As filed with the Securities and Exchange Commission on January 14, 2000
File No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMAZON HERB COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
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FLORIDA 2833 65-0199738
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER NUMBER)
INCORPORATION OR ORGANIZATION CLASSIFICATION CODE NUMBER)
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1002 JUPITER PARK LANE
JUPITER, FL 33458
(561) 575-7663
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN H. EASTERLING
1002 JUPITER PARK LANE
JUPITER, FL 33458
(561) 575-7663
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS SHOULD BE SENT TO:
ROBERT C. HACKNEY, ESQ.
JOEL M. MCTAGUE, ESQ.
HACKNEY & MILLER, P.A.
ADMIRALTY OFFICE TOWER TWO
4400 PGA BOULEVARD, SUITE 505
PALM BEACH GARDENS, FL 33410
(561) 627-0677
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Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, check the following box and
list the Securities Act registration statement number or the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 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. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE REGISTERED PROPOSED MAXIMUM OFFERING PROPOSED AMOUNT OF
SECURITIES TO BE REGISTERED PRICE PER SHARE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock and 5,000,000 $5.50 $27,500,000.00 $7,260
Class A Common Stock
Purchase Warrants
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<FN>
(1) Registration fee enclosed herewith. Estimated solely for purposes of
calculating the registration fee under Rule 457.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
PROSPECTUS (SUBJECT TO COMPLETION)
Issued January 14, 2000
5,000,000 UNITS
AMAZON HERB COMPANY
COMMON STOCK AND CLASS A COMMON STOCK PURCHASE WARRANTS
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Amazon Herb Company, a Florida corporation (the "Company"), has
registered 5,000,000 Units consisting of 5,000,000 shares of its Common Stock
(the "Common Stock"), and 5,000,000 Class A Common Stock Purchase Warrants (the
"Class A Warrants), which may from time to time be offered by this Prospectus on
a delayed basis under Rule 415 principally in connection with the acquisition,
directly or indirectly, of entities. Such shares may be issued in exchange for
the shares of capital stock (by merger or otherwise), partnership interests or
other assets representing an interest, direct or indirect, in other companies or
other entities, or in exchange for assets used in or related to the business of
such entities. The terms of the offers will be determined through exchange
offers to stockholders. Underwriting discounts or commissions will generally not
be paid by the Company. Under some circumstances, however, the Company may issue
shares of Common Stock covered by this Prospectus to pay brokers' commissions
incurred in connection with acquisitions.
The Company has filed a Registration Statement on Form S-4 (including
all amendments and documents incorporated by reference, the "Registration
Statement"), under the Securities Act of 1933, as amended ("the Securities
Act"), with the Securities and Exchange Commission (the "SEC") covering up to
5,000,000 shares of the Common Stock offered hereby. This Prospectus does not
cover any resale of Common Stock, and no person is authorized to make use of
this Prospectus in connection with any such resale or distribution.
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AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK - SEE "RISK FACTORS" BEGINNING ON PAGE 16
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THIS ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is January __, 2000
AVAILABLE INFORMATION
The Company will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports, proxy and information statements and
other information with the SEC. Such reports, proxy and information statements
and other information filed by the Company with the SEC can be inspected and
copied at the public reference facilities of the SEC, Room 1024, Judiciary
Plaza, 450 Fifth Street, NW, Washington, DC, 20549, as well as at the following
SEC Regional Offices: Seven World Trade Center, New York, NY 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies can
be obtained from the SEC by mail at prescribed rates. Requests should be
directed to the SEC's Public Reference Section, Room 1024, Judiciary Plaza, 450
Fifth Street, NW, Washington, DC, 20549.
The Company has filed the Registration Statement under the Securities
Act covering the securities described herein. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the SEC. For
further information, reference is hereby made to the Registration Statement and
the exhibits thereto, which may be inspected without charge at the office of the
SEC at 450 Fifth Street, NW, Washington, DC, 20549, and copies of which may be
obtained from the SEC at prescribed rates.
The SEC maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the SEC. The address of such site is
http://www.sec.gov.
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FORWARD LOOKING STATEMENTS
This Prospectus and the documents incorporated herein by reference
contain forward-looking statements based on current expectations, estimates and
projections about the Company's industry, management's beliefs and certain
assumptions made by management. All statements, trends, analyses and other
information contained in this Prospectus relative to trends in net sales, gross
margin, anticipated expense levels and liquidity and capital resources, as well
as other statements including, but not limited to, words such as "anticipate,"
"believe," "plan," "estimate," "expect," "seek" and "intend," and other similar
expressions, constitute forward-looking statements. These forward-looking
statements involve risks and uncertainties, and actual results may differ
materially from those anticipated or expressed in such statements. Potential
risks and uncertainties include, among others, those set forth herein under
"Risk Factors." Particular attention should be paid to the cautionary statements
involving the Company's limited operating history, the unpredictability of its
future revenues, the unpredictable and evolving nature of its business model,
the intensely competitive internet service industry and the risks associated
with capacity constraints, systems development, management of growth,
acquisitions, any new products and international or domestic business expansion.
Except as required by law, the Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information, future events
or otherwise. Readers, however, should carefully review the factors set forth in
other reports or documents that the Company will file with the SEC from time to
time.
BUSINESS OF THE COMPANY
MISSION STATEMENT AND COMPANY PHILOSOPHY
The Company's mission is to supply consumers with herbs and herbal extracts from
the Rainforest of the Amazon Basin while simultaneously promoting and supporting
the preservation of the flora and fauna of the Rainforest. The Company works
directly with a number of indigenous communities to ecologically harvest
sustainable resources. In addition, as an environmentally responsible company,
the Company commits 10% of its net profits to be returned to the Rainforest to
help protect and preserve the Rainforest and the indigenous people of the Amazon
River Basin.
HISTORY AND DEVELOPMENT OF THE COMPANY
The Company was incorporated in Florida on June 6, 1990, under the name Marco
Polo Trading Co., Inc. On April 1, 1991, the Company registered the name Amazon
Herb Company as a fictitious name. On January 8, 1993, the Company filed
Articles of Amendment changing its name to Amazon Herb Company. The Company also
does business under the name of Rainforest Bio-Energetics.
INDUSTRY OVERVIEW
Based on estimates in "The U.S. Market for Vitamins, Supplements, and Minerals,"
a 1997 market report prepared by Packaged Facts (the "Packaged Facts Report"),
an independent consumer marketing research firm, the retail market for vitamins,
minerals and other supplements (excluding
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sports nutrition and diet products) has grown at a compound annual rate of 15%
from $3.7 billion in 1992 to $6.5 billion in 1996. A large portion of this
growth is attributable to an increase in sales of other supplements (primarily
herbal products), which grew from $570 million in 1992 to $2.3 billion in 1996.
The Packaged Facts Report forecasts 13.6% compound annual growth in the market
for vitamins, minerals and other supplements (excluding sports nutrition and
diet products), including 25% compound annual growth in the market for other
supplements through 2001. Compound annual growth rates from 1992 through 1996
for vitamins, minerals and other supplements were 8.0%, 5.2% and 41.7%,
respectively.
According to Nutrition Business International (NBI), an independent industry
source, consumers spent $3.7 billion on organic foods at retail stores in the
United States in 1996. NBI projects sales to double to $7.2 billion by decade's
end with average annual growth of 18%. According to the NBI, the Botanicals and
Dietary Supplements section showed a healthy 26.3% average increase in sales
growth in 1998. Last year, the Direct Selling Association (DSA) estimated 1998
U.S. retail direct sales to be more than $23 billion, with MLM companies
accounting for 80% of sales. The membership roster of the DSA includes
broad-based pioneers such as Amway and Avon as well as companies such as
Herbalife and Pharmanex that specialize in nutritional supplements. Home and
family care products account for 32% of total sales, wellness products -
including vitamins and weight loss products - account for 17% of total sales or
$3.9 billion. Dane Woodruff, President and CEO of Lawrenceville, Georgia-based
Health Trust Alliancetm, estimates that 10% to 15% of all pharmacists currently
sell MLM products ranging from nutritional supplements to health aids. According
to Natural Business Communications LLC, an independent industry source, the
annual domestic retail market for dietary supplements was $6.5 billion in 1997.
In the last several years, the Company believes that public awareness of the
positive effects of dietary supplements on health has been heightened by widely
publicized reports of scientific findings. Recent studies have indicated a
correlation between the regular consumption of selected supplements and reduced
incidences of conditions such as heart disease, cancer, stroke, arthritis,
osteoporosis, mental fatigue and depression and neural tube birth defects. In
the opinion of the Company, the rise of alternative medicine and the holistic
health movement has also contributed to increased sales of dietary supplements.
The Company expects that the aging of the United States population, together
with a corresponding increased focus on preventative health measures, will
result in increased demand for dietary supplement products. According to the
United States Census Bureau, through 2010, the 35-and-older age group of
consumers, which represents a substantial majority of regular users of dietary
supplements, is expected to grow significantly faster than the general United
States population. Based on a national survey indicating that approximately 35%
of Americans consumed supplements on a regular basis in 1996, the Company
believes that there is a large untapped domestic market for dietary supplements.
Industry sources also report that vitamin consumers are taking more vitamins and
nutritional supplements per day than in the past.
The primary channels of distribution in the dietary supplement industry are: (i)
mass market retailers which include drug stores, supermarkets, mass
merchandisers and discount stores; (ii) health food stores; (iii) direct sales
organizations; and (iv) mail order. Within the mass market retailer channel,
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there are three primary vitamin product categories: national brands, broadline
and other brands and private label brands.
While the retail channel of distribution for dietary supplements has been
consolidating, there has not yet been any significant consolidation among the
companies that manufacture and sell these products. The dietary supplement
industry remains fragmented, and the Company believes that no company controls
more than 10% of the market.
BUSINESS
The Company is engaged in the importing, manufacturing and distribution of herb
products produced from the Amazon rainforests of Peru, Brazil, Paraguay and
Uruguay. The Company conducts its operations from Jupiter, Florida, and
maintains warehouse facilities in Bremen, Georgia, and Woodbine, Iowa.
The Company has experienced substantial growth in sales in recent years. From
1992 to 1999, the Company's sales grew from $234,000 to $2,546,284. The company
experienced an extraordinary loss by withdrawing its registration statement it
had filed during the year with the Securities and Exchange Commission for
issuing publicly traded stock. As part of that registration the company incurred
offering costs of $257,144. As a result of the withdrawal, these costs were
expensed in fiscal 1999.
PRODUCT DISTRIBUTION/DIRECT SALES THROUGH INDEPENDENT DISTRIBUTORS
The Company's products are marketed through a network marketing system
exclusively through a sales force of independent associates who are not
employees of the Company. This system was developed by the Company in 1993. As
with most network marketing systems, the Company's Associates purchase products
for retail sale and personal consumption. The Company believes network marketing
is an effective vehicle to distribute the Company's products for the following
reasons: (i) the benefits of the Company's products are explained more readily
on an individual, educational basis, which emphasizes the manner in which its
products work, and is more direct than the use of television and print
advertisements; (ii) direct sales allow for consumers to try the products; (iii)
it enhances the impact of associate and consumer testimonials; and (iv) as
compared to other distribution methods, Associates can provide higher levels of
customer service and attention by, among other things, following up on sales to
ensure proper product usage and customer satisfaction, and encouraging repeat
purchases. The network marketing system enables the Company's independent
associates to earn profits by selling Amazon Herb products on a retail basis to
consumers. Also, Associates may develop their own associate organizations by
sponsoring other "associates" or distributors to do business in any market where
the Company operates, entitling the sponsors to receive commissions and bonuses
on product sales within their downline organizations. The Company believes that
its network marketing system will continue to build a base of potential
consumers for additional products.
The Company's finished products are packaged only for the network marketing
distribution channel and are not available through retailers. The Company's
independent associates are not required to pay any sign-up fees or to buy any
kits. The Company encourages Associates to enroll new Associates
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with whom the Associates may have an ongoing relationship as a family member,
friend, business associate, neighbor or otherwise.
To become a Company associate, a person or entity must enter into a standard
associate agreement with the Company which obligates that person to abide by the
Company's policies and procedures. A $50.00 order qualifies an associate to
receive commissions. With the first order, information is sent which includes
all of the materials necessary for an associate to commence operating his or its
distributorship including information about the Company, product information,
support functions, training materials, the profit program, policies and
procedures, order forms, application forms and sales aids. To remain active a
$10.00 annual renewal is required of all associates. The number of active
Company associates as of May 1, 1999, was approximately 10,000. An "active"
Company distributor is defined to mean any distributor who is eligible to
participate in the Company business, including all new associates as well as
those existing associates who have renewed their distributorship during the last
twelve months.
The Company processes, fills and ships orders from the Company's distribution
center, usually within a 24 hour period after the order is placed by the
distributor. The Company allows its customers to return any product, for any
reason, for one year from the date of purchase for a total refund or
replacement. In the event of termination of the relationship between the Company
and a distributor, the Company will repurchase from such distributor all
resaleable inventory purchased by such distributor within 12 months of such
termination for 90% of the original net cost to the distributor. The Company
provides for a reserve for such returns, however, to date, such returns have not
been material.
The Company's success is dependent upon continued sales of its products to
consumers by its distributors and the ongoing recruitment and maintenance of a
motivated, experienced network of distributors. The Company sponsors and
conducts regional and national conventions in order to educate and recruit
distributors, and employs various technologies and innovations which allow for
fast and efficient communication and service among the Company, its distributors
and their customers. These include such tools as the monthly automatic shipping
program which allows products to be regularly shipped each month directly from
the Company to the end-user. Also, the Company maintains a dedicated department
to provide information and assistance to distributors. The Company publishes and
distributes a newsletter to inform its distributors of recent developments and
other relevant information and to recognize the accomplishments of certain
distributors.
The Company believes that high quality sales aids play an important role in the
success of Associate efforts. The Company is committed to fully utilizing
current and future technologies to continue to enhance the effectiveness of
direct selling.
The Company built a website as marketing support for its distributors at
WWW.RAINFORESTBIO.COM. The Company plans to enhance its website for additional
exposure and to provide additional support to its distributors by using
video-conferencing via internet. The Company is investigating the possibility of
using new technologies which would allow the Company's distributors to access
information regarding consumers and distributors in their downline. This
information is currently being provided by telephone and fax. The Company
believes that its products and its network marketing system are
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very compatible with internet commerce because independent distributors of the
company's products have an incentive to direct traffic to the company's website.
Management believes that the Company's network marketing system is suited
ideally to its products which emphasize a healthy lifestyle because sales of
such products are strengthened by ongoing contact between consumers and
distributors who use the Company's products themselves. The Company's network
marketing system appeals to a broad cross-section of people throughout the
United States, particularly those seeking to supplement the family income. The
Company intends to offer participation in a stock option plan and stock purchase
plan to distributors who reach certain sales targets.
ASSOCIATE PROFIT PLAN
All Associate profits are paid monthly directly by the Company and are based on
sales of the Company's products. The Company's profit plan integrates a single
downline, or "unilateral" element, with an infinity bonus which adds additional
compensation based upon attainment of certain Associate leadership levels. The
result of this structure is to compensate both Associates in the early stages of
building their business and Associates with more established organizations, by
rewarding Associates for helping the Associates in their organization to be
successful.
Management calls this plan the Amazon Warrior Profit Plan (the "Plan"). An
Associate who purchases at least $50 of Company product is designated as an
"Ambassador" and is paid 10% of the amount purchased by his or her first and
second level Associates. (A first level Associate is a person who is introduced
to the Company by the Ambassador and becomes a "downline" distributor of the
Ambassador. A second level Associate is a person who is sponsored into their
distributorship by the first level Associate.) Each person who is directly
sponsored by the Ambassador begins what is known as a "leg" and as that new
Associate directly sponsors new distributors, the leg grows in both length and
width. An Ambassador with three "legs" is paid 10% on all purchases through
three levels, an Ambassador with four "legs" is paid 10% on all purchases
through four levels, and an Ambassador with five "legs" is paid 10% on all
purchases through five levels. If the Ambassador has a monthly auto ship order
of $100 or more, the Ambassador receives a bonus of 50% on a new associate's
order. An Ambassador with five "legs" is designated a "Five Star Ambassador" and
qualifies for the "Infinity Bonus" which is a percentage of amounts generated
from the sixth level down, regardless of depth. The bonus percentage varies from
1% to 8% on the sixth level down, which means that an Associate has the
potential to earn as much as 10% on the first five levels, and up to 8% on all
levels beyond the fifth level. In addition, for Ambassadors that reach the
maximum compensation of 8% on the Infinity Bonus, there is a profit sharing pool
of 1% (5 people) of the Company's monthly sales which is divided among those
Ambassadors.
The Company believes that its profit plan is among the most associate friendly
and financially rewarding plans offered in the industry. Commissions can reach
60% of finished product sales if Associates reach the highest levels in the
plan. Currently, the Company expends approximately 45% of finished product
revenues on commissions or approximately 30% of the total revenue.
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The ages of the Company's customers varies widely, but approximately 70% of its
customers are between the ages of 30 and 60. The Company markets its products
throughout the United States with Florida, New York, and California being the
Company's largest single markets. To date, the Company has done little
advertising, but hopes to increase its advertising expenditures substantially.
The Company plans to substantially update all Associates' information and
marketing tools.
The retail price of the Company's products range from $15.00 per 100 capsule
bottle of Una de Gato to $48.00 for the 500 oz. bottle of Fiberzon. The Company
markets a quick start kit consisting of one of each of the Company's products
for $300.00.
PURCHASING OF RAW MATERIALS
The raw materials necessary for the manufacture and production of the Company's
products are gathered by various villages of indigenous people who reside in the
Amazon Rainforest. The majority of the Company's raw materials originate in
Peru. These materials may be harvested only by those holding an extraction
permit issued by the various governments. These raw materials are gathered,
sorted, classified and inspected at a compound in the country of collection.
Although the Company does not own the compound in Peru, the construction of two
buildings on this property were funded from profits derived from sales of
botanicals to the Company, and Management believes that the continued use of the
compound is dependent upon the Company's activities. The Peruvian compound
currently employs 12 people although none of these persons are employees of the
Company.
Once the botanicals have been sorted, cleaned, cut, bundled and validated as to
their authenticity, a sanitary permit must be issued by the appropriate
government before they are shipped. Then, the raw material is then transported
by truck to a seaport where it is shipped to Miami, Florida, and inspected by
U.S. Customs, FDA and U.S. Department of Agriculture. The Company uses
approximately 60% of the imported raw materials in the Company's proprietary
finished goods and 40% sells in bulk to third parties. Management then inspects
and tests the raw materials in Jupiter, Florida. If acceptable, the raw
materials are then sent to contract processing plants in either Titusville,
Florida, or Woodbine, Iowa.
MANUFACTURING AND PROCESSING
The Company has no manufacturing facility of its own. Rather, it performs all of
its manufacturing on a contract basis by third party manufacturers.
After the botanicals have been inspected and tested in Jupiter, Florida, the
Company ships and sells approximately 30% of the raw materials to third parties
for their own manufacturing and processing. The company sends the remaining 70%
to one of two manufacturing facilities for processing. The majority of the
contract manufacturing for the Company is performed at a facility in Woodbine,
Iowa, and a lesser amount in Titusville, Florida. At these facilities, the raw
material is cut and ground into powder. Some of the raw material is ground into
a course mix which is then sent to a California facility for packaging into tea
bags. The powder is sent to the Company's warehouse in Georgia where
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it is stored until needed. It is finished ultimately by encapsulators in Florida
and California who compress the powder into tablets or capsules, and package the
finished products.
The liquified products are manufactured at the Iowa facility. Here the raw
materials are treated for approximately two weeks and then pressed. The liquid
extract is then bottled and packaged. To a lesser extent, this facility also
performs a dry extraction process. All finished products are warehoused in
Jupiter, Florida.
DESCRIPTION OF KEY PRODUCTS
Arcozon
Multi-Herb Formula that supports the immune system.
Calmazon
Assists body's ability to relieve stress naturally.
Digestazon
Aids the body's natural process of digestion and nutrient absorption.
Envirozon
Assists the body's natural ability to cleanse and restore balance after exposure
to environmental impurities. Supports healthy liver function.
Fiberzon
Assists the body's natural ability to cleanse and eliminate unwanted toxins.
Helps maintain a healthy intestinal tract.
Illumination
A complete formula for whole body health. Includes arcozon, calmazon,
digestazon, envirozon and metabazon..
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Kavazon
A special blend of herbs to promote a natural feeling of peace and relaxation.
Lunazon
Assists the body's natural ability to maintain harmony during cyclical
imbalance.
Metabazon
Assists the body's natural ability to maintain metabolic harmony.
Recovazon
Assists the body's natural ability to recover faster and promotes comfortable
joint and muscle function.
Shipibo Treasure Tea
All natural herbs provide flavor, energy and clarity, caffeine-free.
Stevia
Convenient Liquid Dietary Supplement. Research shows Stevia contains unique
compounds called steviosides, which have been reported to be 300 times sweeter
than sugar.
Sumacazon
Maximizes youthful energy and vitality.
Una De Gato
Supports the body's immune system.
Warrior
Facilitates stamina and athletic performance.
CUSTOMERS
The Company's customers consist principally of individuals located throughout
the United States, many of whom sell and distribute the Company's products. No
single customer accounts for five percent (5%) or more of the Company's sales.
The largest concentration of the Company's customers are in California, Florida,
and New York. The Company has no plans to market its products outside the United
States in the foreseeable future.
GOVERNMENT REGULATION
The manufacturing, processing, formulating, packaging, labeling and advertising
of the Company's products are subject to regulation by one or more federal
agencies, including the Food & Drug Administration ("FDA"), the Federal Trade
Commission (the "FTC"), the Consumer Products Safety Commission, the United
States Department of Agriculture, the United States Postal Service, the
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United States Environmental Protection Agency and the Occupational Safety and
Health Administration. Various agencies of the states and localities regulate
these activities, as well as foreign countries, in which the Company's products
are sold. In particular, the FDA regulates the safety, labeling and distribution
of dietary supplements, including vitamins, minerals and herbs, food additives,
food supplements, over the counter and prescription drugs and cosmetics. The
regulations that are promulgated by the FDA relating to the manufacturing
process are known as Current Good Manufacturing Practices ("CGMPs"), and are
different for drug and food products. In addition, the FTC has overlapping
jurisdiction with the FDA to regulate the labeling, promotion and advertising of
vitamins, over the counter drugs, cosmetics and foods.
The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was enacted on
October 25, 1994. DSHEA amends the Federal Food, Drug and Cosmetic Act by
defining dietary supplements, which include vitamins, minerals, nutritional
supplements and herbs as a new category of food separate from conventional food.
DSHEA provides a regulatory framework to ensure safe, quality dietary
supplements and the dissemination of accurate information about such products.
Under DSHEA, the FDA is prohibited generally from regulating the active
ingredients in dietary supplements as food additives or as drugs unless product
claims, such as claims that a product may heal, mitigate, cure or prevent an
illness, disease or malady, trigger drug status.
DSHEA provides for specific nutritional labeling requirements for dietary
supplements and final regulations have been published with an October 23, 1997,
effective date for the notification to FDA of Statements of Nutritional Support
and new dietary ingredients, and a March 23, 1999, effective date for the
labeling provisions. DSHEA permits substantiated, truthful and non-misleading
statements of nutritional support to be made in labeling, such as statements
describing general well-being resulting from consumption of a dietary ingredient
or the role of a nutrient or dietary ingredient in affecting or maintaining a
structure or function of the body. Any statement of nutritional support beyond
traditional claims must be accompanied by disclosure that the FDA has not
evaluated such statement and that the product is not intended to cure or prevent
any disease. The Company anticipates that the FDA will finalize CGMPs which are
specific to dietary supplements and require at least some of the quality control
provisions contained in the CGMPs for drugs, which are more rigorous than CGMPs
for foods. Currently, the Company manufactures its vitamins and nutritional
supplement products in compliance with the applicable food CGMPs.
