domain name at www.Healthseek.com.
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2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this Agreement,
at the Closing, Seller will sell and transfer the Shares to Buyer, and Buyer
will purchase the Shares from Seller.
2.2 CONSIDERATION. In consideration of the sale and transfer of the
Shares, the Buyer will issue and deliver to Seller in full payment for the
Shares, 100,000 Shares of common stock, $.001 par value, of Buyer ("Buyer's
Shares"), and will assume, from the date of Closing, any and all costs and
expenses related to the ongoing maintenance of the Website and the Company,
which Seller represents currently averages approximately $100 per month.
2.3 CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place simultaneously with the execution of this
Agreement or as soon thereafter as possible and practical.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) Seller will deliver to Buyer:
(i) certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock
powers), for transfer to Buyer;
(ii) a release in the form of Exhibit 2.4(a)(ii)
executed by Seller ("Seller's Release"); and,
(iii) an opinion of Seller's counsel in the form
attached hereto as Exhibit 2.4(a)(iii)
(b) Buyer will cause its transfer agent to deliver to Seller
certificates representing the Buyer's Shares within a reasonable time after the
closing. Such certificates shall bear a restrictive legend in the form attached
hereto as Exhibit 2.4(b). Buyer will also cause the Company to enter into a
Consulting Agreement with Seller in the form attached hereto as Exhibit 2.4(b).2
(the "Consulting Agreement").
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 THE WEBSITE. Seller is the sole creator of the Website and,
prior to their conveyance to the Company, owned the Assets, free and clear of
all Encumbrances.
3.2 ORGANIZATION AND GOOD STANDING.
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of Massachusetts, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts.
(b) Seller has delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
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3.3 AUTHORITY; NO CONFLICT; RECEIPT OF INFORMATION.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
Seller has the absolute and unrestricted right, power, authority, and capacity
to execute and deliver this Agreement and to perform his obligations under this
Agreement.
(b) Except as set forth in Part 3.3 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the Seller;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which the Company or Seller, or any
of the Assets, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company or that otherwise relates
to the business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or
to become liable for the payment of, any Tax;
(v) contravene, conflict with, or result in a violation
or Breach of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract or any Contract to
which Seller is subject; or
(vi) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by the
Company.
Except as set forth in Part 3.3 of the Disclosure Letter, neither
Seller nor the Company is or will be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Seller is acquiring the Buyer's Shares for his own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act. Seller understands and agrees that the Buyer's Shares
constitute "restricted securities" and cannot be sold without registration,
unless an exemption from registration is available.
(d) Seller acknowledges that he has received copies of all
Forms 10-K and 10-Q and the Proxy Statement dated February 9, 1999 filed by
Buyer with the Securities and Exchange Commission and that he has been given an
opportunity to ask questions of and receive answers from Buyer with respect to
Buyer's business, financial condition, management, prospects and any other
relevant matters. Seller has not requested any additional information from Buyer
and has made his decision to accept the Buyer's Shares in reliance solely upon
the foregoing documents.
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Seller acknowledges that Buyer did not solicit Seller by any means of general
solicitation or advertisement. Seller has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of an investment in the Buyer's Shares and is able to bear the economic
risk of such investment for an indefinite period of time. Seller understands
that the Buyer's Shares are restricted and that Seller is acquiring the Buyer's
Shares without the expectation or desire of a resale or distribution with
respect thereto and has no need for liquidity with respect to the Buyer's
Shares. Seller recognizes that an investment in the Buyer's Shares involves
risks and that he may not be able to sell or dispose of the Buyer's Shares
readily. Seller understands that the Certificates evidencing the Buyer's Shares
will bear a restrictive legend, as described herein and also referring to the
rights of set-off provided for in this Agreement. Seller is familiar with the
resale requirements of Rule 144 of the Securities and Exchange Commission and
understands that one of those requirements is a holding period of one or two
years.