The Company cannot determine what effect such regulations implementing DSHEA,
which were adopted on September 23, 1997, will have on its business in the
future. Such regulations require expanded and different labeling for the
Company's vitamins and nutritional supplement products and, among other things,
require additional recordkeeping, warnings, notification procedures and expanded
documentation of the properties of certain products and scientific
substantiation regarding ingredients, product claims, safety or efficacy. The
Company believes that it is in material compliance with all applicable laws at
the present time.
DSHEA created two new governmental bodies, the Office of Dietary Supplements
("ODS") established within the National Institutes of Health, and the
Presidential Commission on Dietary Supplements ("Commission"). The Commission,
which was established for two years to provide
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recommendations to the President and Congress for the regulation of supplement
labeling and health claims, including procedures for making disease-related
claims, issued its final report on November 24, 1997. Such report includes
findings which are similar, and different in material respects from the FDA
regulations on DSHEA. Such report further recommends that ODS, which is charged
with coordinating research results and advising the Secretary of Health and
Human Services on supplement regulation, safety and health claims, be funded as
authorized by DSHEA. The Company cannot determine what effect such report will
have on its business in the future, and such report could lead to legislative or
regulatory changes to the final rules promulgated by the FDA under DSHEA.
Although the vitamin and nutritional supplement industry is subject to
regulation by the FDA and local authorities, dietary supplements, including
vitamins, minerals, herbs and nutritional supplements, have now been affirmed
statutorily as a food and not as a drug or food additive. Therefore, the
regulation of dietary supplements is less restrictive than that imposed upon
manufacturers and distributors of drugs or food additives. Unlike food additives
and new drugs, which require regulatory approval of formulation, safety and
labeling, and for drugs, efficacy prior to marketing, dietary supplement
companies are authorized to make substantiated statements of nutritional support
and to market manufacturer-substantiated-as-safe dietary supplement products
without such FDA preclearances. Failure to comply with applicable FDA
requirements can result in sanctions being imposed on the Company or the
manufacturers of its products, including warning letters, product recalls and
seizures, injunctions and criminal prosecutions.
The Company is subject to regulation under various international, state and
local laws which include provisions regulating, among other things, the
operations of direct sales programs. Regulations regarding network marketing
companies are a complexity of overlapping laws which vary from jurisdiction to
jurisdiction. Network sales programs are affected by combinations of business
opportunity statutes, franchise and securities statutes, anti-pyramid statutes,
network distribution statutes, and state lottery statutes, as well as U.S. Post
Office and Federal Trade Commission fraud regulations, among others. In
addition, in the Company's opinion, some regulatory officials seem to have a
negative bias toward the legality of network marketing as a means of
merchandising. Many network marketing programs have been targeted for
prosecution and litigation under a variety of laws, though enforcement of these
statutes and regulations appears selective to the Company. Failure to comply
with the laws of any jurisdiction can result in the loss of the Company's
ability to operate therein for indefinite periods of time, and could possibly
affect its ability to operate in other jurisdictions as well. The Company is
subject to the risk that in one or more of its markets, its marketing system
could be found not to be in compliance with applicable regulations. Failure by
the Company to comply with these regulations could have a material adverse
effect on the Company and a particular market or the Company's markets in
general.
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COMPETITION
The Company is subject to significant competition for the recruitment of sales
personnel and distributors from other network marketing organizations, including
those that market weight management products, food and dietary supplements and
personal care products, as well as other types of network marketed products.
Some of the Company's competitors are substantially larger and have available
considerably greater financial resources than the Company. The Company's ability
to remain competitive depends, in significant part, on the Company's success in
recruiting and retaining distributors through an attractive compensation plan
and other incentives. The Company believes that its compensation plan, and other
incentive programs provide its distributors with significant earning potential.
There can be no assurance, however, that the Company's programs for recruitment
and retention of distributors will be successful.
The business of marketing food and dietary supplement products is highly
competitive. This market segment includes numerous manufacturers, distributors,
marketers, retailers and physicians that actively compete for the business of
consumers both in the United States and abroad. In addition, the market is
highly sensitive to the introduction of new products (including various
prescription drugs) that may rapidly capture a significant share of the market.
As a result, the Company's ability to remain competitive depends in part upon
its successful introduction of new products.
TRADEMARKS AND SERVICE MARKS
The Company's products are packaged under the Company's "private label." The
Company has registered the mark Rainforest Bio-Energetics(R) with the United
States Patent and Trademark Office. The Company intends to apply for trademark
or service mark registration for various product names. The Rainforest
Bio-Energetics(R) mark is protected until September 8, 2002. The company has
also reserved the following web domains registered with Internic:
rainforestbio.com, amazonherb.org, and amazonherb.net
EMPLOYEES
As of June 30, 1999, the Company had twelve full-time employees. These numbers
do not include the Company's distributors, who are considered independent
contractors rather than employees of the Company. The Company considers its
employees relationships to be exemplary. None of the Company's employees is a
member of any labor union, and the Company has never experienced any business
interruption as a result of any labor disputes.
FACILITIES
In May, 1998, the Company executed a lease for a term of two years beginning
July 15, 1998, for an office warehouse facility comprising of 5,194 square feet
in Jupiter, Florida. The monthly lease payment of this facility is $4,358. For
the previous five years, the Company has operated from a 3,000 square foot
leased facility in an office warehouse in Jupiter, Florida, having a monthly
rental of $3,402. A 5,000 square foot storage facility in Bremen, Georgia, is
leased on a month to month basis at a rate
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of $300 per month and a 3,000 square foot storage facility in Woodbine, Iowa, is
leased on a month to month basis for $450 per month.
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of risk
and is not an appropriate investment for persons who cannot afford the loss of
their entire investment. Prospective investors should carefully consider the
following risk factors, in addition to the other information contained in this
Prospectus, before purchasing any of the Common Stock.
THIS PROSPECTUS CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WHICH REPRESENT
THE COMPANY'S OBJECTIVES, EXPECTATIONS OR BELIEFS, INCLUDING, BUT NOT LIMITED
TO, STATEMENTS CONCERNING INDUSTRY PERFORMANCE, THE COMPANY'S OPERATIONS,
ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH STRATEGIES AND MARGINS AND
GROWTH IN SALES OF THE COMPANY'S PRODUCTS. FOR THIS PURPOSE, ANY STATEMENTS
CONTAINED IN THIS PROSPECTUS THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE
DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, WORDS
SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE," "ANTICIPATE," "INTEND," "ESTIMATE"
OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE
TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN
OF WHICH ARE BEYOND THE COMPANY'S CONTROL, AND ACTUAL RESULTS MAY DIFFER
MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT FACTORS, INCLUDING THOSE
DESCRIBED BELOW UNDER THIS "RISK FACTORS" SECTION AND ELSEWHERE IN THIS
PROSPECTUS.
DEPENDENCE UPON KEY PERSONNEL. The Company's success is dependent heavily upon
the continued active participation of its current executive officers, key
employees and consultants, particularly John H. Easterling. Loss of the services
of one of these executives, employees or consultants could have a material
adverse effect upon the development of the Company's business. The Company has
no employment agreements with but maintains a $3 million "key man" life
insurance on Mr. Easterling's life. It does not have employment contracts with
or life insurance on any other officers or employees. There can be no assurance
that the Company will be able to recruit or retain other qualified personnel
should it be necessary to do so.
NETWORK MARKETING INDUSTRY REGULATION RISKS. Regulations regarding network
marketing companies are a complexity of overlapping laws which vary from
jurisdiction to jurisdiction. Network sales programs are affected by
combinations of business opportunity statutes, franchise and securities
statutes, anti-pyramid statutes, network distribution statutes, and state
lottery statutes, as well as U.S. Post Office and Federal Trade Commission fraud
regulations, among others. In addition, in the
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Company's opinion, some regulatory officials seem to have a negative bias toward
the legality of network marketing as a means of merchandising. Many network
marketing programs have been targeted for prosecution and litigation under a
variety of laws, though enforcement of these statutes and regulations appears
selective to the Company. Failure to comply with the laws of any jurisdiction
can result in the loss of the Company's ability to operate therein for
indefinite periods of time, and could possibly affect its ability to operate in
other jurisdictions as well. From its inception, the Company has invested a
substantial amount of money to seek the advice of legal counsel in the areas of
corporate, network marketing and securities law in order to structure itself in
accordance with the multiplicity of laws that govern its operations. Though it
can give no assurances, the Company believes it has taken reasonable steps to
comply with the various laws that would apply to it in the jurisdictions in
which it currently operates. The Company is subject to the risk that in one or
more of its markets, its marketing system could be found not to be in compliance
with applicable regulations. Failure by the Company to comply with these
regulations could have a material adverse effect on the Company and a particular
market or the Company's markets in general.
COMPETITION. The market for the sale of dietary supplements is highly
competitive. There are numerous companies in the industry selling products to
retailers, including mass merchandisers, direct to customer distributors, drug
store chains, independent drug stores, supermarkets and health food stores. Most
of these companies are privately held and the Company is unable to assess
precisely the size of its competitors or where it ranks in comparison to such
privately held competitors with respect to sales to retailers. No company is
believed to control more than 10% of this market. Although the Company competes
with other health and nutritional food companies, the Company believes its
primary competition stems from other direct sales companies. The Company
competes in the recruitment of independent sales people with other direct sales
organizations whose product lines may or may not compete with the Company's
products.
Certain of the Company's competitors are substantially larger than the Company
and have greater financial resources than the Company. The principal competitive
factors affecting the market for the Company's products include product quality,
packaging, brand recognition, price and distribution capabilities. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors based on these and other factors. The Company
competes with a variety of domestic and international suppliers of dietary
supplement products, many of whom have substantially greater financial,
distribution and marketing resources and have achieved a higher level of brand
recognition than the Company. Increased competition could result in price
reductions, reduced profit margins and loss of market share, all of which would
have a material adverse effect on the Company's business, financial condition
and results of operations.
RELIANCE ON THIRD PARTIES FOR MANUFACTURING. The Company currently relies upon
third parties to manufacture and package substantially all of its products at
facilities in Woodbine, Iowa, and Titusville, Florida. The Company's business,
results of operations and financial condition would be materially adversely
affected if any one of the manufacturers were unable, for any reason, to meet
the Company's delivery commitments or if a manufacturer were unable to continue
to produce a product being marketed and distributed by the Company. The Company
maintains business interruption insurance. There can be no assurance, however,
that such insurance will continue to be available at a
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reasonable cost or, if available, will be adequate to cover any losses that may
be incurred from an interruption in the Company's manufacturing and distribution
operations.
FOREIGN SUPPLY. Currently, all of the raw materials used by the Company are
grown outside of the United States, in the Amazon Rainforest, primarily in Peru
and to a lesser extent in other South American countries. The foreign supply of
botanicals is subject to a number of risks, including transportation delays and
interruptions, political and economic disruptions, the imposition of tariffs and
import and export controls and changes in governmental policies. Because the raw
materials used by the Company are extracted from the rainforest and because
Management believes that there is growing international pressure to restrict
harvesting of plants and materials in the rainforest for a variety of reasons,
it is possible that the governments controlling the rainforest may impede
significantly or impose restrictions on the harvesting of raw materials in the
future. Because the raw materials used by the Company are extracted from
countries which have or are experiencing political instability and/or
insurrection, it is possible that guerrilla activity or counter-insurgency
activity by these governments may significantly impede the harvesting of raw
materials. Any such impediment could have a material adverse impact on the
Company. While the Company has not experienced to date any material adverse
effects due to such risks, there can be no assurance that such events will not
occur in the future with the result of possible increases in costs and delays
of, or interferences with, product deliveries resulting in losses of revenues
and goodwill.
FOREIGN CURRENCY AND FOREIGN EXCHANGE REGULATION. As part of the Company's
ordinary business operations, the Company will be required to purchase raw
materials from the suppliers. The Company may be required to accomplish such
purchases through the use of foreign currencies. As a result, fluctuations in
exchange rates of the United States dollar against foreign currencies could
affect adversely the Company's results of operations. The Company may attempt to
limit its exposure to the risk of currency fluctuations by purchasing forward
exchange contracts which could expose the Company to substantial risk of loss.
In such a transaction, the Company would purchase a predetermined amount of
foreign currency to ensure that the Company in the future will own a known
amount of such currency to pay for goods at a predetermined cost. The Company
believes that the use of such transactions will successfully allow the Company
to better determine costs involved in its operations, and thus better manage
currency fluctuations. There can be no assurance that the Company will in the
future successfully manage its exposure to currency fluctuations or that such
fluctuations will not have a material adverse effect on the Company.
DEVELOPMENT OF NEW PRODUCTS; NEED TO MANAGE PRODUCT INTRODUCTIONS. The dietary
supplement industry is highly competitive and characterized by changing consumer
preferences and continuous introduction of new products. The Company's goal is
to expand its portfolio of dietary supplement products through the development
of new products serving niche segments of the industry, and introduce such new
products on a timely and regular basis to maintain distributor and consumer
interest and appeal to varying consumer preferences. The Company believes that
its future growth will depend, in part, on its ability to anticipate changes in
consumer preferences and acquire, manage, develop and introduce, in a timely
manner, new products that adequately address such changes. There can be no
assurance that the Company will be successful in acquiring, developing,
introducing and marketing new products on a timely and regular basis. If the
Company is unable to develop and
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introduce new products or if the Company's new products are not successful, the
Company's sales may be affected adversely as customers seek competitive
products. In addition, the introduction or announcement of new products by the
Company could result in reduction of sales of the Company's existing products,
requiring the Company to manage carefully product introductions in order to
minimize disruption in sales of existing products. There can be no assurance
that the introduction of new product offerings by the Company will not cause
distributors and consumers to reduce purchases or consumption of existing
Company products. Such reduction of purchases or consumption could have a
material adverse effect on the Company's business, operating results and
financial condition.
NO DIVIDENDS ON COMMON STOCK ANTICIPATED. The Company has not paid any dividends
upon its Common Stock since its inception and does not contemplate or anticipate
paying any dividends upon its Common Stock in the foreseeable future. Therefore,
any potential purchaser of the Common Stock whose decision to invest in the
Common Stock is based upon an expectation of dividend payments should refrain
from purchasing the shares of Common Stock.
DEPENDENCE ON TRADEMARKS AND PROPRIETARY RIGHTS; NO ASSURANCE OF ENFORCEABILITY.
The Company's success will depend in part on its ability to obtain and preserve
its trademarks and to operate without infringing the proprietary rights of third
parties. There can be no assurance that any applications related to the
Company's trademarks will provide the Company with a competitive advantage or
will afford protection against competitors with products similar to those
offered by the Company, or that competitors of the Company will not circumvent,
or challenge the validity of, the Company's trademarks. In addition, in the
event that another party infringes the Company's trademarks, the enforcement of
such rights is at the option of the Company and can be a lengthy and costly
process, with no guarantee of success. Finally, although to date no claims have
been brought against the Company alleging that its trademarks infringe
intellectual property rights of others, there can be no assurance that such
claims will not be brought against the Company in the future, or that any such
claims will not be successful. If such a claim were successful, the Company's
business could be materially adversely affected. In addition to any potential
monetary liability for damages, the Company could be required to obtain a
license in order to continue to provide products under its trademarks or could
be enjoined from utilizing its trademarks if such a license were not made
available on acceptable terms. If the Company becomes involved in such
litigation, it may require significant Company resources, which may materially
adversely affect the Company.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. The Company's Articles of
Incorporation and Bylaws require the Company to indemnify and hold harmless its
directors and officers from and against and in respect of certain losses,
damages, deficiencies, expenses or costs which may be incurred or suffered by
such directors and officers as a result of their serving in such capacities with
the Company.
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF PRICE OF COMMON STOCK. Prior to
this offering, there has been no public market for any of the shares of the
Company's Common Stock, and there can be no assurance that a trading market will
develop, or if developed, that it will be developed into something greater than
a limited market. The trading price of the shares of Common Stock could be
subject to wide fluctuations in response to such factors as, among others,
variations in the Company's
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anticipated or actual results of operations and market conditions in the
industries in which the Company operates.
GOVERNMENT REGULATION. The manufacturing, processing, formulation, packaging,
labeling and advertising of the Company's products are subject to regulation by
one or more federal agencies, including the FDA, the FTC, the Consumer Product
Safety Commission, the United States Department of Agriculture, the United
States Postal Service, the United States Environmental Protection Agency and the
Occupational Safety and Health Administration. These activities are regulated
also by various agencies of the states and localities in which the Company sell
its products. In particular, the FDA regulates the safety, labeling and
distribution of dietary supplements, including vitamins, minerals and herbs,
food additives, food supplements, over the counter and prescription drugs and
cosmetics. The regulations that are promulgated by the FDA relating to the
manufacturing process are known as Current Good Manufacturing Practices
("CGMPs"), and are different for drug and food products. In addition, the FTC
has overlapping jurisdiction with the FDA to regulate the labeling, promotion
and advertising of vitamins, over the counter drugs, cosmetics and foods.
The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was enacted on
October 25, 1994. DSHEA amends the Federal Food, Drug and Cosmetic Act by
defining dietary supplements which include vitamins, minerals, nutritional
supplements and herbs, as a new category of food separate from conventional
food. DSHEA provides a regulatory framework to ensure safe, quality dietary
supplements and the dissemination of accurate information about such products.
Under DSHEA, the FDA is generally prohibited from regulating the active
ingredients in dietary supplements as drugs unless product claims, such as
claims that a product may heal, mitigate, cure or prevent an illness, disease or
malady, trigger drug status.
DSHEA provides for specific nutritional labeling requirements for dietary
supplements effective January 1, 1997, although final regulations have not been
published and implementation will be delayed. DSHEA permits substantiated,
truthful and non-misleading statements of nutritional support to be made in
labeling, such as statements describing general well-being resulting from
consumption of a dietary ingredient or the role of a nutrient or dietary
ingredient in affecting or maintaining a structure or function of the body. The
Company anticipates that the FDA will finalize CGMPs which are specific to
dietary supplements and require at least some of the quality control provisions
contained in the CGMPs for drugs. The Company currently manufactures its
vitamins and nutritional supplement products in compliance with the applicable
food CGMPs.
The FDA has proposed but not finalized regulations to implement DSHEA, including
those relating to nutritional labeling requirements. The Company cannot
determine what effect such regulations, when promulgated, will have on its
business in the future. Such regulations are likely to require expanded or
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different labeling for the Company's vitamin and nutritional products and could,
among other things, require the recall, reformulation or discontinuance of
certain products, additional record keeping, warnings, notification procedures
and expanded documentation of the properties of certain products and scientific
substantiation regarding ingredients, product claims, safety or efficacy.
Failure to comply with applicable FDA requirements can result in sanctions being
imposed on the Company or the manufacturers of its products, including,
depending on the product category, warning letters, fines, product recalls and
seizures.
Governmental regulations in foreign countries where the Company may plan to
commence or expand sales may prevent or delay entry into a market or prevent or
delay the introduction, or require the reformulation, of certain of the
Company's products.
The Company is subject to regulation under various international, state and
local laws which include provisions regulating, among other things, the
operation of direct sales programs. In addition, many countries currently have
laws that would restrict or prohibit direct sales companies, such as the
Company, from conducting business therein.
In addition, the Company cannot predict whether new domestic or foreign
legislation regulating its activities will be enacted. Such new legislation
could have a material adverse effect on the Company.
MANAGING GROWTH. Currently, the Company is experiencing a period of rapid growth
and expansion which has placed, and could continue to place, a significant
strain on the Company's management, customer service and support operations,
sales and administrative personnel and other resources. In order to serve the
needs of its existing and future customers, the Company has increased
substantially and will continue to increase its workforce, which requires the
Company to attract, train, motivate and manage qualified employees. The
Company's ability to manage its planned growth requires the Company to continue
to expand its operating, management, information and financial systems, all of
which may significantly increase its operating expenses. If the Company fails to
achieve its growth as planned or is unsuccessful in managing its anticipated
growth, there could be a material adverse effect on the Company. In addition,
the loss of a significant customer or a number of customers, or a significant
reduction in purchase volume by or financial difficulty of such customers, for
any reason, could have a material adverse effect on the Company.
POTENTIAL EFFECT OF ADVERSE PUBLICITY. The Company's products consist of herbs
and other ingredients that the Company regards as safe when taken as suggested
by the Company and that various scientific studies have suggested may involve
health benefits. While the Company conducts extensive quality control testing on
its products, the Company generally does not conduct or sponsor clinical studies
relating to the benefits of its products. The Company is dependent upon
consumers' perception of the overall integrity of its business, as well as the
safety and quality of its products and similar products distributed by other
companies which may not adhere to the same quality standards as the Company. The
Company could be adversely affected if any of the Company's products or any
similar products distributed by other companies should prove or be asserted to
be harmful to consumers or should scientific studies provide unfavorable
findings regarding the effectiveness of the
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Company's products. The Company's ability to attract and retain independent
distributors could be adversely affected by negative publicity relating to it or
to other direct sales organizations.
RELIANCE ON INDEPENDENT DISTRIBUTORS. The Company's sales are dependent directly
upon the efforts of its independent associates (distributors), and any growth in
sales volume will require an increase in the productivity or the number of such
distributors. As is typical in the direct sales industry, there is turnover in
distributors from year to year, which requires the sponsoring and training of
new associates by existing associates in order to maintain the size of the
associate network. The Company experiences seasonal decreases in associate
sponsoring and product sales due to summer and winter holiday periods. Other
factors such as general economic conditions and negative publicity relating to
the Company or other direct sales organizations could affect adversely the
ability of the Company to maintain or expand its distributor network. The loss
of a key associate or group of associates could affect adversely sales of the
Company products and impair the Company's ability to attract new distributors.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS. An element of the Company's future
growth strategy is to increase the distribution and sale of the Company's
products into international markets. The Company's existing and planned
international operations are subject to political and economic uncertainties,
including, among other things, inflation, risk of modification of existing
arrangements with governmental authorities, transportation, tariffs, export
controls, government regulation, currency exchange rate fluctuations, foreign
exchange restrictions which limit the repatriation of investments and earnings
therefrom, changes in taxation, hostilities or confiscation of property. Changes
related to these matters could have a material adverse effect on the Company.
YEAR 2000 COMPLIANCE RISK. The Company uses computer software programs and
operating systems in its internal operations, including applications used in
financial business systems and various administration functions, including
calculation of commissions due to Associates. Traditionally, programmers wrote
computer codes using two digits rather than four to define the applicable year.
As a consequence, unless modified, computer systems will not be able to
differentiate between the year 2000 and 1900. Failure to address this problem
could result in system failures and the generation of erroneous data. The
Company is reviewing its computer programs and systems to ensure that the
programs and systems will function properly and be in compliance for the year
2000. To the extent that these software applications contain code that is unable
to appropriately interpret upcoming calendar year 2000, some level of
modification of such source code or applications will be necessary. The Company
is currently in the process of evaluating its computer software programs and
operating systems to ensure such programs and systems will be able to process
transactions in the year 2000. The Company does not believe that the costs to
modify its programs or systems will be material to its financial condition or
results of operations. While the estimated cost of these efforts are not
expected to be material to the Company's financial position or any year's
results of operations, however, there can be no assurance to this effect. In
addition, the Company cannot predict the effect of the year 2000 problem on
entities with which the Company transacts business, and there can be no
assurance that the effect of the year 2000 problem on such entities will not
have a material adverse effect on the Company's business, financial condition or
results of operations.
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PRODUCT LIABILITY CLAIMS. As a marketer of vitamin and nutritional supplements
and other products that are ingested by consumers or applied to their bodies,
the Company may be subjected to various product liability claims, including,
among others, that its products contain contaminants or include inadequate
instructions as to use or inadequate warnings concerning side effects and
interactions with other substances. While such claims to date have not been
material to the Company and the Company maintains product liability insurance,
there can be no assurance that product liability claims and the resultant
adverse publicity will not have a material adverse effect on the Company.
WEATHER AND OTHER NATURAL PHENOMENA. Some regions in which the raw materials are
harvested, as well as the shipping routes used by the company, are subject to
adverse weather conditions and other natural phenomena such as earthquakes, rock
and mud slides, floods and other potentially damaging events. These events are
outside the company's control and may delay the delivery of or destroy supplies
of raw materials. The Company has neither made any effort to identify these
potential disruptions because of the impracticability of forecasts nor has found
other regions of the world in which the product is grown.
PORTFOLIO RISKS. The Company, from time to time, may acquire various securities
in other companies. The Company cannot guarantee profitability or market trends
that would influence these companies' stock prices. Therefore, the portfolio
securities that this Company may develop may go down in value, depending upon
prevailing market conditions.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common Stock
and does not intend to pay dividends on its Common Stock in the foreseeable
future. The Company presently expects to retain its earnings to finance the
development and expansion of its business. The payment by the Company of
dividends, if any, on its Common Stock in the future is subject to the
discretion of the Board of Directors and will depend on the Company's earnings,
financial condition, capital requirements and other relevant factors.
DILUTION
As of June 30, 1999, there were 2,803,316 shares of Common Stock outstanding (as
adjusted for the 1 for 2.5 reverse split effective May 1, 1998) having a net
tangible book value of $847,714 or approximately $0.30 per share. Net tangible
book value per share is the net tangible assets of the Company (total assets
less total liabilities and intangible assets) divided by the number of shares of
Common Stock outstanding. Upon completion of this offering, there will be
7,803,316 shares of the Company's Common Stock outstanding having a net tangible
book value of approximately $28,347,714 or approximately $3.63 per share if the
total number of Shares is sold.
The Company has reserved an aggregate of 1,000,000 shares of its Common Stock
for its officers, directors, employees and consultants to purchase pursuant to
its Stock Option Plan. As of the date of this Prospectus, the Company has not
issued any options pursuant to the terms of its Stock Option
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Plan. The above paragraph does not give effect to the possible issuance of up to
1,000,000 additional shares of the Company's Common Stock upon exercise of any
options which have been, or may yet be, granted under the Stock Option Plan. The
issuance of shares of the Company's Common Stock upon the exercise of options
which may be granted under the Stock Option Plans would result in further
dilution in the interests of stockholders if at the time of exercise, the
Company's net tangible book value per share is greater than the exercise price
of any such options. See "Stock Option Plan."
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CAPITALIZATION
The following tables set forth at June 30, 1999, the actual capitalization of
the Company. The table should be read in conjunction with the Financial
Statements and Notes thereto included elsewhere in this Prospectus.
JUNE 30, 1999
-------------
ACTUAL(1)
Stockholders' equity:
Common Stock, $.01 par value, 8,000,000 shares authorized;
2,803,316 shares outstanding (3,008,200) ................ 28,033
Additional paid-in-capital ................................. 852,531
Preferred Stock, $1.00 par value, 2,000,000 shares
authorized; no shares outstanding ....................... -0-
Accumulated Deficit ........................................ (32,850)
--------
Total stockholders' equity ............................ 847,714
Total capitalization ............................. 847,714
(1) Derived from the Financial Statements of the Company included elsewhere in
this Prospectus.
SELECTED FINANCIAL DATA
The statement of operations and balance sheet information set forth below as of
June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996 and for the years
ended June 30, 1999, June 30, 1998, June 30, 1997, and June 30, 1996 are derived
from, and are qualified by reference to, the financial statements of the Company
which have been audited by Bernard J. Donth, independent certified public
accountants. The information for the year ending June 30, 1995, is unaudited for
the company. The financial statements as of June 30, 1999, June 30, 1998, June
30, 1997, June 30, 1996 and the reports thereon, are included elsewhere in this
Prospectus. The information below should be read in conjunction with the
Financial Statements and Notes thereto included in this Prospectus. The
Company's historical operating results are not necessarily indicative of the
results of any future period. The per share data has been adjusted to reflect
the 1 for 2.5 reverse split of the common stock that was effective on May 1,
1998.
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Year Ended June 30, 1999 (in thousands)
---------------------------------------
1997 1998 1999
---- ---- ----
Income Statement Data:
Net Sales ................ $ 2,378 $ 2,526 $ 2,546
Gross Profit ............. 1,346 1,444 1,607
Operating income ......... 132 142 (131)
Income before taxes ...... 132 142 (131)
Extraordinary item ....... 0 0 (177)
Income taxes ............. (40) (47) 37
Net income ............... 92 95 (271)
Net income per share (1).. 034 .035 (.097)
Weighted average shares
outstanding (1) .... 2,733 2,733 2,803
June 30, 1999 (in thousands)
----------------------------
1997 1998 1999
---- ---- ----
Balance Sheet Data:
Total assets ......... 814 1,105 1,522
Current liabilities... 164 317 600
Long-term debt, less
current portion ..... 2 0 75
Stockholders' equity.. 648 788 847
(1) Net income per share is computed assuming 2,803,316 shares issued and
outstanding on June 30, 1999, were outstanding for all periods
presented.
26
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS OF THE
COMPANY AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. EXCEPT FOR
THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION CONTAINED IN THIS
PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" THAT INVOLVE RISK AND
UNCERTAINTIES. THESE STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD" OR
"ANTICIPATES" OR THE NEGATIVE THEREOF OR SIMILAR EXPRESSIONS OR BY DISCUSSIONS
OF STRATEGY. THE CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS SHOULD BE READ AS
BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR
IN THIS PROSPECTUS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE DISCUSSED IN THIS PROSPECTUS. IMPORTANT FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED UNDER THE CAPTION
ENTITLED "RISK FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.
OVERVIEW
The Company's historic operations have consisted of sourcing and marketing
dietary supplements produced from products grown in the Amazon Rainforest of
Peru, Brazil, Paraguay and Uruguay. The Company sells its products under the
Rainforest Bio-Energetics brand name primarily through its network marketing
distribution channel throughout the United States. The primary costs of
operating the Company's herb business are those related to the network marketing
of its products.
The Company derives its net sales primarily from sales of dietary supplement
products through its independent distributors and sales of bulk raw materials.
The Company's growth in net sales historically has been a result of the
introduction of new products on an ongoing basis and the expansion of sales
through growth of its network marketing distributor base. A combination of new
product introductions, increases of existing product sales and increases in the
number of network marketing distributors contributed to the Company's net sales
growth during 1999. The Company believes that its future growth in net sales
will depend primarily on increases in the number of network marketing
distributors. The company is launching an internet presence for Direct Sales as
well as product support for Distributors. The Company's future results may also
be affected significantly by the success or failure of individual products or
product lines.
At the end of fiscal 1998, the Company invested in the opening of a 5,194 square
foot warehouse and headquarters facility. The facility is anticipated to improve
efficiency in warehousing and shipping of products, and management believes the
facility provides the flexibility to service its network marketing distributor
base more effectively and respond rapidly to increases in demand for products.
The Company has also developed a dedicated employee sales force of 12 employees
as of June 30, 1999.
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RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998
Operating Expenses. Operating Expenses totaled $1,738,827 for the year ended
June 30, 1999, an increase of 33.6% from $1,301,830 in the year ended June 30,
1998. As a percentage of sales, final operating expenses for the year ended June
30, 1999, were 68.3% as compared to 51.5% in the year ended June 30, 1998. The
increase in operating expenses during the current year were primarily
attributable to increased commissions to distributors, hiring of additional
personnel, the upgrade of the computer system, additional warehouse and office
space.
Revenues and Gross Profits. Revenue increased by .8% to $2,546,284 for year
ended June 30, 1999, compared to $2,526,828 for the year ended June 30, 1998.
Network Marketing Sales increased 50.4% to $1,783,145 for the year ended June
30, 1999, compared to $1,185,948 in the year ended June 30, 1998. The bulk sales
decreased for the year ended June 30, 1999. Gross profits increased 11.3% to
$1,607,023 for year ended June 30, 1999, from $1,444,156 for year ended June 30,
1998. The increased gross profits was attributable to increased network
marketing sales which products carry a higher gross margin. During fiscal 1998
there were 20,260 independent distributors of the Company's products and 25425
during fiscal 1999, an increase of 5165 distributors or 25.5%.
Income/Loss from Operations. The loss from operations was $131,804 for the year
ended June 30, 1999, as compared with income from operations of $142,326 in year
ended June 30, 1998. The net loss for year ended June 30, 1999, was $270,977
compared with net income of $95,323 in year ended June 30, 1998. The fiscal 1999
net loss contains an extraordinary item - write off of offering costs less
income tax benefit of $80,929 in the amount of $176,215.
Net cash used by investing activities was $104,130 in the year ended June 30,
1999, and $3,190 for the year ended June 30, 1998. The increase in net cash used
in investing activities in the year ended June 30, 1999, as compared to year
ended June 30, 1998, was due to, purchases associated with the upgrade of the
computer and internet system to facilitate the increased network marketing
activity.
Net cash provided by financing activities was $303,071 for the year ended June
30, 1999, and $187,854 for the year ended June 30, 1998. Net cash provided by
financing activities for the year ended June 30, 1999, consisted of proceeds
from additional paid in capital of $274,763 and long term borrowing of $154,885.
Net cash provided by financing activities in 1998 was comprised of borrowings
with $150,000 and $100,000 of additional paid in capital.
Liquidity and Capital Resources. At June 30, 1999, the Company had cash balances
totalling $27,147 and a working capital balance of $802,771. This compares to a
cash balance of $76,825 and working capital of $765,377 as of June 30, 1998.
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The Company's primary liquidity needs are to expand its network marketing
distribution base by upgrading sales tools, new product introductions, expanded
marketing services and increase the exposure in internet and direct response.
The net cash used by operating activities was $248,619 for the year ended June
30, 1999, and $125,993 for the year ended June 30, 1998. The decrease in net
cash provided by operating activities in 1999 compared to 1998 was primarily due
to higher inventory balances. The increase in inventory balance was due to
increased purchases in anticipation of growing network base and new product
introductions.
YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED JUNE 30, 1997
Revenues and Gross Profits. Revenues increased by 6.3% to $2,526,828 for the
year ended June 30, 1998, compared to $2,377,528 for the year ended June 30,
1997. The increase in sales was attributable to the increase of bulk sales in
the fourth quarter. Gross profits increased by 7.3% to $1,444,156 for the year
ended June 30, 1998, from $1,345,585 for the year ended June 30, 1997. The
increase in gross profits was attributable to increased sales and lower raw
material costs. During fiscal 1997, there were 18,093 independent distributors
of the Company's products and 20,260 during fiscal 1998, or an increase of 2,167
distributors.
Operating Expenses. Operating Expenses totaled $1,301,830 for the year ended
June 30, 1998, an increase of 7.2% from $1,214,061 for the year ended June 30,
1997. As a percentage of sales, the operating expenses for the year ended June
30, 1998, were 51.5% as compared to 51.5% for the year ended June 30, 1997. The
increase in operating expenses during the current year was primarily
attributable to the costs associated with additional employees and related
general and administrative expenses due to actual and anticipated increases in
sales.
Income from Operations. Income from operations increased to $142,329 for the
year ended June 30, 1998, a 7.3% increase from the $131,949 for the
corresponding period of the prior year. Net Income increased by 3.8% to $95,323
for the year ended June 30, 1998, compared to $91,791 for the year ended June
30, 1997. The increase in net income was attributable to an increase in gross
profits partially offset by an increase in general and administrative expenses,
due to the hiring of additional personnel.
Liquidity and Capital Resources. At June 30, 1998, the Company had cash balances
totaling $76,825 and a working capital balance of $765,377. This compares to a
cash balance of $18,154 and working capital of $639,790 as of June 30, 1997.
The Company's primary liquidity needs are to upgrade Associates' sales tools,
new product introductions, funding inventory purchases, marketing and expanding
its network marketing distributor base. Historically, the Company has funded its
operations through shareholder loans, bank borrowings, and the sale of common
stock.
Net cash used by operating activities was $125,993 for the year ended June 30,
1998, and provided by $36,047 for the year ended June 30, 1997. The decrease in
net cash provided by operating activities in 1998 compared to 1997 was primarily
due to higher levels of accounts receivable and inventory balances, and accounts
payable. The increase in inventory balances was due primarily to
29
<PAGE>
the purchase of larger quantities of raw materials in anticipation of increased
sales and the purchase of raw materials for new products in anticipation of new
product introductions scheduled for 1998. The increase in accounts receivable
was the result of increased sales by the Company during the fourth quarter of
1998 to bulk sales purchasers from whom accounts receivable are on average
outstanding for a longer period of time.
Net cash used by investing activities was $3,190 for the year ended June 30,
1998, and $621 for the year ended June 30, 1997. The increase in net cash used
in investing activities in the year ended June 30, 1998, as compared to the year
ended June 30, 1997, was due to purchases of property and equipment related to
the addition of new employees to the Company.
Net cash provided by (used in) financing activities was $187,854 for the year
ended June 30, 1998, and ($30,907) for the year ended June 30, 1997. Net cash
provided by financing activities for the year ended June 30, 1998, consisted of
borrowings of $150,000, and $100,000 of additional paid in capital, to finance
the expenses associated with this offering. Net cash provided by financing
activities in 1997 was comprised of net borrowings of $20,000 to finance
inventory purchases, $64,770 from additional paid in capital, and a ($7,395)
reduction of long term debt and a ($109,812) reduction of short term debt.
The Company's current Credit Facility consists of a $190,000 revolving line of
credit. As of June 30, 1998, the Company had outstanding borrowings of $150,000
under the Credit Facility. The amounts outstanding under the Credit Facility
bear interest at variable rates which are based upon the lender's base rate,
plus one and one-half percent. Furthermore, the Credit Facility contains various
conditions that would create a default. As of June 30, 1998, the Company was in
compliance with the covenants and restrictions in the Credit Facility. The
Credit Facility is collateralized by a lien on substantially all of the assets
of the Company, and a personal guaranty by the Company's President.
YEAR ENDED JUNE 30, 1997, COMPARED TO YEAR ENDED JUNE 30, 1996
Revenues and Gross Profits. Revenues increased by 12.2% to $2,377,528 for the
year ended June 30, 1997, compared to $2,118,514 for the year ended June 30,
1996. The increase in sales was attributable to an increase in the consumer and
distributor base. Gross profits increased by .9% to $1,345,518 for the year
ended June 30, l997, from $1,357,740 for the year ended June 30, 1996. The
increase in gross profits was attributable to an increase in sales during the
period which were partially offset by a reduction in gross margins. The
reduction in gross margins was attributable to higher raw material costs.
Operating Expenses. Operating expenses totaled $1,214,061 for the year ended
June 30, 1997, a decrease of 2.6% from $1,245,300 for the year ended June 30,
1996. The decrease in operating expenses during the current year was primarily
attributable to a decrease in general and administrative and depreciation
expenses.
Income from Operations. Income from operations increased to $131,797 for the
year ended June 30, 1997, a 17.2% increase from $112,440 for the year ended June
30, 1996. This increase was a result of lower operating expenses.
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<PAGE>
SEASONALITY
The Company believes that its business is characterized by mild seasonality in
the Fall months, which produce slightly more sales than the months during the
balance of the year. The Company does not believe that the impact of seasonality
on its results of operations is material.
IMPACT OF INFLATION
Historically inflation has not had a material effect on the Company's
operations. When the price of raw materials has increased, the costs have been
built into the pricing structure. Furthermore, the Company does not have either
long-term supply contracts or long-term contracts with customers. Prices are
quoted based on the prevailing prices for herbal products. Accordingly, the
Company does not believe inflation will have a material effect on its future
operations.
If inflation, in either the U.S. dollar or in other local currencies that the
Company may do business in, were to become a problem, the Company believes that
a) the forward exchange contracts the Company may enter into from time to time
may mitigate some, if not all, of the risks associated with trading in chaotic
instruments and, b) the entire industry would equally suffer and those factors
that would be detrimental to the industry as a whole would affect the economies
of the nations involved in general. There can be no assurance, however, that the
Company would be able to successfully insulate itself from the effects of
inflation if it were to pose a problem.
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar normal business activities.
The Company has completed an assessment and will have to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The total year 2000
project cost has not been estimated, but it is not expected to be material.
The Company believes that with modifications to existing software and
conversions to new software, the year 2000 issue will not pose significant
operational problems for its computer systems. If such modifications and
conversions are not made or are not completed timely, however, the year 2000
issue could have a material impact on the operations of the Company.
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DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
COMMON STOCK
GENERAL. The Company is authorized to issue 8,000,000 shares of Common
Stock, $.01 par value per share. At June 30, 1999, there were 2,803,316 shares
issued and outstanding. All shares of Common Stock outstanding are validly
issued, fully paid and non-assessable.
VOTING RIGHTS. Each share of Common Stock entitles the holder thereof
to one vote, either in person or by proxy, at meetings of shareholders. The
holders are not permitted to vote their shares cumulatively. Accordingly, the
holders of Common Stock holding, in the aggregate, more than fifty percent (50%)
of the total voting rights can elect all of the directors of the Company.
DIVIDEND POLICY. All shares of Common Stock are entitled to participate
ratably in dividends when and as declared by the Company's Board of directors
out of the funds legally available therefore and subject to the rights, if any,
of the holders of outstanding shares of preferred stock. Any such dividends may
be paid in cash, property or additional shares of Common Stock. The Company has
not paid any dividends since its inception and presently anticipates that all
earnings, if any, will be retained for development of the Company's business and
that no dividends on the shares of Common Stock will be declared in the
foreseeable future. Any future dividends will be subject to the discretion of
the Company's Board of Directors and will depend upon, among other things,
future earnings, the operating and financial condition of the Company, its
capital requirements, general business conditions and other pertinent facts.
Therefore, there can be no assurance that any dividends on the Common Stock will
be paid in the future.
MISCELLANEOUS RIGHTS AND PROVISIONS. Holders of Common Stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of the dissolution, whether voluntary or
involuntary, of the Company, each share of Common Stock is entitled to share
ratably in any assets available for distribution to holders of the equity of the
Company after satisfaction of all liabilities and payment of the applicable
liquidation preference of any outstanding shares of Preferred Stock.
CLASS A COMMON STOCK PURCHASE WARRANTS
GENERAL. Our warrants may be exercised at any time during the period
commencing 30 days after this offering and ending on the second anniversary date
of the date of this prospectus, the expiration date. Each redeemable warrant
entitles the holder to purchase one share of our common stock at an exercise
price during the nine month period after the date of this prospectus for $7.50
per share and $9.00 thereafter, subject to adjustment upon the occurrence of
certain events as provided in the warrant certificate and summarized below. A
warrant holder will not be deemed to be a holder of the underlying common stock
for any purpose until the warrant has been exercised. The warrants will expire
as of December, 2001.
SEPARATE TRANSFERABILITY. Our Class A Warrants are detachable and
separately transferable commencing on a date determined by the Company within 30
days of the effective date of this offering.
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REDEMPTION. We have the right, commencing six months after the date of
this prospectus, to redeem the Class A Warrants issued in the offering at a
redemption price of $.25 per warrant after providing 30 days' prior written
notice to the warrant holders, if the average closing bid price of the common
stock equals or exceeds $12.00 for ten consecutive trading days ending within 15
days prior to the date of the notice of redemption. We will send the written
notice of redemption by first class mail to warrant holders at their last known
addresses appearing on the registration records maintained by the transfer agent
for our warrants. No other form of notice or publication or otherwise will be
required. If we call the warrants for redemption, they will be exercisable until
the close of business on the business day next preceding the specified
redemption date or the right to exercise will lapse.
EXERCISE. A Class A Warrant holder may exercise our warrants only if an
appropriate registration statement is then in effect with the Securities and
Exchange Commission and if the shares of common stock underlying our Class A
Warrants are qualified for sale under the securities laws of the state in which
the holder resides.
Our Class A Warrants may be exercised by delivering to our transfer
agent the applicable warrant certificate on or prior to the expiration date or
the redemption date, as applicable, with the form on the reverse side of the
certificate executed as indicated, accompanied by payment of the full exercise
price for the number of warrants being exercised. Fractional shares of common
stock will not be issued upon exercise of our redeemable warrants.
ADJUSTMENTS OF EXERCISE PRICE. The exercise price is subject to
adjustment if we declare any stock dividend to stockholders, or effect any split
or share combination with respect to our Common Stock. Therefore, if we effect
any stock split or stock combination with respect to our common stock, the
exercise price in effect immediately prior to this stock split or combination
will be proportionately reduced or increased, as the case may be. Any adjustment
of the exercise price will also result in an adjustment of the number of shares
purchasable upon exercise of a warrant or, if we elect, an adjustment of the
number of warrants outstanding.
PREFERRED STOCK
The Company has the right to issue 2,000,000 shares of Preferred Stock.
This Preferred Stock may have such rights and preferences that are greater than
the Company's Common Stock. As of the date of this Prospectus, no Preferred
Stock has been issued. The board of directors is expressly authorized to adopt,
from time to time, a resolution or resolutions providing for the issue of
preferred stock in one or more series, to fix the number of shares in each
series and to fix the designations and the powers, preferences and relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions of such shares, of each such series.
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INDEMNIFICATION PROVISIONS OF FLORIDA LAW AND OF THE COMPANY'S ARTICLES OF
INCORPORATION AND BYLAWS
The Company's Articles of Incorporation and Bylaws require the Company to
indemnify its directors and officers to the fullest extent permitted by Florida
law. Florida law presently provides that in the case of a nonderivative action
(that is, an action other than by or in the right of a corporation to procure a
judgment in its own favor), a corporation has the power to indemnify any person
who was or is a party or is threatened to be made a party to any proceeding by
reason of the fact that the person is or was an agent of the corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with the proceeding that if that person acted
in good faith and in a manner the person reasonably believed to be the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe that the conduct of the person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent does not, of itself, create a
presumption that the person did not act in good faith and in a manner that the
person reasonably believed to be in the best interests of the corporation or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
With respect to derivative actions, Florida law provides that a corporation has
the power to indemnify any persons who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
the person is or was an agent of the corporation, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of the action if the person acted in good faith, in a manner the person believed
to be in the best interests of the corporation and its shareholders.
Indemnification is not permitted to be made in respect of any claim, issue, or
matter as to which the person shall have been adjudged to be liable to the
corporation in the performance of that person's duty to the corporation and its
shareholders, unless and only to the extent that the court in which the
proceeding is or was pending determines that, in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnify for
expenses, and then only to the extent that the court shall determine.
ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S AMENDED ARTICLES OF
INCORPORATION, THE EQUITY INCENTIVE PLAN, AND FLORIDA LAW
On November 30, 1999, the Board of Directors (the "Board") of Amazon
Herb Company (the "Company") declared a dividend of one purchase warrant (a
"warrant") for every outstanding share of the Company's Common Stock, $.01 par
value (the "Common Stock"). The Warrants will be distributed on January 31,
2000, to stockholders of record as of the close of business on that date (the
"Dividend Record Date"). The terms of the Warrants are set forth in the Warrants
Agreement dated as of November 30, 1999, (the "Warrants Agreement") between the
Company and Equiserve, as Warrants Agent (the "Warrants Agent"). The Warrants
Agreement provides for the issuance of one Warrant for every share of Common
Stock issued and outstanding on the Dividend Record Date and for each share of
Common Stock which is issued or sold after that date and prior to the
"Distribution Date" (as defined below).
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Each Warrant entitles the holder to purchase from the Company one share
of Common Stock at a price of $.10 per share, subject to adjustment. The
Warrants will expire on December 30, 2009 (the "Expiration Date"), or the
earlier redemption of the Warrants, and are not exercisable until the
Distribution Date.
No separate Warrants certificates will be issued at the present time.
Until the Distribution Date (or earlier redemption or expiration of the
Warrants), (i) the Warrants will be evidenced by the Common Stock certificates
and will be transferred with and only with such Common Stock certificates, (ii)
new Common Stock certificates issued after the Dividend Record Date upon
transfer or new issuance of the Company's Common Stock will contain a notation
incorporating the Warrants Agreement by reference and (iii) the surrender for
transfer of any of the Company's Common Stock certificates will also constitute
the transfer of the Warrants associated with the Common Stock represented by
such certificate.