3.4 CAPITALIZATION. The authorized equity securities of the Company
consists of 100 Shares, no par value, of which 100 Shares are issued and
outstanding and constitute the Shares. Seller is the record and beneficial owner
and holder of the Shares, free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of the Company. All of the outstanding equity securities of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any other Legal Requirement. The Company
does not own, nor does the Company have any Contract to acquire, any equity
securities or other securities of any Person (other than the Company) or any
direct or indirect equity or ownership interest in any other business.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct. The minute book of the Company
contains accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, the Board of Directors, and committees of the
Board of Directors of the Company, and no meeting of any such stockholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. All of those books and
records are in the possession of the Company.
3.6 TITLE TO ASSETS; ENCUMBRANCES. The Company owns all the
Assets free and clear of all Encumbrances.
3.7 NO LIABILITIES. The Company has no liabilities or obligations of
any nature whether known or unknown and whether absolute, accrued, contingent,
or otherwise, except the obligation to perform Seller's obligations under the
Applicable Contracts.
3.8 EMPLOYEES. The Company has no employees.
3.9 COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) The Company is and, during the period the Website was
operated by Seller, Seller was in full compliance with each Legal Requirement
that is or was applicable to the Website or to the operation of the Website or
the ownership or use of any of the Assets;
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) may constitute or result in a violation by
the Company of, or a failure on
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the part of the Company to comply with, any Legal Requirement, or (ii) may give
rise to any obligation on the part of the Company to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature; and
(c) Neither Seller nor the Company have received any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding (i) any actual, alleged, possible, or potential violation
of, or failure to comply with, any Legal Requirement, or (ii) any actual,
alleged, possible, or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(d) Part 3.9 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, the Company. Each Governmental Authorization listed or required to be listed
in Part 3.9 of the Disclosure Letter is valid and in full force and effect.
Except as set forth in Part 3.9 of the Disclosure Letter:
(i) the Company is, and Seller has at all times been, in
full compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.9 of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists that
may (with or without notice or lapse of time) (A) constitute or result directly
or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed in
Part 3.9 of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.9 of the Disclosure Letter;
(iii) neither Seller nor the Company has received, at
any time, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or required to be listed
in Part 3.9 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.9 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate the Website in
the manner it currently conducts and operates such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets of Seller previously owned and used such assets.
3.10 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding:
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(i) that has been commenced by or against Seller or the
Company or that otherwise relates to or may affect the business of the Company,
or any of the Assets; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller and the Company, (1) no such Proceeding
has been threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding.
(b) Except as set forth in Part 3.10 of the Disclosure
Letter:
(i) there is no Order to which the Seller or Company, or
any of the Assets, is subject;
(ii) Seller is not subject to any Order that relates to
the business of, the Company or any of the Assets; and
(iii) to the Knowledge of Seller and the Company, no
officer, director, agent, or employee of the Company is subject to any Order
that prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Part 3.10 of the Disclosure
Letter:
(i) Seller and the Company are and at all times have
been, in full compliance with all of the terms and requirements of each Order to
which they are subject;
(ii) no event has occurred or circumstance exists that
may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order to
which the Seller or the Company, or the Assets, is subject; and
(iii) neither Seller nor the Company have received, any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which Seller, the Company, or the Assets is or has been subject.
3.11 CONTRACTS; NO DEFAULTS.
(a) Part 3.11(a) of the Disclosure Letter contains a complete
and accurate list, and Seller has delivered to Buyer true and complete copies,
of each Applicable Contract and each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Each Applicable Contract is in full force and effect and
is valid and enforceable in accordance with its terms.
(c) Except as set forth in Part 3.11(c) of the Disclosure
Letter:
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(i) Seller and the Company are, and at all times have
been, in full compliance with all applicable terms and requirements of each
Applicable Contract;
(ii) each other Person that has or had any obligation or
liability under any Applicable Contract is in full compliance with all
applicable terms and requirements of such Applicable Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or Breach of, or give Seller or the Company or other
Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract; and
(iv) neither Seller nor the Company have given to or
received from any other Person any notice or other communication (whether oral
or written) regarding any actual, alleged, possible, or potential violation or
Breach of, or default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to
Seller or the Company under current or completed Applicable Contracts and no
such Person has made written demand for such renegotiation.