The Warrants will separate from the Common Stock and Warrants
certificates will be issued on the Distribution Date. Unless otherwise
determined by a majority of the Board then in office, the Distribution Date will
occur on the earlier of (i) the tenth business day following the later of the
date of a public announcement that a person, including affiliates or associates
of such person (an "Acquiring Person"), except as described below, has acquired
or obtained the Warrant to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock or the date on which an executive officer of
the Company has actual knowledge that an Acquiring Person became such (the
"Stock Acquisition Date") or (ii) the tenth business day following commencement
of a tender offer or exchange offer that would result in any person together
with its affiliates and associates owning 15% or more of the Company's
outstanding Common Stock. In any event, the Board of Directors may delay the
distribution of the certificates. After the Distribution Date, separate
certificates evidencing the Warrants ("Warrant Certificates") will be mailed to
holders of record of the Company's Common Stock as of the close of business on
the Distribution Date and such separate Warrants Certificates alone will
evidence the Warrants.
If, at any time after January 31, 2000, any person or group of
affiliated or associated persons (other than the Company and its affiliates)
shall become an Acquiring Person, each holder of a Warrant will have the Warrant
to receive shares of the Company's Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a market value of one
hundred times the exercise price of the Warrant. Also, in the event that after
the Stock Acquisition Date the Company was acquired in a merger or other
business combination, or more than 25% of its assets or earning power was sold,
each holder of a Warrant would have the Warrant to exercise such Warrant and
thereby receive common stock of the acquiring company with a market value of one
hundred times the exercise price of the Warrant. Following the occurrence of any
of the events described in this paragraph, any Warrants that are, or (under
certain circumstances specified in the Warrants Agreement) were, beneficially
owned by any Acquiring Person shall immediately become null and void.
The Board may, at its option, at any time after any person becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Warrants for shares of Common
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Stock at an exchange ratio of one share of Common Stock per Warrant,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after November 30, 1999 (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). The Board, however, may not
effect an exchange at any time after any person (other than (i) the Company,
(ii) any subsidiary of the Company, (iii) any employee benefit plan of the
Company or any subsidiary of the Company or (iv) any entity holding Common Stock
for or pursuant to the terms of any such plan), together with all affiliates of
such person, becomes the beneficial owner of 50% or more of the Common Stock
then outstanding. Immediately upon the action of the Board ordering the exchange
of any Warrants and without any further action and without any notice, the
Warrant to exercise such Warrants will terminate and the only Warrant thereafter
of a holder of such Warrants will be to receive that number of shares of Common
Stock equal to the number of such Warrants held by the holder multiplied by the
Exchange Ratio.
The exercise price of the Warrants, and the number of shares of Common
Stock or other securities or property issuable upon exercise of the Warrants are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Common Stock, (ii) upon the grant to holders of the Common Stock of certain
Warrants or warrants to subscribe for shares of the Common Stock or convertible
securities at less than the current market price of the Common Stock or (iii)
upon the distribution to holders of the Common Stock of evidences of
indebtedness or assets (excluding cash dividends paid out of the earnings or
retained earnings of the Company and certain other distributions) or of
subscription Warrants or Class A Warrants (other than those referred to above).
At any time prior to the earlier of the Distribution Date or the Close
of Business on the Expiration Date, the Company, by a majority vote of the Board
then in office, may redeem the Warrants at a redemption price of $.01 per
Warrant (the "Redemption Price"), as described in the Warrants Agreement.
Immediately upon the action of the Board electing to redeem the Warrants, the
Warrant to exercise the Warrants will terminate and the only right of the
holders of Warrants will be to receive the Redemption Price.
Until a Warrant is exercised, the holder thereof, as such, will have no
Warrants as a stockholder of the Company, including, without limitation, the
Warrant to vote or to receive dividends.
The Warrants Agreement may be amended by the Board at any time prior to
the Distribution Date without the approval of the holders of the Warrants. From
and after the Distribution Date, the Warrants Agreement may be amended by the
Board without the approval of the holders of the Warrants in order to cure any
ambiguity, to correct any defective or inconsistent provisions, to change any
time period for redemption or any other time period under the Warrants Agreement
or to make any other changes that do not adversely affect the interests of the
holders of the Warrants (other than any Acquiring Person or its affiliates and
associates, or their transferees).
The form of Warrants Agreement dated as of November 30, 1999, between
the Company and Boston Equiserve Limited Partnership, as Warrants Agent,
specifying the terms of the
36
<PAGE>
Warrants (including as exhibits the form of the Warrants Certificate and the
Summary of Warrants) is attached hereto as an exhibit. The foregoing description
of the Warrants does not purport to be complete and is qualified in its entirety
by reference to the Warrants Agreement, which is incorporated herein by
reference.
The Board of Directors, at its discretion, may issue an identical
warrants to those shareholders who acquire the stock that is being registered
in this prospectus. At this time, the Board has not elected to do so.
The Company's Board of Directors, without stockholder approval, has the
authority under the company's Amended Articles of Incorporation to issue, at the
Board of Directors' discretion, series of preferred shares with such rights,
limitations and preferences as may be determined at the time of issuance.
Additionally, the company's Equity Incentive Plan allows for all options and
awards in the company's equity to vest upon a "change of control" as defined by
the plan.
The laws of the State of Florida, where the company's principal
executive offices are located, impose restrictions on certain transactions
between certain foreign corporations and significant stockholders. Florida
Statutes 607.0901 to 607.0903 is an "affiliated transaction" statute which
prevents certain hostile and coercive merger devices. An affiliated transaction
is a significant transaction (e.g., merger, a sale of more than 5% of the
assets, issuance of an additional 5% of stock, or dissolution) with a
shareholder who owns more than 10% of the outstanding stock of a company. In
addition to any approval required by law, the company charter, or by the
interests given to either bondholders to stockholders by operation of an
agreement, an affiliated transaction must also be approved by either a majority
of the corporation's disinterested directors, or two thirds of the remaining
disinterested shareholders. There are three exceptions to this rule. First, the
affiliated transaction statute can be avoided if the minimum price paid to the
shareholders is at least equal to the highest price paid by an interested
shareholder in the past two years. Second, if the interested shareholder has
owned more than 80% of the corporation's outstanding shares for at least five
years before the affiliated transaction occurs, the statute does not apply.
Third, the statute would not apply if the interested shareholder owned more than
90% of the outstanding shares when the affiliated transaction occurs.
Additionally, a corporation may elect to opt out of the statute; the Company has
not yet chosen this option.
EXCHANGE AND NASDAQ LISTING
The Company plans on applying for a listing on the NASDAQ system
immediately upon completion of this offering. In the meantime, the Company has
made an initial application for listing on the Chicago Exchange.
LEGAL MATTERS
The legality of the Common Stock being offered hereby will be passed
upon for the Company by Hackney & Miller, P.A., Admiralty Office Tower Two, 4400
PGA Boulevard, Suite 505, Palm Beach Gardens, FL 33410.
37
<PAGE>
EXPERTS
The Financial Statements of the Company for the July 1, 1996, to June 30, 1997;
July 1, 1997, to June 30, 1998; and July 1, 1998, to June 30, 1999, for the
period ended therein, have been included in this Prospectus in reliance upon the
report appearing elsewhere herein, of Bernard J. Donth, C.P.A. independent
certified public accountants, and upon the authority of said independent
certified public accountants as experts in accounting and auditing.
TRANSFER AGENT
Equiserve Limited Partnership, Shareholder Services, 620 Herndon Parkway, Suite
200, Herndon, Virginia 22070, has been appointed the transfer agent of the
Company's Common Stock and warrants.
38
<PAGE>
MANAGEMENT
The following table sets forth certain information regarding the
directors and executive officers of the Company.
NAME AGE POSITION
---- --- --------
OFFICERS
- --------
John H. Easterling 47 President, Chief Executive Officer
Michael J. Perry 45 Vice-President, Chief Financial Officer
Mark Lowery 45 Secretary/Treasurer
Terry Benzia 37 Vice President of Marketing
Elaine O'Dell 42 Vice-President - Bulk Sales and Marketing
DIRECTORS
- ---------
Ted Nicholas 65 Director
Robert Butwin 47 Director
John H. Easterling 47 Director
Michael J. Perry 45 Director
TERMS OF OFFICE
The directors of the Company hold office until the next annual meeting of
stockholders of the Company or until their successors are elected and duly
qualified. All officers serve at the discretion of the directors.
BUSINESS EXPERIENCE
JOHN H. EASTERLING has served as President, Chief Executive Officer and Director
since the Company's founding in 1990. Mr. Easterling obtained his Bachelor of
Arts degree in Environmental Studies from the University of North Carolina in
1976. He is a frequent speaker and presenter on health, rainforest and
environmental business issues.
39
<PAGE>
MICHAEL J. PERRY has served as Vice-President, CFO and Director since 1992. Mr.
Perry obtained his BA degree from Georgia State University in 1982, and his
Master in Business Administration from the same university in 1985. He served as
the Chief Executive Officer of Aloes International, a company engaged in direct
sales of national Health Products from 1997 to 1999.
TERRY BENZIA has served as Vice-President of Marketing of the Company since
March, 1999. Prior to joining the Amazon Herb Company, Ms. Benzia was in
management with several major advertising agencies developing national
advertising and marketing programs for companies such as Toyota Motor
Corporation, Walt Disney Corporation, British Airways and Rexall/Sundown. Ms.
Benzia has also served as a Senior Creative Director and has won numerous awards
in the advertising/marketing/direct marketing industries for her creative work.
In 1994, Ms. Benzia completed her Executive Masters Program at the University of
Southern California (USC) where she was also a consultant and guest lecturer.
ELAINE O'DELL has served as Vice-President - Bulk Sales of the Company since
November, 1995. From January, 1993, until September, 1995, Ms. O'Dell was a
Territory Sales Manager for Galaxy Carpet Mills of Chatsworth, Georgia.
MARK LOWERY joined the Company in 1999 as Secretary and Treasurer. He has
previously served as Office Manager for BLK Textiles, Tunnel Hill, Georgia, from
September 1998 to January 1999. He served as Manager of Information Systems in
Dalton, Georgia from November 1995 to August 1998. He obtained his Bachelors
degree in Business Administration at the University of Georgia.
ROBERT BUTWIN has served as a Director of the Company since May, 1998. From May,
1995, until the present, Mr. Butwin has served a Director of Class Development,
Inc., which markets information products in the field of personal development
and also presents marketing and networking seminars. From May, 1995, until the
present, Mr. Butwin has served a Director of Royal Living, Inc., which provides
personal coaching services. From June, 1990, until November, 1996, Mr. Butwin
served a Director of Results by Design, Inc., a company offering personal
development training. He was twice named Distributor of the Year by the
Multi-Level Marketing International Association, the industry's professional
organization. He has been a contributing editor for the professional trade
journal UPLINE and has a monthly column in Money Makers Monthly, an MLM
magazine. Mr. Butwin is the author of a recently published book, STREET SMART
NETWORKING.
TED NICHOLAS has served as a Director of the Company since May, 1998. Mr.
Nicholas has been the President of Nicholas Direct, Inc. since 1991, which
markets his books, audio and video tapes, newsletter, seminars and other
information products. He is the author of fourteen books relating to direct
marketing, entrepreneurship, and business subjects. Mr. Nicholas consults with
clients regarding marketing and self-publishing.
EXECUTIVE COMPENSATION.
The following table sets forth information as to the compensation paid or
accrued to the President of the Company for the three years ended June 30, 1999.
No other officer or director received compensation of at least $100,000 during
that time period.
40
<PAGE>
ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ENDED SALARY
- --------------------------- ---------- ------
John H. Easterling June, 1999 $ 9,125
President, and Director June, 1998 $109,346
June, 1997 $ 59,118
41
<PAGE>
DIRECTORS COMPENSATION
No Compensation has been paid to any directors for service in such capacity in
the past, and no such compensation is presently payable to directors, but
directors may be reimbursed for certain expenses in connection with attendance
at Board and committee meetings. At such time as the Board of Directors deems
appropriate, the Company intends to adopt an appropriate policy to compensate
non-employee directors, in order to attract and retain the services of qualified
non-employee directors.
NUTRITIONAL ADVISORY BOARD MEMBERS
The Company has created a Nutritional Advisory Board. The Board consists of
Gabriel Cousins, M.D., author and physician, Jack Hinze, N. D., a Pharmacist,
and homeopathic teacher, Eric Innes, D.C., a Chiropractic physician, James
Hawver, N.D., and Donna Schwontkowski, D. C., an author and master nutritionist.
The purpose of the medical advisory board is to keep the Company informed as to
developments in the nutritional field. None of the members are compensated for
serving on the board. Donna Schwontkowski receives reimbursement and a small
stipend from the Company for various research activities.
1998 STOCK OPTION PLAN
The Company's 1998 Stock Option Plan (the "1998 Option Plan") was adopted by the
Board of Directors and a majority of the shareholders of the Company on May 1,
1998. A total of 1,000,000 shares of Common Stock are reserved for issuance
under the 1998 Option Plan. The 1998 Option Plan provides for the granting to
participants (including officers, advisors, consultants and directors) of
nonstatutory stock options. The 1998 Option Plan may be administered by the
Board of Directors or a committee of the Board of Directors (the
"Administrator"), which committee shall satisfy the applicable requirements of
Section 16 of the Exchange Act and the Code. The Administrator determines the
terms of options granted under the 1998 Option Plan, including the number of
shares subject to the option, exercise price, term and the rate at which the
options become exercisable. The exercise price of all stock options granted
under the 1998 Option Plan must be at least equal to the fair market value of
the Common Stock of the Company on the date of grant.
The term of all options may not exceed ten years. If not terminated earlier, the
1998 Option Plan will terminate on May 1, 2008.
The Administrator has the authority to amend, and the Board has the authority to
terminate the 1998 Option Plan as long as such action does not adversely affect
any outstanding options.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of the date of
this Prospectus, regarding ownership of the Company's Common Stock (i) by each
person known by the Company to be the beneficial owner of more than 5% of the
Company's outstanding Common Stock, (ii) by each director of the Company, (iii)
by certain related stockholders, and (iv) by all executive officers and
directors of the Company as a group. All persons named have sole voting and
investment power with respect to such shares, subject to community property
laws, and except as otherwise noted.
PERCENT BENEFICIALLY
OWNED
----------------------
NUMBER OF BEFORE POST
NAME OF SHAREHOLDER (1) SHARES OWNED OFFERING OFFERING
- ----------------------- ------------ -------- --------
John H. Easterling (2) 1,700,000 62.2% 22%
1002 Jupiter Park Lane
Jupiter, Florida 33458
Michael J. Perry 150,000 5.5% 1.9%
1002 Jupiter Park Lane
Jupiter, Florida 33458
Barbara Ann Doan 140,000 5.1% 1.8%
6430 Vernon Woods
Atlanta, Georgia 30328
Elaine O'Dell 40,400 1.5% .5%
1002 Jupiter park Lane
Jupiter, Florida 33458
Robert S. Kaufman 390,000(3) 14.3% 5%
121 South Beverly Blvd.
Beverly Hills, CA 90212
All officers and directors a group
(5) persons 1,850,800 83.6% 31.2%
- ---------------------
* Less than 1%
(1) See table under "Management of the Company" for offices and directorships
held by the persons listed hereunder.
(2) Includes 1,580,000 owned by Evergreen Natural Success Group, Ltd., who is
owned by Evergreen Natural Trust, the sole beneficiary is John Easterling.
(3) Includes shares owned by Mr. Kaufman's IRA.
43
<PAGE>
OPTIONS GRANTED TO DIRECTORS AND MANAGEMENT
NAME OPTIONS DATE GRANTED EXERCISE PRICE
- ---- ------- ------------ --------------
Ted Nicholas (1) 100,000 shares 11-21-98 $5.50
Ted Nicholas (1) 50,000 shares 11-21-98 Market Price
Robert Butwin (2) 100,000 shares 11-21-98 $5.50
Robert Butwin (2) 50,000 shares 11-21-98 Market Price
Mark Lowery (3) 50,000 shares 10-8-99 $4.00
Mark Lowery (3) 20,000 shares 6-15-99 $4.00
Elaine O'Dell (3) 20,000 shares 10-8-99 $4.00
Elaine O'Dell (3) 20,000 shares 6-15-99 $4.00
Terry Benzia (3) 20,000 shares 6-15-99 $4.00
Terry Benzia (3) 20,000 shares 10-8-99 $4.00
(1) All options for Mr. Nicholas are owned by Media Consulting, Inc., an
entity of which Mr. Nicholas is related but disclaims beneficial
ownership.
(2) All options for Mr. Butwin are owned by Success Strategies, Inc., an
entity of which Mr. Butwin through his spouse is related but disclaims
beneficial ownership.
(3) All options are granted from the 1998 Stock Option Plan, and are
governed by the terms therein.
44
<PAGE>
INDEX TO
FINANCIAL STATEMENTS
Auditor's Report ..................................................... F-2
Assets ............................................................... F-3
Liabilities and Stockholder's Equity ................................. F-4
Statement of Cash Flow ............................................... F-5
Notes ................................................................ F-6
Assets ............................................................... F-11
Liabilities and Stockholder's Equity ................................. F-12
Statement of Income and Retained Earnings ............................ F-13
Statement of Cash Flows .............................................. F-16
Notes ................................................................ F-18
F-1
<PAGE>
BERNARD J. DONTH LETTERHEAD
To the Board of Directors and Stockholders of Amazon Herb Company Jupiter,
Florida
We have audited the accompanying balance sheet of Amazon Herb company (a Florida
Corporation) as of June 30, 1999, and the related statements of income, retained
earnings, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amazon Herb Company as of June
30, 1999, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Bernard J. Donth
September 18, 1999
F-2
<PAGE>
AMAZON HERB COMPANY
BALANCE SHEET
JUNE 30, 1999
ASSETS
Current Assets:
Cash $ 27,147
Accounts receivable - trade 94,967
Inventory 1,131,865
Prepaid expenses 1,241
Other receivable 4,155
Income taxes receivable 97,566
Deferred income tax benefit 45,928
----------
Total current assets $1,402,869
----------
Property and Equipment 170,669
Less accumulated depreciation (76,218)
----------
94,451
----------
Other Assets:
Deposits 25,036
----------
Total Assets $1,522,356
==========
F-3
<PAGE>
AMAZON HERB COMPANY
BALANCE SHEET
JUNE 30, 1999
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 373,285
Accrued expenses 305
Line of credit 190,000
Current maturities of long-term debt 11,481
Customer deposits 27
Shareholder loan payable 25,000
-----------
Total current liabiliti 600,098
-----------
Long-term debt, less current maturities 74,544
-----------
Stockholder's equity:
Common stock, $.01 par value, 8,000,000
shares authorized, 2,803,316 shares 28,033
Preferred stock, $1.00 par value, 2,000,000 shares
Authorized, 0 shares issued and outstanding - 0 -
Additional paid-in capital 852,531
Accumulated deficit (32,850)
-----------
Total stockholder's equity 847,714
-----------
Total liabilities & Stockholder's equity $ 1,522,356
===========
The accompanying notes and independent auditor's report
should be read with this financial statement
F-4
<PAGE>
AMAZON HERB COMPANY
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED
JUNE 30, 1999
Cash flows from operating activities
Net loss before extraordinary item $ (94,762)
Adjustments to reconcile net income to net cash
Used by operations
Depreciation (including capitalized amounts) 11,192
(Increase) decrease in:
Accounts receivable (net) 181,155
Inventory (412,198)
Prepaid expenses 8,849
Other receivables (4,155)
Deposits (3,792)
Income taxes receivable (97,566)
Deferred income tax benefit (45,928)
Increase (decrease) in:
Accounts payable 217,954
Accrued expenses (2,392)
Current income taxes payable (6,782)
Customer deposits (194)
---------
Net cash used by operating activities $(248,619)
---------
Cash flows from investing activities
Purchases of property and equipment (104,130)
---------
Net cash used by investing activities (104,130)
---------
Cash flows from financing activities
Extraordinary item - Disbursements for offering costs
(Net of tax benefit) (121,122)
Proceeds from additional paid-in capital 274,763
Proceeds from sale of common stock 701
Net borrowings:
Long-term 74,544
Short-term 80,341
Debt-reduction:
Long-term -0-
Short-term (6,156)
Net cash provided by financing activities 303,071
---------
Net decrease in cash (49,678)
Cash at beginning of year 76,825
---------
Cash at end of year 27,147
=========
F-5
<PAGE>
AMAZON HERB COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS ACTIVITY
The Company imports, processes and sells herbs and herbal extracts. They also
operate a network marketing business to assist in these sales.
BASIS OF ACCOUNTING
The Company uses the accrual basis of accounting for financial statement and
income tax reporting purposes. Revenues are recognized and billed when sales are
ordered and shipped.
INVENTORY
Inventory is stated at the lower of cost or market. Cost is determined by the
first-in, first-out method, and market represents the lower of replacement cost
or estimated net realizable value.
DEPRECIATION
Property and equipment are stated at cost. Depreciation is computed under the
modified accelerated cost recovery system. Use of the modified accelerated cost
recovery system approximates generally accepted accounting principles. No
material variance is produced between the use of this method.
CASH
The company considers all short term investments with an original maturity of
three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
F-6
<PAGE>
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issues Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128") which
is effective for interim and annual financial statements for periods ending
after December 15, 1997. Under FAS 128, basic and diluted earnings per share are
to be presented.
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares.
2. ACCOUNTS RECEIVABLE:
Management considers all accounts receivable to be collectible. Thus, no
allowance for uncollectibles has been established in these financial statements.
3. INVENTORY:
The inventory at June 30, 1999, consisted of the following:
Raw materials $ 968,312
Finished products 163,553
----------
$1,131,865
==========
4. PROPERTY AND EQUIPMENT:
Property and Equipment consists of the following:
Furniture and fixtures $ 2,043
Equipment 165,363
Leasehold improvements 3,263
----------
$ 170,669
==========
5. LONG-TERM DEBT:
Long-term debt at June 30, 1999, consists of the following:
Note payable to vendor, secured by equipment,
payable in monthly installments of $466,
including interest at 12.502% $ 1,368
F-7
<PAGE>
Note payable to leasing company, secured
by equipment, payable in monthly
installments of $1,810, including interest
at 10.26% 84,657
--------
86,025
Less current maturities 11,481
--------
$ 74,544
========
Annual requirements to amortize long-term debt are as follows:
Year Ended June 30
2000 $11,481
2001 14,748
2002 16,333
2003 18,090
2004 20,036
Thereafter 5,337
-------
$86,025
=======
6. STOCKHOLDERS' EQUITY:
During the year the company offered a Private Placement of stock. As part of
this Private Placement, units were sold. Each unit consisted of two shares of
stock and one warrant. The stock was sold at $4.00 a share with the warrant
giving the stockholder the right to purchase stock at $6.00 a share. These
warrants expire three years from the date of issuance.
As a result of this Private Placement, 67,616 shares of stock were issued during
the year, which increased Stockholders' Equity $270,464.
Separately, a stockholder exercised stock options acquiring 2,500 shares of
stock at $2.00 per share thus increasing Stockholders' Equity $5,000.
7. EXTRAORDINARY ITEM:
The company withdrew the registration statement it had filed during the year
with the Securities and Exchange Commission for issuing publicly traded stock.
As part of that registration the company incurred offering costs of $257,144. As
a result of the withdrawal these costs are being expensed during this year.
F-8
<PAGE>
8. LEASING ARRANGEMENTS:
The Company has a lease for its office and storage facility under a two-year
lease. The lease began July 15, 1998, and expires July 14, 2000. The monthly
rent including sales tax on this lease is $4,455. The following is a schedule of
future rental payments as of June 30, 1999.
YEAR ENDED JUNE 30
2000 $53,460
=======
9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
INTEREST AND INCOME TAXES PAID
Cash paid for interest and income taxes during the year ended June 30, 1999 were
as follows:
Interest $30,305
=======
Income Taxes $ 6,782
=======
10. FINANCIAL INSTRUMENTS:
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and trade accounts
receivables. The Company places its temporary cash investments with financial
institutions and limits the amount of credit exposure to any one financial
institution. Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the Company's customer
base and their dispersion across different geographic areas. As of June 30,
1999, the Company had no significant concentrations of credit risk.
11. INCOME TAXES:
The Company has an income tax loss carryforward totaling $107,416 that may be
offset against future taxable income. If not used, the carryforward will expire
June 30, 2019.
F-9
<PAGE>
12. EARNINGS PER SHARE.
FOR THE YEAR ENDED JUNE 30, 1999
--------------------------------
LOSS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Basic EPS:
Loss available to
common stockholders $(270,977) $2,803,316 $ (.097)
========= ========== =======
Diluted EPS:
Loss available to
common stockholders
& assumed conversions $(270,977) $2,850,816 $ (.095)
========= ========== =======
F-10
<PAGE>
AMAZON HERB COMPANY
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
(unaudited)
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash 27,147 76,825 18,154 13,635 57,229
Accounts receivable - trade 94,967 276,122 169,394 81,379 40,271
Other receivables 4,155 -0- 20,674 56,777 64,683
Inventory 1,131,865 719,667 594,368 755,313 192,339
Prepaid expenses 1,241 10,090 1,140 1,378 299
Income taxes receivable 97,566 -0- -0- -0- -0-
Deferred income tax benefit 45,928 -0- -0- -0- -0-
----------- ----------- ----------- ----------- -----------
Total current assets 1,402,869 1,082,704 803,730 908,482 354,821
----------- ----------- ----------- ----------- -----------
Property and equipment 170,669 79,714 95,442 95,587 86,541
Less accumulated depreciation (76,218) (78,201) (90,749) (85,327) (67,343)
----------- ----------- ----------- ----------- -----------
94,451 1,513 4,693 10,260 19,198
----------- ----------- ----------- ----------- -----------
Other Assets:
Deposits 25,036 21,244 4,607 4,607 4,383
Start up costs 0 0 1,110 2,320 4,232
----------- ----------- ----------- ----------- -----------
Net of accumulated
amortization) 25,036 21,244 5,717 6,927 8,615
----------- ----------- ----------- ----------- -----------
Total Assets $ 1,522,356 $ 1,105,461 $ 814,140 $ 925,669 $ 382,634
=========== =========== =========== =========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Current Liabilities:
Accounts payable 373,285 155,331 110,288 159,315 45,793
Accrued expenses 305 2,697 6,441 21,512 17,620
Current income taxes payable -0- 6,782 40,158 37,537 -0-
Line of credit 190,000 150,000 -0- -0- -0-
Current maturities of
Long-term debt 11,481 2,296 7,053 96,865 30,997
Customer deposits 27 221 -0- -0- -0-
Loans from stockhholder 25,000 -0- -0- 110,936 -0-
----------- ----------- ----------- ----------- -----------
Total current liabilities 600,098 317,327 163,940 426,165 94,410
----------- ----------- ----------- ----------- -----------
Long-term debt, less current
maturities 74,544 -0- 2,296 9,691 49,909
----------- ----------- ----------- ----------- -----------
F-11
<PAGE>
LIABILITIES AND STOCKHOLDER'S EQUITY (CONT'D)
Stockholder's Equity:
Common Stock, $01. par value 28,033 27,332 68,330 66,800 61,100
Preferred Stock, $1.00 par value -0- -0- -0- -0- -0-
Additional paid-in capital 852,531 577,768 436,770 372,000 209,300
Offering costs -0- (55,093) -0- -0- -0-
Retained earnings (32,850) 238,127 142,804 51,013 (32,085)
----------- ----------- ----------- ----------- -----------
Total Stockholder's Equity 847,714 788,134 647,904 489,813 238,315
----------- ----------- ----------- ----------- -----------
Total Liabilities & Stockholder's
Equity $ 1,522,356 $ 1,105,461 $ 814,140 $ 925,669 $ 382,634
=========== =========== =========== =========== ===========
</TABLE>
F-12
<PAGE>
AMAZON HERB COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED JUNE 30, 1999, 1998, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Sales $ 2,546,284 $ 2,526,828 $ 2,377,528 $ 2,118,514 $ 1,291,422
Cost of sales 939,261 $ 1,082,672 $ 1,031,670 $ 760,774 281,089
Gross Profit 1,607,023 $ 1,444,156 $ 1,345,858 $ 1,357,740 1,010,333
Expenses:
General and administrative 1,697,330 $ 1,291,300 $ 1,192,135 $ 1,203,972 958,406
Interest 30,305 3,050 14,528 14,733 16,165
Depreciation and Amortization 11,192 7,480 7,398 26,595 28,634
Income (Loss) from Operations (131,804) 142,326 131,797 112,440 7,128
Other Income:
Interest/Miscellaneous 42 3 152 8,196 87,991
Net income (loss) before taxes (131,762) 142,329 131,949 120,636 95,119
(Income Taxes)Benefit 37,000 (47,006) (40,158) (37,537) -0-
Write-off of offering costs (176,215) -0- -0- -0- -0-
Net Income (Loss) (270,977) 95,323 91,791 83,099 95,119
Retained earnings - beginning of year 238,127 142,804 51,013 (32,086) (127,205)
Retained earnings - end of year (32,850) 238,127 142,804 51,013 (32,085)
Earnings per common share (.097) .0349 .0336 -0- -0-
Earning per common share-
assuming dilution (.095) .0342 .0330 -0- -0-
</TABLE>
F-13
<PAGE>
AMAZON HERB COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED JUNE 30, 1999, JUNE 30, 1998, AND JUNE 30, 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON COMMON PAID-IN OFFERING RETAINED
SHARES STOCK CAPITAL COSTS EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1996 6,680,000 $ 66,800 $372,000 -0- $ 51,013 $ 489,813
Affect on capital structure
Issuance of stock 153,000 1,530 64,770 -0- -0- 66,300
Net Income -0- -0- -0- -0- 91,791 91,791
Balances, June 30, 1997 6,833,000 $ 68,330 $436,770 -0- $ 142,804 $ 647,904
Affect on capital structure:
1 for 2.5 reverse stock split (4,099,800) (40,998) 40,998 -0- -0- -0-
Issuance of stock options -0- -0- 100,000 -0- -0- 100,000
Offering expenses paid -0- -0- -0- (55,093) -0- (55,093)
Net income -0- -0- -0- -0- 95,323 95,323
----------- -------- -------- -------- --------- ---------
Balances, June 30, 1998 2,733,200 $ 27,332 $577,768 $(55,093) $ 238,127 $ 788,134
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL
COMMON COMMON PAID-IN OFFERING RETAINED
SHARES STOCK CAPITAL COSTS EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1998 2,733,200 $ 27,332 $577,768 $(55,093) $ 238,127 $ 788,134
Affect on capital structure:
Issuance of stock 70,116 701 274,763 -0- -0- 275,464
Offering expenses expired -0- -0- -0- 55,093 -0- 55,093
Net Loss -0- -0- -0- -0- (270,977) (270,977)
----------- -------- -------- -------- --------- ---------
Balances, June 30, 1999 2,803,316 $ 28,033 $852,531 $ -0- $ (32,850) $ 847,714
=========== ======== ======== ======== ========= =========
</TABLE>
F-15
<PAGE>
AMAZON HERB COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999, JUNE 30, 1998, JUNE 30, 1997, AND
JUNE 30, 1996
<TABLE>
<CAPTION>
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income/net loss before
extraordinary items $ (94,762) $ 95,323 $ 91,791 $ 83,099
Adjustments to reconcile net income to
Net cash used by operations
Depreciation (including capitalized
amounts) 11,192 7,480 7,398 26,595
(Increase) decrease in:
Accounts receivable (net) 181,155 (106,728) (88,015) (41,108)
Inventory 412,198) (125,299) 160,945 562,974)
Prepaid expenses 8,849 (8,950) 238 (1,079)
Other receivables (4,155) 20,674 36,103 7,906
Deposits (3,792) (16,637) -0- (224)
Income taxes receivable (97,566) -0- -0- -0-
Deferred income tax benefit (45,928) -0- -0- -0-
Increase (decrease) in:
Accounts payable 217,954 45,043 (49,027) 113,524
Accrued expenses (2,392) (3,744) (15,071) 3,892
Customer Deposits (194) 221 -0- -0-
Loans from stockholder -0- -0- (110,936) 110,936
Current income taxes payable (6,782) (33,376) 2,621 37,537
--------- --------- --------- ---------
Net cash provided (used) by
operating activities (248,619) (125,993) 36,047 (221,896)
--------- --------- --------- ---------
Cash flows from investing activities
Purchases of property & equipment (104,130) (3,477) (621) (17,637)
Disposition of property & equipment -0- 287 -0- 1,889
--------- --------- --------- ---------
Net cash used by
Investing activities (104,130) (3,190) (621) 15,748)
--------- --------- --------- ---------
Cash flows from financing activities
Extraordinary item - Disbursements (121,121) 0 0 0
Disbursements
for offering costs 0 (55,093) 0 0
Proceeds from issuance of common stock 701 -0- 1,530 4,780
Proceeds from additional paid-in capital 274,763 100,000 64,770 163,620
New borrowings:
Long-term 74,544 -0- -0- 6,528
Short-term 80,341 150,000 0,000 93,000
Debt reduction:
Long-term -0- (7,053) (7,395) (294)
Short-term (6,156) -0- (109,812) (73,583)
--------- --------- --------- ---------
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Net cash provided (used) by
financing activities 303,071 187,854 (30,907) 194,051
--------- --------- --------- ---------
Net increase (decrease) in cash (49,678) 58,671 4,519 (43,593)
Cash at beginning of year 76,825 18,154 13,635 57,228
--------- --------- --------- ---------
Cash at end of year 27,147 76,825 18,154 13,635
========= ========= ========= =========
</TABLE>
F-17
<PAGE>
AMAZON HERB COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998, JUNE 30, 1997 AND JUNE 30, 1996
1. Summary of Significant Accounting Policies:
Business Activity
The Company imports, processes and sells herbs and herbal extracts.
They also operate a network marketing business to assist in these sales.
BASIS OF ACCOUNTING
The Company uses the accrual basis of accounting for financial
statements and income tax reporting purposes. Revenues are recognized and billed
when sales are ordered and shipped.
INVENTORY
Inventory is stated at the lower of cost or market. Cost is determined
by the first-in-first-out method, and market represents the lower of replacement
cost or estimated net realizable value.
DEPRECIATION
Property and equipment are stated at cost. Depreciation is computed
under the modified accelerated cost recovery system. Use of the modified
accelerated cost recovery system approximates generally accepted accounting
principles. No material variance is produced between the use of this method.
CASH
The Company considers all short term investments with an original
maturity of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128") which is effective for interim and annual financial statements for periods
ending after June 15, 1997. Under FAS 128, basic and diluted earnings per share
are to be presented.
F-18
<PAGE>
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
in this period. Diluted earnings per share takes into consideration common
shares outstanding (computed under basic earnings per share) and potentially
dilutive common shares.
F-19
<PAGE>
AMAZON HERB COMPANY
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 1998, JUNE 1997, AND JUNE 1996
1. Summary of Significant Accounting Policies: - (Continued)
Offering Expenses
The company's offering expenses related to its direct public offering
are reflected on the balance sheet in the stockholders equity section as a
reduction of capital investment. These expenses offset future capital inflows
from the public offering. If the public offering is not successful, these
expenses will be written off against income.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due. No provision for
deferred taxes has been made since there are no timing differences reported for
financial statements and income tax purposes.
2. Accounts Receivable:
Management considers all account receivable to be collectible. Thus, no
allowance for uncollectibles has been established in these financial statements.
3. Inventory:
The inventory consists of the following:
June 30,
1998 1997 1996
-------- ---------------------
Raw materials $593,870 $466,724 $651,655
Finished products $125,797 $127,644 $103,658
-------- -------- --------
$719,667 $594,368 $755,313
======== ======== ========
4. Property and Equipment:
Property and Equipment consists of the following:
Furniture and fixtures 1,762 2,217 2,217
Equipment 77,953 93,225 93,270
-------- -------- --------
$ 79,715 $ 95,442 $ 95,587
======== ======== ========
F-20
<PAGE>
5. Long-term debt:
Long-term debt at
Consists of the following:
June 30,
1998 1997
------ ------
Note payable to bank, payable in monthly
installments of $224, including interest
at 14.25% $2,296 $4,484
Note payable to bank, payable in monthly
installments of $224, including interest -0- 1,726
Note payable to bank, payable in monthly
installments of $513, including interest -0- 3,139
------ ------
$2,296 $9,349
Less current maturities 2,296 7,053
------ ------
$ -0- $2,296
====== ======
Annual requirements to amortize long-term debt are as follows:
Year Ended June 30 1998 1997
1998 $ -0- $7,053
1999 2,296 2,296
2000 -0- -0-
2001 -0- -0-
2002 -0- -0-
2003 -0- -0-
Thereafter -0- -0-
------ ------
$2,296 $9,349
====== ======
Long-term debt at June 30, 1996 consists of the following:
Unsecured note payable to a minority shareholder,
payable in monthly installments of $2,932, including
interest at 12% $ 30,398
Unsecured note payable to a minority shareholder,
payable in monthly installments of $2,221, including
interest at 12% 23,029
F-21
<PAGE>
Note payable to bank, payable in monthly installments
of $224, including interest at 14.25% 6,234
Note payable to bank, payable in monthly installments
of $224, including interest 3,797
Note payable to bank, payable in monthly installments
of $513, including interest 9,813
Unsecured note payable to a minority shareholder,
payable in monthly installments of $2,665 including
interest at 12% 33,285
--------
106,556
Less current maturities 96,865
--------
$ 9,691
========
Annual requirements to amortize long-term debt are as follows:
Year ended June 30
1997 $ 96,865
1998 7,591
1999 2,100
2000 -0-
2001 -0-
Thereafter -0-
--------
$106,556
========
6. Stockholders' Equity:
During the year ended June 30, 1998, the company authorized a 1 for 2.5
reverse stock split, reducing the number of outstanding common shares from
6,833,000 to 2,733,200. The stock split has been retroactively reflected in
these financial statements. In addition, the company created a class of
preferred stock and authorized 2,000,000 shares. As of June 30, 1998, there were
no outstanding shares of preferred stock. During the year the company incurred
$55,093 of offering costs related to its pursuit of becoming a publicly held
company. As of June 30 the registration statement filed with the Securities &
Exchange Commission had not been declared effective and no stock had been
authorized for sale.
On May 1, 1998, the company adopted a Stock Option Plan. This plan
authorized a maximum number of common shares which may be issued of 1,000,000.
The total number of common shares with respect to which stock options may be
granted to any participant during any year will not exceed 100,000 shares. The
term of all option may not exceed ten years. If not terminated earlier, the 1998
Stock Option Plan will terminate on May 1, 2008.
F-22
<PAGE>
On May 1, 1998 the company sold 50,000 stock options at $2 per option.
For every option owned the owner is entitled to buy one share of common stock of
the company for $2 per share making the effective price $4 per share. These
options expire March 31, 2001.
During the year ended June 30, 1997, the company issued 153,000
additional shares of stock for a total of $66,300. This amount included common
stock and additional paid-in-capital.
During the year 1996, the company issued 478,000 additional shares of
stock for a total of $168,400. This amount included common stock and additional
paid-in capital. Loans from the majority stockholder totaling $110,936 were
outstanding on June 30, 1996.
7. Leasing Arrangements:
During the year ended June 30, 1997, the Company leased its office and
storage facility under three (3) two-year leases. The leases began April 1,
1997, and expire March 31, 1999. The monthly rent including sales tax on these
leases is $3,402. During the year ended June 30, 1998, the Company entered into
a lease at a new office and storage facility under a two-year lease. The lease
begins July 15, 1998, and expires July 14, 2000. The monthly rent including
sales tax on this lease is $4,359. The lease provides for CPI adjustments after
year one. The following is a schedule of future rental payments as of June 30,
1998, and June 30, 1997.
Year ended June 30 1998 1997
1998 $ -0- $ 40,824
1999 52,308 30,618
2000 52,308 -0-
-------- --------
$104,616 $ 71,442
======== ========
During the year ended June 30, 1996, the Company leased its office and
storage facility under two (2) two-year leases and one sixteen (16) month lease.
One lease began December, 1995, and expires March 31, 1997. The monthly rent
including sales tax on this lease is $1,137. The other two leases began April,
1995, and expire March 1997. The monthly rent including sales tax on these
leases is $2,129. The following is a schedule of future rental payments as of
June 30, 1996.
Year ended June 30
1997 $ 29,394
========
8. Supplemental Disclosures of Cash Flow Information:
Interest and Income Taxes Paid
Cash paid for interest and income taxes during the years ended June 30,
1998, June 30, 1997 and June 30, 1996 were as follows:
F-23
<PAGE>
1998 1997 1996
Interest $ 3,050 $14,528 $14,733
======= ======= =======
Income Taxes $80,382 $37,537 $ -0-
======= ======= =======
9. Financial Instruments:
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade account receivables. The Company places its temporary cash investments
with financial institutions and limits the amount of credit exposure to any one
financial institution. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising the
Company's customer base and their dispersion across different geographic areas.
As of June 30, 1998, June 30, 1997, and June 30, 1996, the Company had no
significant concentrations of credit risk.
10. Earnings per share:
<TABLE>
<CAPTION>
For the year ended June 30,
1998 1997
Income Shares Per-Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Den.) Amount
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income available to
common stockholders $95,323 2,733,200 $.0349 $91,791 2,733,200 $.0336
======= ========= ====== ======= ========= ======
Diluted EPS:
Income available to
common stockholder
& assumed conversions $95,323 2,783,200 $.0342 $91,791 2,783,200 $.0330
======= ========= ====== ======= ========= ======
</TABLE>
F-24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Florida Statute Section 607.0850 provides that a corporation may
indemnify directors and officers, as well as other employees and agents, along
with a director, officer, employee or agent against of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
incurred in legal proceedings connected with their service to the corporation,
if he or she acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interests of the corporation and, had no
reasonable cause to believe his or her conduct was unlawful.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3.0 Amended Articles of Incorporation of Amazon Herb Company
3.1 Bylaws of Amazon Herb Company
4.0 Specimen Stock Certificate
4.1 Form of Class A Common Stock Purchase Warrant
5.0 Opinion of Hackney & Miller P.A., as to legality
10.0 Amazon Herb Company 1998 Stock Option Plan
10.1 Purchase Agreement by and between Amazon Herb Company and
Terradyne Naturale, Inc.
II-1
<PAGE>
10.2 Business Lease Agreement by and between Amazon Herb Company and
Jupiter Industrial Associates
10.3 Investment Advisory Agreement with Crown Capital Advisors, Inc.
23.0 Consent of Bernard J. Donth, C.P.A., independent certified
public accountants
23.1 Consent of Hackney & Miller P.A. (included in Exhibit 5.0)
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus that is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145 ( c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) Every prospectus that (i) is filled pursuant to paragraph (1)
immediately preceding or (ii) purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of any
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, 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) The undersigned registrant will deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirement of Rule
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, will deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(4) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(5) The registrant will respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first-class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
II-2
<PAGE>
registration statement through the date of responding to the request.
(6) The registrant will supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired
involved therein, that was not the subject of an included in the registration
statement when it became effective, except where the transaction in which the
securities being offered pursuant to the registration statement would itself
qualify for an exemption under Section 5 of the Securities Act of 1933, absent
the existence of other similar (prior or subsequent) transactions.
(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by its is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(8) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(A) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(B) To reflect in the prospectus any facts or events arising
after the effective date of the 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 the registration
statement; and
(C) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement or any
material change to such information in the registration statement.
(9) That, for the purpose of determining any liability under the
Securities Act of 1933, each 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.
(10) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
caused this registration statement to be signed by the undersigned, thereunto
duly authorized, in the City of Jupiter, State of Florida, on December 14, 1999.
Amazon Herb Company
/s/ JOHN H. EASTERLING
------------------------------------
By: John H. Easterling
Title: President
SPECIAL POWER OF ATTORNEY
The undersigned constitute and appoint John H. Easterling their true and lawful
attorney-in-fact and agent with full power of substitution, for him and in his
name, place, and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Form S-4 Registration
Statement, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting such
attorney-in-fact the full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
date indicated:
Signature Title Date
/s/ John Easterling Director January 13, 2000
- ---------------------
John Easterling
/s/ Michael J. Perry Director January 13, 2000
- ---------------------
Michael J. Perry
/s/ Ted Nicholas Director January 13, 2000
- ---------------------
Ted Nicholas
/s/ Robert Butwin Director January 13, 2000
- ---------------------
Robert Butwin
II-4
<PAGE>
Exhibit Index
Exhibit No. Exhibit Description
3.0 Amended Articles of Incorporation of Amazon Herb Company
3.1 Bylaws of Amazon Herb Company
4.0 Specimen Stock Certificate
4.1 Form of Class A Common Stock Purchase Warrant
5.0 Opinion of Hackney & Miller P.A., as to legality
10.0 Amazon Herb Company 1998 Stock Option Plan
10.1 Purchase Agreement by and between Amazon Herb Company and
Terradyne Naturale, Inc.
10.2 Business Lease Agreement by and between Amazon Herb Company and
Jupiter Industrial Associates
10.3 Investment Advisory Agreement with Crown Capital Advisors, Inc.
23.0 Consent of Bernard J. Donth, C.P.A., independent certified
public accountants
23.1 Consent of Hackney & Miller P.A. (included in Exhibit 5.0)
EXHIBIT 3.0
EXHIBIT 3.0
ARTICLES OF INCORPORATION
OF
MARCO POLO TRADING CO., INC.
The undersigned, for the purpose of forming a corporation under the
Florida General Corporation Act, hereby adopt the following articles of
incorporation:
ARTICLE ONE
The name of this corporation is Marco Polo Trading Co., Inc.
ARTICLE TWO
The corporation is to have perpetual existence.
ARTICLE THREE
The corporation may transact any and all lawful business for which
corporations may be incorporated under the Florida General Corporation Act.
ARTICLE FOUR
4.01 The aggregate number of shares which the corporation shall have
the authority to issue is 1000, all of which shall be common shares with a par
value of $1.00 per share.
4.02 The minimum amount of paid-in capital with which the corporation
shall begin business shall be not less then Five Hundred Dollars ($500.00).
ARTICLE FIVE
5.01 The street address of the initial corporate office of the
corporation is 801 Seafarer Circle, #403, Jupiter, Florida 33477.
5.02 The name and address of the initial Resident Agent for this
corporation to accept service of process within the State of Florida is Mark J.
Nowicki, 1155 U. S. Highway One, Suite 302, Juno Beach, Florida 33408.
ARTICLE SIX
6.01 The name and address of the incorporator of this corporation is
Mark J. Nowicki, 1155 U. S. Highway One, Suite 302, Juno Beach, Florida 33408.
<PAGE>
6.02 Said incorporator is over the age of eighteen (18) years; is sui
juris, and is a citizen of the United States.
ARTICLE SEVEN
7.01 One director shall constitute the initial Board of Directors of
the corporation, but the Bylaws may provide for such increase or decrease in
number thereof as is authorized by law.
7.02 The name(s) and addresses of the member(s) of the first Board of
Directors are:
NAME ADDRESS
---- -------
John Easterling 801 Seafarer Circle, #403
Jupiter, Florida 33477
ARTICLE EIGHT
Nothing in these articles of incorporation shall be taken to limit the
power of this corporation.
IN WITNESS WHEREOF, the undersigned has made and subscribed these
articles of incorporation this 24th day of May, 1990.
By:_________________________________
Incorporator
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
MARCO POLO TRADING COMPANY, INC.
1. ARTICLE FOUR of the Articles of Incorporation of Marco Polo Trading
Company, Inc. is amended to read as follows:
ARTICLE FOUR
4.01 The aggregate number of shares which the corporation shall
have authority to issue is 8,000,000, all of which shall be
common shares with a par value of .010 per share.
4.02 The minimum amount of paid in capital with which the
corporation shall begin business shall not be less than
$500.00.
2. The foregoing amendment was adopted by the shareholders of this
corporation on October 18, 1991, and this action was taken by the
directors of the corporation through a major vote.