(f) The Applicable Contracts have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.12 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY ASSETS -- The term "Intellectual
Property Assets" includes:
(i) the name Healthseek.com, all fictional business
names, trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights;
(iv) the Website and all know-how, trade secrets,
confidential information, customer lists, computer software (including access
codes and source codes), technical information, data, process technology, plans,
drawings, and blueprints (collectively, "Trade Secrets"); owned, used, or
licensed by the Company as licensee or licensor.
(b) KNOW-HOW NECESSARY FOR THE BUSINESS. The Intellectual
Property Assets are all those necessary for the operation of the Website as it
is currently conducted. The Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets, only as they relate
directly to Healthseek.com and subject to the qualification and disclaimer
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below, free and clear of all Encumbrances, equities, and other adverse claims,
and has the right to use same without payment to a third party all of the
Intellectual Property Assets.
(c) QUALIFICATION AND DISCLAIMER. Any and all representations
and warranties in this Agreement are expressly qualified by the following
disclaimer. Seller is not the owner of and otherwise does not have express
permission to use the various business names (with the exception of the name
Healthseek.com), trading names, registered and unregistered trademarks, service
marks and applications currently used on the Website. Those marks and related
links are provided only as general resources to those who visit the Website.
(d) TRADE SECRETS.
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use without
reliance on the Knowledge or memory of any individual.
(ii) Seller and the Company have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) The Company has good title and an absolute right
to use the Trade Secrets. The Trade Secrets are not part of the public Knowledge
or literature and have not been used, divulged, or appropriated either for the
benefit of any Person (other than the Company) or to the detriment of the
Company. No Trade Secret is subject to any adverse claim or has been challenged
or threatened in any way.
3.13 DISCLOSURE.
(a) No representation or warranty of Seller in this Agreement
and no statement in the Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 5.4 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
(c) There is no fact known to Seller that has specific
application to Seller, the Company or the Website (other than general economic
or industry conditions) and that materially adversely affects or, as far as
Seller can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Company that has
not been set forth in this Agreement or the Disclosure Letter.
3.14 RELATIONSHIPS WITH RELATED PERSONS. Neither Seller nor any
Related Person of Seller or of the Company has any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the Company's business. Neither Seller nor any Related Person
of Seller or of the Company owns (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with the
Company, or (ii) engaged in competition with the Company with respect to the
Website (a "Competing Business"). Neither Seller nor any Related Person of
Seller or of the Company is a party to any Contract with, or has any claim or
right against, the Company, with the exception of related Consulting Agreement
between Seller and the Company.
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3.15 BROKERS OR FINDERS. Seller and his agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.16 WEBSITE NOT A WORK FOR HIRE. The Website and all related
computer software was not created by Seller as a "work for hire", as that term
is used in 17 U.S.C. ss.201(b) for or an behalf of any employer of Seller.
3.17 LEGAL ADVICE. Seller has relied solely upon Seller's legal
counsel with respect to the legal and tax aspects of the Contemplated
Transactions.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Nevada.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and to perform its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement by
Buyer nor the consummation or performance of any of the Contemplated
Transactions by Buyer will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or
the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may
be subject; or
(iv) any Contract to which Buyer is a party or by which
Buyer may be bound.
Buyer is not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance
of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
threatened.
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4.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Seller harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
5. INDEMNIFICATION; REMEDIES
5.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE.
All representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, and any other document delivered pursuant to this
Agreement will survive the Closing. The right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
5.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller will
indemnify and hold harmless Buyer, the Company, and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Seller in this Agreement (without giving effect to any supplement to the
Disclosure Letter), the Disclosure Letter, the supplements to the Disclosure
Letter, or any other certificate or document delivered by Seller pursuant to
this Agreement;
(b) any Breach of any representation or warranty made by
Seller in this Agreement;
(c) any Breach by Seller of any covenant or obligation of such
Seller in this Agreement or in the Consulting Agreement;
(d) all business done by Seller and/or the Company with
respect to the Website prior to the Closing;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or the Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 5.2 will not be exclusive of
or limit any other remedies that may be available to Buyer or the other
Indemnified Persons.