3. This amendment is pursuant to and approved by a unanimous vote of all
shareholders entitled to vote.
IN WITNESS WHEREOF, the undersigned president, vice president and
secretary/treasurer of this corporation have executed these Articles of
Amendment on this 21st day of October, 1991.
--------------------------------
President
--------------------------------
Vice President
--------------------------------
Secretary/Treasurer
STATE OF FLORIDA
COUNTY OF PALM BEACH
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BEFORE ME, the undersigned authority, duly appeared John Easterling,
who, after being duly sworn, deposes and states that he executed the foregoing
Articles of Amendment f or the purposes therein expressed.
DATED this 21st day of October, 1991.
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Notary Public, State of Florida (Notary Seal)
My Commission Expires:_______________
<PAGE>
ARTICLES OF AMENDMENT
OF
MARCO POLO TRADING CO., INC.
1. The following provisions of the Articles of Incorporation of Marco Polo
Trading Co., Inc., L78953, a Florida corporation, filed in Tallahassee on June
6, 1990, be and they hereby are amended in the following particulars:
The following Article is hereby deleted in its entirety:
"ARTICLE ONE"
The name of this corporation is "Amazon Herb Company"
2. The foregoing amendments were adopted by all of the stockholders and
Directors of the corporation on the 26th day of December, 1992.
3. IN WITNESS WHEREOF, the undersigned incorporator of this corporation
has executed these Articles of Amendment this 6th day of January, 1993.
-----------------------------
John Easterling, President
STATE OF FLORIDA
COUNTY OF PALM BEACH
BEFORE ME, the undersigned authority, personally appeared John
Easterling, President, ( ) known to me, (X ) who produced the following
identification FLORIDA DRIVERS LICENSE #E236-468-52-130-0 to be the person who
executed the foregoing Articles of Amendment and he acknowledged before me that
he executed such instrument for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 6th day
of January, 1993.
-----------------------------------
Notary Public - State of Florida
My Commission Expires:
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
AMAZON HERB COMPANY
1. The following provisions of the Articles of Incorporation of Amazon
Herb Company, a Florida corporation, filed in Tallahassee on June 6,
1990, be and they hereby are amended in the following particulars:
2. Article Four of the Articles of Incorporation is hereby amended to read
as follows:
"4.1 The aggregate number of shares which the corporation is authorized to
issue is 10,000,000 shares, of which 8,000,000 shares of the par value of $.Ol
per share shall be designated as "Common Shares" and 2,000,000 of the par
value of $1.00 shall be designated as "Preferred Shares".
4.2 The Board of Directors, by resolution, has the authority to grant rights
to subscribe for or purchase and issue in one (1) or more series, Preferred
Shares, having such preferences, rights, and limitations as therein set forth.
The voting powers, if any, of a holder of one Preferred Share, may not exceed
the voting rights of one Common Share.
Article Four of the Articles of Incorporation is further amended by adding a
paragraph 4.3 as follows:
Paragraph 4.3: The 6,833,000 shares of Common Stock of the company without par
value, either issued and outstanding or held by the company as treasury stock,
immediately prior to the time this amendment becomes effective shall be and
are automatically reclassified and changed (without any further act) into
2,733,200 fully paid and nonassessable shares of the Common Stock of the
Company without par value without increasing or decreasing the amount of
stated capital or paid-in surplus of the company, provided that no fractional
shares shall be issued. The fractional share interests that occur as a result
of the foregoing reclassification and change shall be rounded up to the next
nearest whole number.
The Articles of Incorporation are hereby amended by adding Articles Nine and
Ten which shall read as follows:
ARTICLE NINE
LIABILITY OF DIRECTORS AND OFFICERS
<PAGE>
No director or officer of the Company shall have any personal liability to the
Company or its Shareholders for monetary damages for breach of fiduciary duty as
a director notwithstanding any provision of law imposing such liability;
provided, however, that this Article Nine shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the Company or its Shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
the Florida Business Corporation Act, or (iv) for any transaction from which the
director or officer derived an improper personal benefit. No amendment to or
repeal of this Article Nine shall apply to or have any effect on the elimination
pursuant hereto of liability or alleged liability of any director or officer of
the Company for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal. Nothing in this Article Nine shall
limit any lawful right to indemnification existing independently of this
Article.
ARTICLE TEN
INDEMNITY
Every person now or in the future serving as a director, officer or employee of
the corporation shall be indemnified and held harmless by the corporation from
and against any and all loss, cost, liability and expense that may be imposed
upon or incurred by such person in connection with or resulting from any claim,
action, suit, or proceeding, civil or criminal, in which the person may become
involved, as a party or otherwise, by reason of being or having been a director,
officer or employee of the corporation, whether or not the person continues to
be such at the time of such loss, cost, liability or expense shall have been
imposed or incurred. As used in these Articles, the term "loss, cost, liability
and expense" shall include, but shall not be limited to, counsel fees and
disbursements and amounts of judgments, fines or penalties against, and amounts
paid in settlement by, any such director, officer or employee; provided,
however, that no such director, officer or employee shall be entitled to claim
such indemnity: (1) with respect to any matter as to which there shall have been
a final adjudication that the person has committed or allowed some act or
omission, (a) otherwise than in good faith in what the person considered to be
the best interests of the corporation, and (b) without reasonable cause to
believe that such act or omission was proper and legal; or (2) in the event of a
settlement of such claim, action, suit, or proceeding unless (a) the court
having jurisdiction of the matter shall have approved of such settlement with
knowledge of the indemnity provided in these Articles, or (b) a written opinion
of independent legal counsel, selected by or in manner determined by the Board
of Directors, shall have been rendered substantially concurrently with such
settlement, to the effect that it was not probable that the matter as to which
indemnification is being made would have resulted in a final adjudication as
specified in clause (1) above, and that the loss, cost, liability or expense may
properly be borne by the corporation. A conviction or judgment (whether based on
a plea of guilty, or nolo contenders or its equivalent, or after trial) in a
criminal action, suit or proceeding shall not be deemed an adjudication that
such director, officer or employee has committed or allowed some act or omission
as provided above if independent legal counsel, selected as set forth above,
shall substantially concurrently with such conviction or judgment give to the
corporation a written opinion that such director, officer or employee was acting
in good faith in what he or she considered to be the best interests of the
corporation or was not without reasonable cause to believe that such act or
omission was proper and legal.
3. The foregoing amendments were adopted by the Stockholders of the
corporation on the 1st day of May, 1998.
4. The number of votes cast for the Amendments by the shareholders was
sufficient for approval.
IN WITNESS WHEREOF, the undersigned President and Secretary of this corporation
have executed these Articles of Amendment this 1st day of May, 1998.
AMAZON HERB COMPANY
- ----------------------------------
John H. Easterling, President
- ----------------------------------
Connie Lynch, Secretary
EXHIBIT 3.1
EXHIBIT 3.1
BYLAWS OF
AMAZON HERB COMPANY
(A Florida Corporation)
ARTICLE I
OFFICES
SECTION 1. Principal Office. The principal executive office of the
Corporation shall be at such place as the Board of Directors may from time to
time determine, but until a change is effected such principal office shall be
at: 725 North A1A, Suite C-115, Jupiter, Florida 33447.
SECTION 2. Other Offices. The Corporation may also have other offices at
such places, within or without the State of Florida, as the Board of Directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. Time and Place of Meetings. A meeting of stockholders for
any purpose may be held at such time and place, within or without the State of
Florida, as shall be stated on the notice thereof or in a duly executed waiver
of notice thereof.
SECTION 2. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held on the tenth day of May in each year if not a
legal holiday, and if a legal holiday, at such place, either within or without
the State of Florida, and at such time as set forth in the notice of the meeting
or in a duly executed waiver of notice thereof, for the election of the Board of
Directors and for the transaction of such other business as may properly be
brought before the meeting. In the event the annual meeting is not held on the
date above provided, the Board of Directors shall cause the meeting to be held
as soon thereafter as may be convenient. Such subsequent meeting shall be called
in the same manner as hereinafter provided for special meetings of stockholders.
SECTION 3. Special Meetings. Special meetings of the stockholders,
unless otherwise prescribed by statute, may be called at any time for any
purpose or purposes by the Board of Directors or the holders of not less than 10
percent of all the shares entitled to be cast in any issue proposed to be
considered at the proposed special meeting; provided that said persons sign,
date and deliver to the Corporation one or more written demands for the meeting
describing the proposal for which it is to be held, and shall be held at such
place, either within or without the State of Florida, and at such hour as may be
designated by the Board of Directors in the notice of the meeting; provided,
however, that the time so fixed shall permit the giving of notice as provided in
Section 4 of this Article II, unless such notice is waived as provided by law or
by these Bylaws. At a special meeting only such matters as may be specified in
the notice thereof shall be considered. Special meetings shall also be called
and held in such cases and in such manner as may be specifically required by law
or by the Articles of Incorporation.
SECTION 4. Notice of Meetings. Written notice of each meeting of the
stockholders, which shall state the place, date and hour of the meeting and, in
the case of a special meeting or where otherwise required by law, the purpose or
purposes for which it is called, shall be given, unless a different period is
required by law, not less than ten (10) nor more than sixty (60) days before the
date of such meeting, by or at the direction of the person
<PAGE>
calling the meeting. If mailed, the notice of a meeting of stockholders shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. No business other than that stated in the notice shall be
transacted at any meeting without the unanimous consent of all the stockholders
entitled to vote thereat. Any such notice for any meeting other than the annual
meeting shall, if issued at the direction of the Board of Directors, so
indicate. When a meeting is adjourned to another time or place, notice need not
be given if the time and place thereof are announced at the meeting at which the
adjournment is taken. At such an adjourned meeting, any business may be
transacted that might have been transacted on the original date of the meeting.
If the adjournment is for more than thirty days after the date of the original
meeting, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 5. Quorum. Except as otherwise required by law, the Articles of
Incorporation or these Bylaws, the holders of a majority of the shares entitled
to vote at any meeting of shareholders, present in person or represented by
proxy, shall constitute a quorum for the transaction of any business at any such
meeting, provided that when a specified item of business is required to be voted
on by a class or series (if the corporation shall then have outstanding shares
of more than one class or series) voting as a class, the holders of a majority
of the shares of such class or series shall constitute a quorum (as to such
class or series) for the transaction of such item of business. When a quorum is
once presented to organize a meeting of shareholders, it is not broken by the
subsequent withdrawal of any shareholders or their proxies. The holders of a
majority of shares present in person or represented by proxy at any meeting of
shareholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. When a meeting is
adjourned to another time or place, it shall not be necessary to give notice of
the adjourned meeting if the time and place to which the meeting is adjourned
are announced at the meeting at which the adjournment is taken and at the
adjourned meeting any business may be transacted that might have been transacted
on the original date of the meeting.
The absence from any meeting of the number of shares required by law, the
Articles of Incorporation or these Bylaws for action upon one matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if the number of shares required in respect of
such other matters shall be present.
SECTION 6. Organization. At each meeting of the stockholders, the
Chairman of the Board or, in his absence or inability to act, the Vice-Chairman
or, in his absence or inability to act, the President or, in his absence or
inability to act, a Vice President or, in his absence or inability to act any
person as may be designated by the Board of Directors or, in the absence of such
person or if there shall be no such designation, a chairman present in person or
represented by proxy shall act as chairman of the meeting. The Secretary or, in
his absence or inability to act, an Assistant Secretary, or in his absence or
inability to act, any person as may be designated from time to time by the Board
of Directors shall act as secretary of each meeting of stockholders and keep the
minutes thereof; if no such person is present or has been chosen, the holders of
record of a majority of shares of stock present in person or represented by
proxy and entitled to vote at the meeting shall choose any person present to act
as secretary of the meeting.
SECTION 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 8. Voting and Required Vote. At each meeting of stockholders,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder except as otherwise provided in the Articles of
Incorporation. Except as otherwise provided in the Articles of Incorporation,
and subject to statute, at each meeting of stockholders if there shall be a
quorum, the affirmative vote of the holders of a majority of shares present in
person or represented by proxy and entitled to vote thereat, shall decide all
matters brought before such meeting.
SECTION 9. Proxies. Each stockholder entitled to vote at any meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Any such proxy shall be delivered to the secretary of such meeting at or
prior to the time
<PAGE>
designated in the order of business for so delivering such proxies. Each such
proxy shall be in writing and executed by the stockholder or his duly authorized
attorney-in-fact, but no such proxy shall be voted after eleven (11) months from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally.
SECTION 10. List of Stockholders. A complete list of the stockholders
entitled to vote at any annual or special meeting, arranged in alphabetical
order, with the address of each, and the number of shares held by each, shall be
prepared, or shall be caused to be prepared, by the Secretary and shall be open
to examination by any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city in which the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. The stock ledger shall be
the only evidence as to the stockholders entitled to examine the stock ledger,
the list required by these Bylaws or the books of the Corporation, or to vote in
person or by proxy at any meeting of the stockholders.
SECTION 11. Voting by Fiduciary, and Joint Owners. Persons holding
stock in a fiduciary capacity shall be entitled to vote the shares so held.
Persons whose stock is pledged shall be entitled to vote, unless in the transfer
by the pledgor on the books of the corporation he has expressly empowered the
pledgee to vote thereon, in which case only the pledgee, or his proxy, may
represent such stock and vote thereon.
If the shares or other securities having voting power stand of record
in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants-in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect:
(a) if only one votes, his act binds all;
(b) if more than one votes, the act of the majority so voting
binds all;
(c) if more than one votes, but the vote is evenly split on any
particular matter, each fraction may vote the securities in
question proportionally, or any person voting the shares, or a
beneficiary, if any, may apply to the Circuit Court or such
other court as may have jurisdiction to appoint an additional
person to act with the persons so voting the shares, which
shall then be voted as determined by a majority of such
persons and the person appointed by the court. If the
instrument so filed shows that any such tenancy is held in
unequal interest, a majority or even-split for the purpose of
this paragraph shall be a majority or even-split in interest.
SECTION 12. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided by the Articles of Incorporation, any action required or
permitted to be taken at any annual or special meeting of stockholders of the
Corporation may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock of each voting group
entitled to vote thereon having not less than the minimum number of votes with
respect to each voting group that would be necessary to authorize or take such
action at a meeting at which all voting groups and shares entitled to vote
thereon were present and voted, as provided by law. Within ten (10) days after
obtaining such authorization by written consent, notice shall be given to those
shareholders who have not consented in writing or who are not entitled to vote,
said notice shall fairly summarize the material features of the authorized
action and if the action requires the providing of dissenters' rights, said
notice shall comply with the disclosure requirements pertaining to dissenters'
rights of Florida law.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of a Board of Directors, which may
exercise all such authority and powers of the Corporation and do all such lawful
acts and things as are not by statute, by the Articles of Incorporation or by
these Bylaws directed or required to be exercised or done by the stockholders or
such other persons as provided therein.
SECTION 2. Qualification. Directors must be natural persons of 18 years
of age or older but need not be residents of the State of Florida and need not
be shareholders of the Corporation.
SECTION 3. Number of Directors. The Corporation shall have no fewer
than five (5) nor more than seven (7) directors; the exact number to be
determined from time to time by resolution adopted by approval of the
outstanding shares or by the affirmative vote of a majority of the whole Board
of Directors, and such exact number shall be five (5) until otherwise
determined.
SECTION 4. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which an action on any
corporate matter is taken will be presumed to have assented to the action unless
such director votes against such action or abstains from voting in respect
thereto because of an asserted conflict of interest.
SECTION 5. Resignations. Any director may resign at any time upon
written notice to the Board of Directors, the Chairman or the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt thereof by the Board of Directors or by any such officer. If the
resignation is made effective at a date later than the date of receipt of the
written resignation by the Board of Directors or an authorized officer, then the
Board of Directors may fill the pending vacancy before the effective date if the
Board of Directors provides that the successor does not take office until the
effective date.
SECTION 6. Annual Meetings. The annual meeting of the Board of
Directors for the purpose of organizing the Board, appointing officers and
members of committees and transacting other business, shall be held immediately
following the annual meeting of the stockholders at the same place where such
meeting of stockholders shall be held. No notice shall be required for any such
meeting if held immediately after the adjournment, and at the site, of the
meeting of the stockholders. If not so held, notice shall be given in the same
manner as required for special meetings of the Board of Directors.
SECTION 7. Regular Meetings. Additional regular meetings of the Board
of Directors may be held without notice at such times and places (within or
without the State of Florida) as shall have been approved and agreed to at any
prior meeting of the Board of Directors.
SECTION 8. Special Meetings. A special meeting of the Board of
Directors may be called at any time by the Chairman of the Board, the Vice
Chairman, the President or any Vice President or by two or more directors and
shall be held at such time and place (within or without the State of Florida) as
may be fixed by the person or persons calling the meeting; provided, however,
that the time so fixed shall permit the giving of notice as provided in Section
9 of this Article III.
SECTION 9. Notice of Special Meeting. Written notice of the time and
place of each special meeting of the Board of Directors shall be delivered at
least five (5) business days before the day on which such meeting is to be held
to each director personally, or by certified, registered or express mail,
postage prepaid, or telegram or cablegram or nationwide overnight courier
service addressed to such director at his address as it appears on the records
of the Corporation, confirmed on the same day by telegraph, telex, cable,
facsimile, wireless or telephone, and the method used for notice of such special
meeting need not be the same for each director being notified except as
otherwise required by law, the Articles of Incorporation or these Bylaws.
<PAGE>
SECTION 10. Organization. The Chairman of the Board shall preside over
all meetings of the Board of Directors at which he is present. In his absence or
inability to act, the Vice Chairman shall preside. In the absence or inability
to act of the Chairman and Vice Chairman, the Board of Directors shall select a
chairman of the meeting from among the directors present. The Secretary or, in
his absence or inability to act, an Assistant Secretary, or in his absence or
inability to act, another director selected by the Board of Directors shall act
as secretary of the meeting and keep the minutes thereof.
SECTION 11. Quorum. A majority of the number of directors fixed by
these Bylaws shall constitute a quorum for the transaction of business. The act
of a majority of the directors present at a meeting at which a quorum is present
will be the act of the Board of Directors. At any meeting of the Board of
Directors, no action shall be taken (except adjournment, in the manner provided
below) until after a quorum has been established, except as otherwise provided
by law, the Articles of Incorporation or these Bylaws.
Except as otherwise provided by law, the Articles of Incorporation or
these Bylaws, the act of a majority of directors who are present at a regular
meeting at which a quorum previously has been established (or at any adjournment
of such meeting, provided that a quorum shall have previously been established
at such adjourned meeting) shall be the act of the Board of Directors,
regardless of whether or not a quorum is present at the time such action is
taken. In determining the number of directors who are present at the time any
such action is taken, any director who is in attendance at such meeting but who,
for just cause, is disqualified to vote on such matter, shall not be considered
as being present at the time of such action for the purpose of establishing the
number of votes required to take action on any matter submitted to the Board of
Directors, but shall be considered as being present for purposes of determining
the existence of a quorum.
In the event a quorum cannot be established at the beginning of a
meeting, a majority of the directors present at the meeting, or the Secretary of
the Corporation, if there be no director present, may adjourn the meeting from
time to time until a quorum be present. Only such notice of such adjournment
need be given as the Board of Directors may from time to time prescribe.
SECTION 12. Regulations. The Board of Directors may adopt such rules
and regulations for the conduct of its meetings and for the management of the
business and affairs of the Corporation as it may deem proper and not
inconsistent with law, the Articles of Incorporation and these Bylaws.
SECTION 13. Written Consent in Lieu of Meetings. Any action required to
be taken at a meeting of the Board of Directors, or any action which may be
taken at a meeting of the Board of Directors or a committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action to be
so taken, signed by all the directors, or all the members of the committee, as
the case may be, is filed in the minutes of the proceedings of the board or of
the committee. Such consent will have the same effect as a unanimous vote.
SECTION 14. Telephonic Participation. Any and all members of the Board
of Directors may participate in a meeting of the Board of Directors by means of
a conference telephone or similar communications equipment by means of which all
persons participating in such meeting can hear each other. Participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting.
SECTION 15. Compensation. Directors shall be entitled to such
compensation for their services as directors and to such reimbursement for any
reasonable expenses incurred in attending meetings of the Board of Directors as
may from time to time be fixed by the Board of Directors. The compensation of
directors may be on such basis as is determined by the Board of Directors. Any
director may waive compensation for any meeting. Any director receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and receiving compensation and reimbursement
for reasonable expenses for such other services.
<PAGE>
ARTICLE IV
COMMITTEES
SECTION 1. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the total number of directors constituting the entire
Board, whether then in office or not, may appoint an Executive Committee
consisting of one or more directors, one of whom shall be designated as Chairman
of the Executive Committee. Each member of the Executive Committee shall
continue as a member thereof until the expiration of his term as a director or
his earlier resignation or removal as a member of the Executive Committee or as
a director or until his death.
SECTION 2. Powers. The Executive Committee shall have and may exercise
those rights, powers and authority of the Board of Directors to the extent
permitted by law, and may authorize the seal of the Corporation to be affixed to
all papers that may require it, but shall not have the power or authority with
respect to approving or recommending to shareholders actions or proposals
required by law to be approved by shareholders, filling vacancies on the Board
of Directors or any committee thereof, adopting, amending or repealing these
Bylaws, authorizing or approving the reacquisition of shares unless pursuant to
a general formula or method specified by the Board of Directors and authorizing
or approving the issuance or sale or contract for the sale of shares, or
determine the designation and relative rights, preferences, and limitations of a
voting group except that the Board of Directors may authorize the Executive
Committee to do so within limits specifically prescribed by the Board of
Directors.
SECTION 3. Procedure and Meetings. The Executive Committee shall fix
its own rules of procedure and shall meet at such times and at such place or
places as may be provided by such rules or as the members of the Executive
Committee shall fix. The Executive Committee shall keep minutes of its meetings,
which it shall deliver to the Board of Directors from time to time. The Chairman
of the Executive Committee or, in his absence, a member of the Executive
Committee chosen by a majority of the members present shall preside at meetings
of the Executive Committee, and the Secretary, or in his absence, an Assistant
Secretary, or in his absence another member of the Executive Committee chosen by
the Executive Committee, shall act as secretary of the Executive Committee.
SECTION 4. Quorum. All of the members of the Executive Committee must
be present in person or by electronic means for the transaction of business, and
the affirmative vote of all of the members shall be required for any action of
the Executive Committee.
SECTION 5. Audit Committee. There shall be an audit committee composed
of such number of directors (not less than three) as the board of directors, by
resolution passed by the vote of a majority of the entire board may appoint,
none of whom shall be an employee of the corporation.
The audit committee shall have the following duties:
(a) To recommend to the board of directors for approval by
the shareholders the appointment of a firm of independent
public accountants (the "auditors") to audit the accounts of
the corporation as the committee may recommend for the
financial year in respect of which such appointment is made;
(b) To make, or cause to be made by the auditors, such
examinations or audits of the affairs and operations of the
corporation of such scope, with such objects, and at such
times or intervals as the committee may determine in its
discretion or as may be ordered by the board of directors or
the executive committee;
(c) To submit to the board of directors as soon as may be
convenient following the conclusion of each examination or
audit made by or at the direction of the committee, a written
report relative thereto;
<PAGE>
(d) To oversee the activities of the general auditor and
his or her staff, and to conduct periodic performance
evaluations and to establish the compensation of the general
auditor; and
(e) To review matters associated with internal control and
the management of risk.
A notation with respect to each report made to the board of directors
by the audit committee and of the action taken thereon by the board of directors
shall be made in the minutes of the board of directors.
SECTION 6. Other Committees. The Board of Directors, by resolutions
adopted by a majority of the total number of directors constituting the entire
Board, whether then in office or not, shall establish compensation committee and
may appoint such other committee or committees as it shall deem advisable and
with such rights, powers, and authority as it shall prescribe. Each such
committee shall consist of one or more directors. Unless otherwise provided by
the Board of Directors, a majority of the members of each such other committee
shall constitute a quorum, and the acts of a majority of the members present at
a meeting at which a quorum is present shall be the act of such committee.
SECTION 7. Vacancies; Committee Changes. In the absence or
disqualification of a member of any committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
The Board of Directors shall have the power at any time to fill
vacancies in, to change the membership of, and to discharge, any committee or
any member of any committee.
SECTION 8. Compensation. Members of the committees shall be entitled to
such compensation for their services as members of the committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any
committee member receiving compensation under these provisions shall not be
barred from serving the Corporation in any other capacity and from receiving
compensation and reimbursement of reasonable expenses for such other services.
SECTION 9. Telephonic Participation. Any and all members of the
committee designated by the Board of Directors may participate in a meeting of
such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in such meeting can hear
each other, and participation in such a meeting pursuant to this Section shall
constitute presence in person at such meeting.
SECTION 10. Action by Consent. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent thereto shall be signed by all members of
the committee then in office, provided that the number of such members is
sufficient to constitute a quorum for such action, if any, and such written
consent is filed with the minutes of its proceedings.
ARTICLE V
NOTICES
SECTION 1. Waiver of Notice. Whenever any notice is required to be
given by law, the Articles of Incorporation or these Bylaws, a written waiver
thereof, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to such notice.
Neither the business to be transacted at, nor the purpose of any regular or
special meeting of stockholders, any meeting of other security-holders, the
Board of Directors, or any committee of the Board of Directors need be specified
in any written waiver of notice unless so required by law, the Articles of
Incorporation or these Bylaws.
<PAGE>
SECTION 2. Attendance at Meeting. Attendance of a person at any
meeting, whether of stockholders or other security-holders (in person or by
proxy), or the Board of Directors or any committee of the Board of Directors,
shall constitute a waiver of notice of such meeting, except when such person
attends such meeting for the express purpose of objecting, and objects, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not legally called or convened.
ARTICLE VI
OFFICERS
SECTION 1. Number and Qualifications. The officers of the Corporation
shall include the Chairman, the Vice Chairman, the President, one or more Vice
Presidents, a Treasurer, and a Secretary and such other officers as may elected
or appointed in accordance with the provisions of Section 2 of this Article VI.
Any number of offices may be held by the same person. The Board of Directors
shall determine who shall be the chief executive officer of the Company.
SECTION 2. Selection, Term of Office and Qualification. The officers
shall be elected from time to time by the Board of Directors at its first
regular meeting after each annual meeting of stockholders. Each officer shall
hold his office until his successor is elected and qualified or until he shall
resign in the manner provided in Section 3 of this Article VI, or until he shall
have been removed in the manner provided in Section 4 of this Article VI, or
until his death. Other officers, including without limitation one or more
Assistant Treasurers and one or more Assistant Secretaries shall be chosen in
such manner, hold office for such period, have such authority, perform such
duties and be subject to removal as may be prescribed by the Board of Directors.
SECTION 3. Resignations. Any officer may resign at any time upon
written notice to the Board of Directors, the President or the Secretary. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt thereof by the Board of Directors or any such officer.
SECTION 4. Removal. Any officer may be removed at any time, either with
or without cause, by the Board of Directors; and any officer not elected by the
Board of Directors may be removed in such manner as may be determined by the
Board of Directors. Removal from office however, shall not prejudice the
contract rights, if any, of the person removed except as provided in such
contract.
SECTION 5. Vacancies. Any vacancy occurring in any office of the
Corporation which is required by Section 2 of this Article VI to be elected by
the Board of Directors, whether by death, resignation, removal or otherwise,
shall be filled for the unexpired portion of the term by the Board of Directors.
A vacancy in any other office shall be filled in such manner as may be
determined by the Board of Directors.
SECTION 6. Chairman. The Chairman may be the chief executive officer of
the Corporation if the Board of Directors shall so determine and, in such case
and subject to the direction of the Board of Directors, shall have general
charge of the business, affairs and property of the Corporation, shall have
general supervision over its other officers and agents and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
SECTION 7. Vice Chairman. The Vice Chairman shall have such powers and
perform such duties as may from time to time be assigned to him by the Board of
Directors and shall report to the Chairman, subject to the control of the Board
of Directors.
SECTION 8. The President. The President shall have, subject to the
control of the Chairman, if the Chairman is designated as the chief executive
officer of the Corporation and the Board of Directors, general and active
management of the business of the Corporation and general and active supervision
and direction over the business operations and affairs of the Corporation and
over its several officers, agents and employees. He shall be an ex officio
member of all committees of the Board. In general, he shall have such other
powers and shall
<PAGE>
perform such other duties as usually pertain to the office of the President or
as from time to time may be assigned to him by the Board or these Bylaws. The
President may be the chief executive officer of the Corporation if the Board of
Directors shall so determine and, in such case and subject to the direction of
the Board of Directors, shall have general charge of the business, affairs and
property of the Corporation, shall have general supervision over its other
officers and agents and shall see that all orders and resolutions of the Board
of Directors are carried into effect.
SECTION 9. Vice President. The Vice President or, in the event there be
more than one, the Vice Presidents in the order designated, or in the absence of
any designation, in the order of their seniority, shall have such powers and
perform such duties as from time to time may be assigned to them by the Board of
Directors.
SECTION 10. The Treasurer and Assistant Treasurers. The Treasurer
shall:
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements
in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the
credit of the Corporation in such depositories as may be
designated by the Board of Directors;
(d) receive moneys due and payable to the Corporation from any
source whatsoever and give receipts for moneys so paid;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board
of Directors, taking proper vouchers therefor;
(f) render to the President and the Board of Directors at the
regular meetings of the Board, or whenever they may request
it, an account of all his transactions as Treasurer and of the
financial condition of the Corporation; and
(g) in general, have all the powers and perform all the duties
incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the Board of
Directors or the President. The Assistant Treasurer or
Assistant Treasurers, if any, shall in the absence or
disability of the Treasurer or at his request, perform his
duties and exercise his powers and authority as may be
assigned to him by the Board of Directors or the President.
SECTION 11. The Secretary and Assistant Secretaries. The Secretary
shall:
(a) attend all meetings of the Board of Directors, any committee
of the Board of Directors, stockholders and other
security-holders and record all votes and the proceedings of
such meetings in minute books to be kept by him for that
purpose;
(b) see that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law;
(c) be custodian of the records and the seal of the Corporation
and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such
certificates shall be a facsimile, as hereinafter provided)
and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and
filed are properly kept and filed; and
<PAGE>
(e) in general, have all the powers and perform all the duties
incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Board of
Directors or the President. The Assistant Secretary or
Assistant Secretaries, if any, shall, in the absence or
disability of the Secretary or at his request, perform his
duties and exercise his powers and authority as may be
assigned to him by the Board of Directors or the President.
SECTION 12. Compensation. The compensation of all officers of the
Corporation shall be fixed from time to time by the Board of Directors; no
officer of the Corporation shall be prevented from receiving compensation
because he is also a director of the Corporation.
ARTICLE VII
CAPITAL STOCK AND DIVIDENDS
SECTION 1. Stock Certificates for Shares. Every holder of shares of
capital stock of the Corporation will be entitled to have a certificate
representing all shares to which he is a holder. No certificate representing
shares will be issued until such shares are fully paid. Certificates for shares
of the capital stock of the Corporation shall be in such form, not inconsistent
with the Articles of Incorporation, as shall be approved by the Board of
Directors and shall be signed by or in the name of the corporation by the
Chairman or Vice-Chairman or by the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary,
provided that the signatures of any such officers thereon may be facsimiles. The
seal of the Corporation shall be impressed, by original or by facsimile, printed
or engraved, on all such certificates. A certificate may also be signed by the
transfer agent and a registrar as the Board of Directors may determine, and in
such case the signature of the transfer agent or the registrar may also be
facsimile, engraved or printed. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may nevertheless be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
SECTION 2. Stock Records. The Corporation shall keep at such place or
places, within or without the State of Florida, as the Board of Directors may
from time to time determine, the stock record books in which shall be recorded
the number of shares issued, the names of the owners of the shares, the number
of shares owned by them respectively, and the transfer of such shares with the
date of transfer. Blank stock certificate books shall be kept by the Secretary
or by any officer or agent designated by the Board of Directors.
SECTION 3. Registration of Transfers. Registration of transfer of
certificates representing shares of stock of the Corporation shall be effected
only on the books of the Corporation only upon authorization by the registered
holder thereof, or by his attorney duly executed and filed with the Secretary or
with a designated transfer agent or transfer clerk, and upon surrender to the
Corporation or any transfer agent of the Corporation of the certificate or
certificates being transferred, which certificate or certificates shall be
properly endorsed or accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Whenever a certificate is endorsed by or
accompanied by a stock power executed by someone other than the person or
persons named in the certificate, evidence of authority to transfer shall also
be submitted with the certificate. Whenever any transfers of shares shall be
made for collateral security and not absolutely, and both the transferor and
transferee request the Corporation to do so, such fact shall be stated in the
entry of the transfer.
SECTION 4. Determination of Stockholders. Except as otherwise provided
by law, the Corporation shall be entitled to recognize the exclusive right of a
person in whose name any share or shares stand on the record of stockholders as
the owner of such share or shares for all purposes, including, without
limitation, the right to receive dividends or other distributions, and to vote
as such owner. The Corporation may hold any such stockholder of record liable
for calls and assessments and the Corporation shall not be bound to recognize
any equitable or legal claim to or interest in any such share or shares on the
part of any other person whether or not it shall have express or other notice
thereof.
<PAGE>
SECTION 5. Regulations Governing Issuance and Transfer of Shares. The
Board of Directors shall have the power and authority to make all such rules and
regulations, not inconsistent with these Bylaws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
SECTION 6. Fixing of Record Date. In order that the Corporation may
determine the stockholders of record entitled to notice of, or to vote at, any
meeting of stockholders or any adjournment thereof, or entitled to express
consent to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. Except as otherwise provided by law, the
Articles of Incorporation, these Bylaws or by resolution of the Board of
Directors:
(1) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close
of business on the day next preceding the day on which the
meeting is held;
(2) The record date for determining stockholders entitled to
express consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent
is expressed; and
(3) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which
the Board adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board
may affix a new record date for the adjourned meeting.
SECTION 7. Lost, Stolen or Destroyed Stock Certificates. The holder of
any certificates representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or mutilation
of such certificate, and the Board of Directors may authorize the issuance of a
new certificate of stock in lieu thereof upon satisfactory proof of such loss,
theft or destruction upon the giving of an open penalty bond with surety
satisfactory to the Treasurer and the Corporation's counsel, to protect the
Corporation or any person injured on account of the alleged loss, theft or
destruction of any such certificate or the issuance of a new certificate from
any liability or expense which it or they may incur by reason of the original
certificates remaining outstanding and upon payment of the Corporation's
reasonable costs incident thereto.
SECTION 8. Dividends and Reserves. Subject to the provisions of law or
of the Articles of Incorporation, the Board of Directors may, out of funds
available therefor at any regular or special meeting, declare dividends upon the
capital stock of the Corporation as and when they deem expedient. Before
declaring any dividend there may be set apart out of any funds of the
Corporation available for dividends, such sum or sums as the Board of Directors
may from time to time in their discretion deem proper as a reserve fund for
working capital, to meet contingencies, or for equalizing dividends, or for the
purpose of repairing, maintaining or increasing the property or business of the
Corporation, or for such other purposes as the Board of Directors shall deem to
be in the best interests of the Corporation. The Board of Directors may, in its
discretion, modify or abolish any such reserve at any time.
ARTICLE VIII
BOOKS AND RECORDS
<PAGE>
SECTION 1. Books and Records. The Corporation shall keep as permanent
records minutes of all meetings of its shareholders and Board of Directors, a
record of all actions taken by the shareholders or Board of Directors without a
meeting, and a record of all actions taken by a committee of the Board of
Directors in place of the Board of Directors on behalf of the Corporation.
Furthermore, the Corporation shall maintain accurate accounting records.
Furthermore, the corporation shall maintain the following:
(i) A record of its shareholders in a form that permits
preparation of a list of the names and addresses of all
shareholders in alphabetical order by class of shares showing
the number and series of shares held by each;
(ii) The Corporation's Articles or Restated Articles of
Incorporation and all amendments thereto currently in effect;
(iii) The Corporation's Bylaws (or Restated Bylaws and all
amendments thereto currently in effect;
(iv) Resolutions adopted by the Board of Directors creating
one or more classes or series of shares and fixing their
relative rights, preferences and limitations if shares issued
pursuant to those resolutions are outstanding;
(v) The minutes of all shareholders' meeting and records of
all actions taken by shareholders without a meeting for the
past three years;
(vi) Written communications to all shareholders generally or
all shareholders of a class or series within the past three
years including the financial statements furnished for the
past three years to shareholders as may be required under
Florida law;
(vii) A list of the names and business street addresses of the
corporation's current directors and officers; and
(viii) A copy of the Corporation's most recent annual report
delivered to the Department of State.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form.
SECTION 2. Shareholder's Inspection Rights. A shareholder of the
Corporation (including a beneficial owner whose shares are held in a voting
trust or a nominee on behalf of a beneficial owner) may inspect and copy, during
regular business hours at the Corporation's principal office, any of the
corporate records required to be kept pursuant to Section 1 of this Article of
these Bylaws, if said shareholder gives the Corporation written notice of such
demand at least five business days before the date on which the shareholder
wishes to inspect and copy. The foregoing right of inspection is subject however
to such other restrictions as are applicable under Florida law, including, but
not limited to, the inspection of certain records being permitted only if the
demand for inspection is made in good faith and for a proper purpose (as well as
the shareholder describing with reasonable particularity the purpose and records
desired to be inspected and such records are directly connected with the
purpose).
SECTION 3. Financial Information. Unless modified by resolution of the
shareholders within 120 days of the close of each fiscal year, the Corporation
shall furnish the shareholders annual financial statements which may be
consolidated or combined statements of the Corporation and one or more if its
subsidiaries as appropriate, that include a balance sheet as of the end of the
fiscal year, an income statement for that year, and a statement of cash flow for
that year. If financial statements are prepared on the basis of generally
accepted accounting principles,
<PAGE>
the annual financial statements must also be prepared on that basis. If the
annual financial statements are reported on by a public accountant, said
accountant's report shall accompany said statements. If said annual financial
statements are not reported on by a public accountant, then the statements shall
be accompanied by a statement of the Chairman or the person responsible for the
Corporation's accounting records by;
(a) stating his reasonable belief whether the statements were
prepared on the basis of generally accepted accounting
principles and if not, describing the basis of preparation;
and
(b) describing any respects in which the statements were not
prepared on a basis of accounting consistent with the
statements prepared for the preceding year. The annual
financial statements shall be mailed to each shareholder of
the Corporation within 120 days after the close of each fiscal
year or within such additional time as is reasonably necessary
to enable the Corporation to prepare same, if, for reasons
beyond the Corporation's control, said annual financial
statement cannot be prepared within the prescribed period.
SECTION 4. Other Reports to Shareholders. The Corporation shall report
any indemnification or advanced expenses to any director, officer, employee, or
agent (for indemnification relating to litigation or threatened litigation) in
writing to the shareholders with or before the notice of the next shareholders'
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time such meeting is held, which
report shall include a statement specifying the persons paid, the amounts paid,
and the nature and status, at the time of such payment, of the litigation or
threatened litigation.
Additionally, if the Corporation issues or authorizes the issuance of
shares for promises to render services in the future, the Corporation shall
report in writing to the shareholders the number of shares authorized or issued
and the consideration received by the Corporation, with or before the notice of
the next shareholders' meeting.
ARTICLE IX
CORPORATE INDEMNIFICATION
Subject to the provisions of the Company's Articles of Incorporation, the
Corporation shall indemnify any person:
(1) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in the
right of, the Corporation) by reason of the fact that he is or was a director,
officer, employee, or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
Corporation, partnership, joint venture, trust, or other enterprise against such
costs and expenses, and to the extent and in the manner provided under Florida
law.
(2) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against such costs and expenses, and to the extent and in the manner
provided under Florida law.
The extent, amount, and eligibility for the indemnification provided
herein will be made by the Board of Directors. Said determinations will be made
by a majority vote to a quorum consisting of directors who were not parties to
such action, suit, or proceeding or by the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such action suit or
proceeding.
The corporation will have the power to make further indemnification as
provided under Florida law except to indemnify any person against gross
negligence or willful misconduct.
<PAGE>
The Corporation is further authorized to purchase and maintain
insurance for indemnification of any person as provided herein and to the extent
provided under Florida law.
ARTICLE X
GENERAL PROVISIONS
SECTION 1. Execution of Contracts, Papers and Documents. Except as otherwise
required by law, the Articles of Incorporation or these Bylaws, any contract or
other instrument may be executed and delivered in the name and on behalf of the
Corporation by such officers or employees of the Corporation as the Board of
Directors may from time to time determine, or in the absence of such
determination, by the Chairman or the President. Such may be general or confined
to specific instances as the Board of Directors may determine. Unless authorized
by the Board of Directors or expressly permitted by these Bylaws, no officer or
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to incur a pecuniary
liability for any purpose.
SECTION 2. Voting Shares in Other Corporations. The Corporation may
vote any and all shares of stock and other securities having voting rights which
may at any time and from time to time be held by it in any other corporation or
corporations and such vote may be cast either in person or by proxy by such
officer of the Corporation as the Board of Directors may appoint or, in the
absence of such appointment, by the Chairman or President.
SECTION 3. Checks, Drafts, etc. All checks, drafts, bills of exchange
or other orders for the payment of money out of the funds of the Corporation,
and all notes or other evidences of indebtedness of the Corporation, shall be
signed in the name and on behalf of the Corporation by such persons and in such
manner as shall from time to time be authorized by the Board.
SECTION 4. Corporate Seal. The Board of Directors shall provide a
suitable seal which shall bear the name of the Corporation, the year of
incorporation and shall include the words "Corporate Seal, Florida." Said seal
shall be in the custody of the Secretary of the Corporation, and the Board of
Directors may prescribe that one or more duplicates thereof be kept in the
custody of such other officer or officers of the Corporation.
SECTION 5. Fiscal Year. The fiscal year of the Corporation shall be a
period of either fifty-two (52) or fifty-three (53) weeks as may be determined
by the Board of Directors from time to time.
ARTICLE XI
TRANSACTIONS WITH DIRECTORS AND OFFICERS
SECTION 1. Affiliated Transactions. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be valid unless, at the time of the
contract or transaction, the Board of Directors consists of at least two (2)
independent directors, and a majority of such independent directors, after
having access, at the Corporation's expense, to the Corporation's or independent
legal counsel, approve such contract or transaction. For purposes of this
Section 1 of this Article XI of the Bylaws, an independent director shall be a
member of the Board of Directors who is not an officer or employee of the
Corporation, its subsidiaries or affiliates, a promoter or does not have a
material business or professional relationship with the Corporation.
SECTION 2. Determining Quorum. Interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee thereof which authorized an affiliated contract or transaction.
<PAGE>
ARTICLE XII
AMENDMENT
The power to adopt, amend or repeal these Bylaws shall be in the
stockholders entitled to vote and may be exercised by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat at any
annual meeting of the stockholders or at any special meeting thereof if notice
of the proposed amendment or repeal be contained in the notice of such special
meeting. Such power shall also be conferred upon the directors and may be
exercised by the affirmative vote of a majority of the Board of Directors at any
regular meeting of the Board of Directors or at any special meeting of the Board
of Directors if notice of the proposed amendment or repeal be contained in the
notice of such special meeting, but the fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal the Bylaws.
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of Amazon
Herb Company, a Florida corporation (the "Corporation"), and that the foregoing
Amended and Restated Bylaws were adopted as the Bylaws of the Company on April
6, 1998, by the duly elected directors of the Company.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal the _____ day of April, 1998.
_______________________________
Connie Lynch, Secretary
EXHIBIT 4.0
EXHIBIT 4.0
Specimen Stock Certificate
- - -------------------------------------------------
- - ----------- -----------
NUMBER SHARES
- - ----------- -----------
***000*** ***000***
- - ----------- -----------
AMAZON HERB COMPANY
- - -------------------------------------------------
ORGANIZED UNDER THE LAWS OF THE STATE OF FLORIDA
8,000,000 Common Stock Shares $.01 par value
2,000,000 Preferred Stock Shares $1.00 par value
- - -------------------------------------------------
THIS CERTIFIES THAT ______________ is the registered holder of _________ shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
CORPORATION WILL NOT TRANSFER THIS CERTIFICATE UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION COVERING THE SHARES REPRESENTED BY THIS CERTIFICATE UNDER THE
SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST
RECEIVES A LETTER OF OPINION FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF
DIRECTORS OR ITS AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE
PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933
AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, (iii) THE TRANSFER IS MADE
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ___ day of ___________, 19__, A.D.
------------------------ ---------------------
President Secretary
- - -------------------------------------------------
FORM OF CLASS A WARRANT AGREEMENT
CLASS A COMMON STOCK PURCHASE WARRANT AGREEMENT
between
AMAZON HERB COMPANY
and
EQUISERVE TRUST COMPANY
Dated as of November 30, 1999
This Agreement, dated as of November 30, 1999, is between Amazon Herb
Company, a Florida corporation (the "Company") and EQUISERVE TRUST COMPANY, a
New York corporation, (the "Warrant Agent").
The Company, at or about the time that it is entering into this
Agreement, proposes to issue and sell to public investors up to 5,000,000 Units
("Units"). Each Unit consists of one share of Common Stock of the Company
("Common Stock") and one Class A Warrant (collectively, the "Class A Warrants"),
each Class A Warrant exercisable to purchase one share of Common Stock for $7.50
or $9, upon the terms and conditions and subject to adjustment in certain
circumstances, all as set forth in this Agreement.
The Company wishes to retain the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, transfer, exchange and replacement of the certificates evidencing the
Class A Warrants to be issued under this Agreement (the "Class A Warrant
Certificates") and the exercise of the Class A Warrants;
The Company and the Warrant Agent wish to enter into this Agreement to
set forth the terms and conditions of the Class A Warrants and the rights of the
holders thereof ("Class A Warrantholders") and to set forth the respective
rights and obligations of the Company and the Warrant Agent. Each Class A
Warrantholder is an intended beneficiary of this Agreement with respect to the
rights of Class A Warrantholders herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
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Section 1. APPOINTMENT OF WARRANT AGENT
The Company appoints the Warrant Agent to act as agent for the Company
in accordance with the instructions in this Agreement and the Warrant Agent
accepts such appointment.
Section 2. DATE, DENOMINATION AND EXECUTION OF CLASS A WARRANT
CERTIFICATES
The Class A Warrant Certificates (and the Form of Election to Purchase
and the Form of Assignment to be printed on the reverse thereof) shall be in
registered form only and shall be substantially of the tenor and purport recited
in Exhibit A hereto, and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law, or with any rule or regulation made pursuant
thereto, or with any rule or regulation of any stock exchange on which the
Common Stock or the Class A Warrants may be listed or any automated quotation
system, or to conform to usage. Each Class A Warrant Certificate shall entitle
the registered holder thereof, subject to the provisions of this Agreement and
of the Class A Warrant Certificate, to purchase, on or before the close of
business on December 1, 2001 (the "Expiration Date"), one fully paid and
non-assessable share of Common Stock for each Class A Warrant evidenced by such
Class A Warrant Certificate, subject to adjustments as provided in Sections 6
hereof, for $7.50, prior to 9 months after the date of the sale prospectus and
$9.00 thereafter (the "Exercise Price"). Each Class A Warrant Certificate issued
as a part of a Unit offered to the public as described in the recitals, above,
shall be dated November 30, 1999; each other Class A Warrant Certificate shall
be dated the date on which the Warrant Agent receives valid issuance
instructions from the Company or a transferring holder of a Class A Warrant
Certificate or, if such instructions specify another date, such other date.
For purposes of this Agreement, the term "close of business" on any
given date shall mean 5:00 p.m., Eastern time, on such date; provided, however,
that if such date is not a business day, it shall mean 5:00 p.m., Eastern time,
on the next succeeding business day. For purposes of this Agreement, the term
"business day" shall mean any day other than a Saturday, Sunday, or a day on
which banking institutions in New York, New York are authorized or obligated by
law to be closed.