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5.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Seller, and will pay to Seller the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
5.4 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under
Section 5.2, 5.3, or of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 5.4(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 5 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's Consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary Damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its Consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary Damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the
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indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its Consent (which may
not be unreasonably withheld).
(d) Seller hereby Consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Seller with respect to such a claim anywhere in the
world.
5.5 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
5.6 RIGHT OF SETOFF. Notwithstanding anything contained herein to
the contrary, the right of setoff set forth in this Section 5.6 shall be the
sole and exclusive remedy of all Indemnified Persons in the event any of same
are entitled to indemnification hereunder and Seller shall have no personal
liability to any Indemnified Persons hereunder. In addition to any and all other
remedies, Buyer shall have the right to exercise, by delivery of written notice
to Seller, one or more setoffs against the Buyer's Shares all Damages to which
Buyer is entitled under Section 5.2. The certificate(s) evidencing the Buyer's
Shares shall bear a legend referring to such right. Setoffs hereunder shall be
based on the value of the Buyer's Shares, which shall be based on the public
trading price of Buyer's common stock, with appropriate discount for the
restricted nature of such shares. If a setoff is effected by Buyer, Seller shall
forthwith after receipt of notice from Buyer deliver to Buyer certificates
evidencing ownership of the setoff shares for cancellation.
6. GENERAL PROVISIONS
6.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, Representatives, counsel, and accountants. Seller will cause the Company
not to incur any out-of-pocket expenses in connection with this Agreement.
6.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer determines.
Unless Consented to by Buyer in advance or required by Legal Requirements, prior
to the Closing Seller shall, and shall cause the Company to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Seller and Buyer will consult with each other concerning the means by
which the Company's customers and others having dealings with the Company will
be informed of the Contemplated Transactions, and Buyer will have the right to
be present for any such communication.
6.3 NOTICES. All notices, Consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Seller: Eric Egnet
16 Parsonage Hill Road
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Havenhill, MA 01832
Facsimile No.: (___) ___-____
with copy to: James M. Bolton, Esq.
Law Offices of James M. Bolton
6 New England Executive Park, Suite 400
Burlington, MA 01803
Facsimile No.: (978) 691-5450
Buyer: Nutriceuticals.com Corporation
6950 Bryan Dairy Road
Largo, FL 33777
Attention: Jugal K. Taneja
Facsimile No.: (727) 548-1917
with a copy to: Philip M. Shasteen, Esq.
Johnson, Blakely, Pope,
Bokor, Ruppel & Burns, P.A.
Post Office Box 1100
Tampa, FL 33601-1100
Facsimile No.: (813) 225-1857
6.4 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Florida, County of Pinellas, or, if it has or can acquire jurisdiction, in
the United States District Court for the Middle District of Florida, and each of
the parties Consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
6.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
6.6 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
6.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject
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<PAGE>
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
6.8 DISCLOSURE LETTER. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
6.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the prior
Consent of the other parties, which will not be unreasonably withheld, except
that Buyer may assign any of its rights under this Agreement to any Subsidiary
of Buyer. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
6.10 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
6.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
6.12 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
6.13 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Florida without regard to conflicts of laws principles.
6.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
NUTRICEUTICALS.COM CORPORATION,
a Nevada corporation
By: _______________________
Jugal K. Taneja, CEO
SELLER:
___________________________
Eric Egnet
17
SUBSIDIARIES OF THE REGISTRANT
STATE OR JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION OR ORGANIZATION
- -------------------- -----------------------------
HealthSeek.com Corp. Massachusetts
[KIRKLAND, RUSS, MURPHY & TAPP LETTERHEAD]
Board of Directors
Nutriceuticals.com Corporation
We consent to the use of our reports included herein and to the reference to our
firm under the heading "experts" in the prospectus.
/s/ KIRKLAND, ROSS, MURPHY & TAPP
Clearwater, Florida
June 28, 1999
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0
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