Each Class A Warrant Certificate shall be executed on behalf of the
Company by the Chairman of the Board or its President or a Vice President,
either manually or by facsimile signature printed thereon, and have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. Each Class A Warrant Certificate shall be manually
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
Class A Warrant Certificate shall cease to be such officer of the Company before
countersignature by the Warrant Agent and issue and delivery thereof by the
Company, such Class A Warrant Certificate, nevertheless, may be countersigned by
the Warrant Agent, issued and delivered with the same force and effect as though
the person who signed such Class A Warrant Certificate had not ceased to be such
officer of the Company.
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Section 3. SUBSEQUENT ISSUE OF CLASS A WARRANT CERTIFICATES
Subsequent to their original issuance, no Class A Warrant Certificates
shall be reissued except (i) Class A Warrant Certificates issued upon transfer
thereof in accordance with Section 4 hereof, (ii) Class A Warrant Certificates
issued upon any combination, split-up or exchange of Class A Warrant
Certificates pursuant to Section 4 hereof, (iii) Class A Warrant Certificates
issued in replacement of mutilated, destroyed, lost or stolen Class A Warrant
Certificates pursuant to Section 5 hereof, (iv) Class A Warrant Certificates
issued upon the partial exercise of Class A Warrant Certificates pursuant to
Section 7 hereof, and (v) Class A Warrant Certificates issued to reflect any
adjustment or change in the Exercise Price or the number or kind of shares
purchasable thereunder pursuant to Section 22 hereof. The Warrant Agent is
hereby irrevocably authorized to countersign and deliver, in accordance with the
provisions of said Sections 4, 5, 7 and 22, the new Class A Warrant Certificates
required for purposes thereof, and the Company, whenever required by the Warrant
Agent, will supply the Warrant Agent with Class A Warrant Certificates duly
executed on behalf of the Company for such purposes.
Section 4. TRANSFERS AND EXCHANGES OF CLASS A WARRANT CERTIFICATES
The Warrant Agent will keep or cause to be kept books for registration
of ownership and transfer of the Class A Warrant Certificates issued hereunder.
Such registers shall show the names and addresses of the respective holders of
the Class A Warrant Certificates and the number of Class A Warrants evidenced by
each such Class A Warrant Certificate.
The Warrant Agent shall, from time to time, register the transfer of
any outstanding Class A Warrants upon the books to be maintained by the Warrant
Agent for that purpose, upon surrender of the Class A Warrant Certificate
evidencing such Class A Warrants, with the Form of Assignment duly filled in and
executed with such signature guaranteed by a banking institution or NASD member
and such supporting documentation as the Warrant Agent or the Company may
reasonably require, to the Warrant Agent at its stock transfer office in
Freeport, New York at any time on or before the Expiration Date, and upon
payment to the Warrant Agent for the account of the Company of an amount equal
to any applicable transfer tax. Payment of the amount of such tax may be made in
cash, or by certified or official bank check, payable in lawful money of the
United States of America to the order of the Company.
Upon receipt of a Class A Warrant Certificate, with the Form of
Assignment duly filled in and executed, accompanied by payment of an amount
equal to any applicable transfer tax, the Warrant Agent shall promptly cancel
the surrendered Class A Warrant Certificate and countersign and deliver to the
transferee a new Class A Warrant Certificate for the number of full Class A
Warrants transferred to such transferee; provided, however, that in case the
registered holder of any Class A Warrant Certificate shall elect to transfer
fewer than all of the Class A Warrants evidenced by such Class A Warrant
Certificate, the Warrant Agent in addition shall promptly countersign and
deliver to such registered holder a new Class A Warrant Certificate or
Certificates for the number of full Class A Warrants not so transferred.
Any Class A Warrant Certificate or Certificates may be exchanged at the
option of the holder thereof for another Class A Warrant Certificate or
Certificates of different denominations, of like tenor and representing in the
aggregate the same number of Class A Warrants, upon surrender of such Class A
Warrant Certificate or Certificates, with the Form of Assignment duly filled in
and executed, to the Warrant Agent, at any time or from time to time after the
close of
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business on the date hereof and prior to the close of business on the Expiration
Date. The Warrant Agent shall promptly cancel the surrendered Class A Warrant
Certificate and deliver the new Class A Warrant Certificate pursuant to the
provisions of this Section.
Section 5. MUTILATED, DESTROYED, LOST OR STOLEN CLASS A WARRANT
CERTIFICATES
Upon receipt by the Company and the Warrant Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
any Class A Warrant Certificate, and in the case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
them of all reasonable expenses incidental thereto, and, in the case of
mutilation, upon surrender and cancellation of the Class A Warrant Certificate,
the Warrant Agent shall countersign and deliver a new Class A Warrant
Certificate of like tenor for the same number of Class A Warrants.
Section 6. ADJUSTMENTS OF NUMBER AND KIND OF SHARES PURCHASABLE AND
EXERCISE PRICE
The number and kind of securities or other property purchasable upon
exercise of a Class A Warrant shall be subject to adjustment from time to time
upon the occurrence, after the date hereof, of any of the following events:
A. In case the Company shall (1) pay a dividend in, or make a
distribution of, shares of capital stock on its outstanding Common Stock, (2)
subdivide its outstanding shares of Common Stock into a greater number of such
shares or (3) combine its outstanding shares of Common Stock into a smaller
number of such shares, the total number of shares of Common Stock purchasable
upon the exercise of each Class A Warrant outstanding immediately prior thereto
shall be adjusted so that the holder of any Class A Warrant Certificate
thereafter surrendered for exercise shall be entitled to receive at the same
aggregate Exercise Price the number of shares of capital stock (of one or more
classes) which such holder would have owned or have been entitled to receive
immediately following the happening of any of the events described above had
such Class A Warrant been exercised in full immediately prior to the record date
with respect to such event. Any adjustment made pursuant to this Subsection
shall, in the case of a stock dividend or distribution, become effective as of
the record date therefor and, in the case of a subdivision or combination, be
made as of the effective date thereof. If, as a result of an adjustment made
pursuant to this Subsection, the holder of any Class A Warrant Certificate
thereafter surrendered for exercise shall become entitled to receive shares of
two or more classes of capital stock of the Company, the Board of Directors of
the Company (whose determination shall be conclusive and shall be evidenced by a
Board resolution filed with the Warrant Agent) shall determine the allocation of
the adjusted Exercise Price between or among shares of such classes of capital
stock.
B. In the event of a capital reorganization or a reclassification of
the Common Stock (except as provided in Subsection A. above or Subsection E.
below), any Class A Warrantholder, upon exercise of Class A Warrants, shall be
entitled to receive, in substitution for the Common Stock to which he would have
become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other securities or
property of the Company (or cash) that he would have been entitled to receive at
the same aggregate Exercise Price upon such reorganization or reclassification
if such Class A Warrants had been exercised immediately prior to the record date
with respect to such event; and in any
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such case, appropriate provision (as determined by the Board of Directors of the
Company, whose determination shall be conclusive and shall be evidenced by a
certified Board resolution filed with the Warrant Agent) shall be made for the
application of this Section 6 with respect to the rights and interests
thereafter of the Class A Warrantholders (including but not limited to the
allocation of the Exercise Price between or among shares of classes of capital
stock), to the end that this Section 6 (including the adjustments of the number
of shares of Common Stock or other securities purchasable and the Exercise Price
thereof) shall thereafter be reflected, as nearly as reasonably practicable, in
all subsequent exercises of the Class A Warrants for any shares or securities or
other property (or cash) thereafter deliverable upon the exercise of the Class A
Warrants.
C. Whenever the number of shares of Common Stock or other securities
purchasable upon exercise of a Class A Warrant is adjusted as provided in this
Section 6, the Company will promptly file with the Warrant Agent a certificate
signed by a Chairman or co-Chairman of the Board or the President or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth the number and
kind of securities or other property purchasable upon exercise of a Class A
Warrant, as so adjusted, stating that such adjustments in the number or kind of
shares or other securities or property conform to the requirements of this
Section 6, and setting forth a brief statement of the facts accounting for such
adjustments. Promptly after receipt of such certificate, the Company, or the
Warrant Agent at the Company's request, will deliver, by first-class, postage
prepaid mail, a brief summary thereof (to be supplied by the Company) to the
registered holders of the outstanding Class A Warrant Certificates; provided,
however, that failure to file or to give any notice required under this
Subsection, or any defect therein, shall not affect the legality or validity of
any such adjustments under this Section 6; and provided, further, that, where
appropriate, such notice may be given in advance and included as part of the
notice required to be given pursuant to Section 12 hereof.
D. In case of any consolidation of the Company with, or merger of the
Company into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or any
transaction such that Section 13 of the Warrant Agreement dated November 30,
1999 is triggered, then this Class A Warrant shall be unavailable for redemption
and suspended until the Company shall notify the Transfer Agent that such event
is no longer in existence.
The Warrant Agent shall not be under any responsibility to determine
the correctness of any provision contained in any such supplemental warrant
agreement relating to either the kind or amount of shares of stock or securities
or property (or cash) purchasable by holders of Class A Warrant Certificates
upon the exercise of their Class A Warrants after any such consolidation,
merger, sale or transfer or of any adjustment to be made with respect thereto,
but subject to the provisions of Section 20 hereof, may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, a certificate of a firm of independent certified public
accountants (who may be the accountants regularly employed by the Company) with
respect thereto.
E. Irrespective of any adjustments in the number or kind of shares
issuable upon exercise of Class A Warrants, Class A Warrant Certificates
theretofore or thereafter issued may
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continue to express the same price and number and kind of shares as are stated
in the similar Class A Warrant Certificates initially issuable pursuant to this
Class A Warrant Agreement.
F. The Company may retain a firm of independent public accountants of
recognized standing, which may be the firm regularly retained by the Company,
selected by the Board of Directors of the Company or the Executive Committee of
said Board, and not disapproved by the Warrant Agent, to make any computation
required under this Section, and a certificate signed by such firm shall, in the
absence of fraud or gross negligence, be conclusive evidence of the correctness
of any computation made under this Section.
G. For the purpose of this Section, the term "Common Stock" shall mean
(i) the Common Stock or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that at any time as a result of an adjustment made pursuant
to this Section, the holder of any Class A Warrant thereafter surrendered for
exercise shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, thereafter the number of such other
shares so receivable upon exercise of any Class A Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in this
Section, and all other provisions of this Agreement, with respect to the Common
Stock, shall apply on like terms to any such other shares.
H. The Company may, from time to time and to the extent permitted by
law, reduce the exercise price of the Class A Warrants by any amount for a
period of not less than 20 days. If the Company so reduces the exercise price of
the Class A Warrants, it will give not less than 15 days' notice of such
decrease, which notice may be in the form of a press release, and shall take
such other steps as may be required under applicable law in connection with any
offers or sales of securities at the reduced price.
Section 7. EXERCISE AND REDEMPTION OF CLASS A WARRANTS
Unless the Class A Warrants have been redeemed as provided in this
Section 7, the registered holder of any Class A Warrant Certificate may exercise
the Class A Warrants evidenced thereby, in whole at any time or in part from
time to time at or prior to the close of business, on the Expiration Date,
subject to the provisions of Section 9, at which time the Class A Warrant
Certificates shall be and become wholly void and of no value. Class A Warrants
may be exercised by their holders or redeemed by the Company as follows:
A. Exercise of Class A Warrants shall be accomplished upon surrender of
the Class A Warrant Certificate evidencing such Class A Warrants, with the Form
of Election to Purchase on the reverse side thereof duly filled in and executed,
to the Warrant Agent at its stock transfer office in Freeport, New York,
together with payment to the Company of the Exercise Price (as of the date of
such surrender) of the Class A Warrants then being exercised and an amount equal
to any applicable transfer tax and, if requested by the Company, any other taxes
or governmental charges which the Company may be required by law to collect in
respect of such exercise. Payment of the Exercise Price and other amounts may be
made by wire transfer of good funds, or by certified or bank cashier's check,
payable in lawful money of the United States of America to the order of the
Company. No adjustment shall be made for any cash dividends, whether paid or
declared, on any securities issuable upon exercise of a Class A Warrant.
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B. Upon receipt of a Class A Warrant Certificate, with the Form of
Election to Purchase duly filled in and executed, accompanied by payment of the
Exercise Price of the Class A Warrants being exercised (and of an amount equal
to any applicable taxes or government charges as aforesaid), the Warrant Agent
shall promptly request from the Transfer Agent with respect to the securities to
be issued and deliver to or upon the order of the registered holder of such
Class A Warrant Certificate, in such name or names as such registered holder may
designate, a certificate or certificates for the number of full shares of the
securities to be purchased, together with cash made available by the Company
pursuant to Section 8 hereof in respect of any fraction of a share of such
securities otherwise issuable upon such exercise. If the Class A Warrant is then
exercisable to purchase property other than securities, the Warrant Agent shall
take appropriate steps to cause such property to be delivered to or upon the
order of the registered holder of such Class A Warrant Certificate. In addition,
if it is required by law and upon instruction by the Company, the Warrant Agent
will deliver to each Class A Warrantholder a prospectus which complies with the
provisions of Section 9 of the Securities Act of 1933 and the Company agrees to
supply Warrant Agent with sufficient number of prospectuses to effectuate that
purpose.
C. In case the registered holder of any Class A Warrant Certificate
shall exercise fewer than all of the Class A Warrants evidenced by such Class A
Warrant Certificate, the Warrant Agent shall promptly countersign and deliver to
the registered holder of such Class A Warrant Certificate, or to his duly
authorized assigns, a new Class A Warrant Certificate or Certificates evidencing
the number of Class A Warrants that were not so exercised.
D. Each person in whose name any certificate for securities is issued
upon the exercise of Class A Warrants shall for all purposes be deemed to have
become the holder of record of the securities represented thereby as of, and
such certificate shall be dated, the date upon which the Class A Warrant
Certificate was duly surrendered in proper form and payment of the Exercise
Price (and of any applicable taxes or other governmental charges) was made;
provided, however, that if the date of such surrender and payment is a date on
which the stock transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares as of, and the
certificate for such shares shall be dated, the next succeeding business day on
which the stock transfer books of the Company are open (whether before, on or
after the Expiration Date) and the Warrant Agent shall be under no duty to
deliver the certificate for such shares until such date. The Company covenants
and agrees that it shall not cause its stock transfer books to be closed for a
period of more than 20 consecutive business days except upon consolidation,
merger, sale of all or substantially all of its assets, dissolution or
liquidation or as otherwise provided by law.
E. The Class A Warrants outstanding at the time of a redemption may be
redeemed at the option of the Company, in whole or in part on a pro-rata basis,
at any time if, at the time notice of such redemption is given by the Company as
provided in Paragraph F, below, the Daily Price has exceeded $6.00 for the ten
consecutive trading days immediately preceding the date of such notice, at a
price equal to $0.25 per Class A Warrant (the "Redemption Price"). For the
purpose of the foregoing sentence, the term "Daily Price" shall mean, for any
relevant day, the closing bid price on that day as reported by the principal
exchange or quotation system on which prices for the Common Stock are reported.
On the redemption date the holders of record of redeemed Class A Warrants shall
be entitled to payment of the Redemption Price upon surrender of such redeemed
Class A Warrants to the Company at the principal office of the Warrant Agent in
Freeport, New York.
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F. Notice of redemption of Class A Warrants shall be given at least 30
days prior to the redemption date by mailing, by registered or certified mail,
return receipt requested, a copy of such notice to the Warrant Agent and to all
of the holders of record of Class A Warrants at their respective addresses
appearing on the books or transfer records of the Company or such other address
designated in writing by the holder of record to the Warrant Agent not less than
40 days prior to the redemption date.
G. From and after the redemption date, all rights of the Class A
Warrantholders (except the right to receive the Redemption Price) shall
terminate, but only if (a) no later than one day prior to the redemption date
the Company shall have irrevocably deposited with the Warrant Agent as paying
agent a sufficient amount to pay on the redemption date the Redemption Price for
all Class A Warrants called for redemption and (b) the notice of redemption
shall have stated the name and address of the Warrant Agent and the intention of
the Company to deposit such amount with the Warrant Agent no later than one day
prior to the redemption date.
H. The Warrant Agent shall pay to the holders of record of redeemed
Class A Warrants all monies received by the Warrant Agent for the redemption of
Class A Warrants to which the holders of record of such redeemed Class A
Warrants who shall have surrendered their Class A Warrants are entitled.
I. Any amounts deposited with the Warrant Agent that are not required
for redemption of Class A Warrants may be withdrawn by the Company. Any amounts
deposited with the Warrant Agent that shall be unclaimed after six months after
the redemption date may be withdrawn by the Company, and thereafter the holders
of the Class A Warrants called for redemption for which such funds were
deposited shall look solely to the Company for payment. The Company shall be
entitled to the interest, if any, on funds deposited with the Warrant Agent and
the holders of redeemed Class A Warrants shall have no right to any such
interest.
J. If the Company fails to make a sufficient deposit with the Warrant
Agent as provided above, the holder of any Class A Warrants called for
redemption may at the option of the holder (a) by notice to the Company declare
the notice of redemption a nullity as to such holder, or (b) maintain an action
against the Company for the Redemption Price. If the holder brings such an
action, the Company will pay reasonable attorneys' fees of the holder. If the
holder fails to bring an action against the Company for the Redemption Price
within 60 days after the redemption date, the holder shall be deemed to have
elected to declare the notice of redemption to be a nullity as to such holder
and such notice shall be without any force or effect as to such holder. Except
as otherwise specifically provided in this Paragraph J, a notice of redemption,
once mailed by the Company as provided in Paragraph F shall be irrevocable.
Section 8. FRACTIONAL INTERESTS
The Company shall not be required to issue any Class A Warrant
Certificate evidencing a fraction of a Class A Warrant or to issue fractions of
shares of securities on the exercise of the Class A Warrants. any fraction
(calculated to the nearest one-hundredth) of a Class A Warrant or a share of
securities would, except for the provisions of this Section, be issuable on the
exercise of any Class A Warrant, the Company shall, at its option, either
purchase such fraction for an amount in cash equal to the current value of such
fraction computed on the basis of the closing market price (as quoted on NASDAQ
or any other comparable tracking
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system) on the trading day immediately preceding the day upon which such Class A
Warrant Certificate was surrendered for exercise in accordance with Section 7
hereof or issue the required fractional Class A Warrant or share. By accepting a
Class A Warrant Certificate, the holder thereof expressly waives any right to
receive a Class A Warrant Certificate evidencing any fraction of a Class A
Warrant or to receive any fractional share of securities upon exercise of a
Class A Warrant, except as expressly provided in this Section 8.
Section 9. RESERVATION OF EQUITY SECURITIES
The Company covenants that it will at all times reserve and keep
available, free from any pre-emptive rights, out of its authorized and unissued
equity securities, solely for the purpose of issue upon exercise of the Class A
Warrants, such number of shares of equity securities of the Company as shall
then be issuable upon the exercise of all outstanding Class A Warrants ("Equity
Securities"). The Company covenants that all Equity Securities which shall be so
issuable shall, upon such issue, be duly authorized, validly issued, fully paid
and non-assessable.
The Company covenants that if any equity securities, required to be
reserved for the purpose of issue upon exercise of the Class A Warrants
hereunder, require registration with or approval of any governmental authority
under any federal or state law before such shares may be issued upon exercise of
Class A Warrants, the Company will use all commercially reasonable efforts to
cause such securities to be duly registered, or approved, as the case may be,
and, to the extent practicable, take all such action in anticipation of and
prior to the exercise of the Class A Warrants, including, without limitation,
filing any and all post-effective amendments to the Company's Registration
Statement on Form S-4 (Registration No. pending) necessary to permit a public
offering of the securities underlying the Class A Warrants at any and all times
during the term of this Agreement, provided, however, that in no event shall
such securities be issued, and the Company is authorized to refuse to honor the
exercise of any Class A Warrant, if such exercise would result in the opinion of
the Company's Board of Directors, upon advice of counsel, in the violation of
any law; and provided further that, in the case of a Class A Warrant exercisable
solely for securities listed on a securities exchange or for which there are at
least two independent market makers, in lieu of obtaining such registration or
approval, the Company may elect to redeem Class A Warrants submitted to the
Warrant Agent for exercise for a price equal to the difference between the
aggregate low asked price, or closing price, as the case may be, of the
securities for which such Class A Warrant is exercisable on the date of such
submission and the Exercise Price of such Class A Warrants; in the event of such
redemption, the Company will pay to the holder of such Class A Warrants the
above-described redemption price in cash within 10 business days after receipt
of notice from the Warrant Agent that such Class A Warrants have been submitted
for exercise.
Section 10. REDUCTION OF CONVERSION PRICE BELOW PAR VALUE
Before taking any action that would cause an adjustment pursuant to
Section 6 hereof reducing the portion of the Exercise Price required to purchase
one share of capital stock below the then par value (if any) of a share of such
capital stock, the Company will use its best efforts to take any corporate
action which, in the opinion of its counsel, may be necessary in order that the
Company may validly and legally issue fully paid and non-assessable shares of
such capital stock.
Section 11. PAYMENT OF TAXES
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The Company covenants and agrees that it will pay when due and payable
any and all federal and state documentary stamp and other original issue taxes
which may be payable in respect of the original issuance of the Class A Warrant
Certificates, or any shares of Common Stock or other securities upon the
exercise of Class A Warrants. The Company shall not, however, be required (i) to
pay any tax which may be payable in respect of any transfer involved in the
transfer and delivery of Class A Warrant Certificates or the issuance or
delivery of certificates for Common Stock or other securities in a name other
than that of the registered holder of the Class A Warrant Certificate
surrendered for purchase or (ii) to issue or deliver any certificate for shares
of Common Stock or other securities upon the exercise of any Class A Warrant
Certificate until any such tax shall have been paid, all such tax being payable
by the holder of such Class A Warrant Certificate at the time of surrender.
Section 12. NOTICE OF CERTAIN CORPORATE ACTION
In case the Company after the date hereof shall propose (i) to offer to
the holders of Common Stock, generally, rights to subscribe to or purchase any
additional shares of any class of its capital stock, any evidences of its
indebtedness or assets, or any other rights or options or (ii) to effect any
reclassification of Common Stock (other than a reclassification involving merely
the subdivision or combination of outstanding shares of Common Stock) or any
capital reorganization, or any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is required, or
any sale, transfer or other disposition of its property and assets substantially
as an entirety, or the liquidation, voluntary or involuntary dissolution or
winding-up of the Company, then, in each such case, the Company shall file with
the Warrant Agent and the Company, or the Warrant Agent on its behalf, shall
mail (by first-class, postage prepaid mail) to all registered holders of the
Class A Warrant Certificates notice of such proposed action, which notice shall
specify the date on which the books of the Company shall close or a record be
taken for such offer of rights or options, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer, other
disposition, liquidation, voluntary or involuntary dissolution or winding-up
shall take place or commence, as the case may be, and which shall also specify
any record date for determination of holders of Common Stock entitled to vote
thereon or participate therein and shall set forth such facts with respect
thereto as shall be reasonably necessary to indicate any adjustments in the
Exercise Price and the number or kind of shares or other securities purchasable
upon exercise of Class A Warrants which will be required as a result of such
action. Such notice shall be filed and mailed in the case of any action covered
by clause (i) above, at least ten days prior to the record date for determining
holders of the Common Stock for purposes of such action or, if a record is not
to be taken, the date as of which the holders of shares of Common Stock of
record are to be entitled to such offering; and, in the case of any action
covered by clause (ii) above, at least 20 days prior to the earlier of the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, voluntary or involuntary dissolution
or winding-up is expected to become effective and the date on which it is
expected that holders of shares of Common Stock of record on such date shall be
entitled to exchange their shares for securities or other property deliverable
upon such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, voluntary or involuntary dissolution
or winding-up.
Failure to give any such notice or any defect therein shall not affect
the legality or validity of any transaction listed in this Section 12.
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Section 13. DISPOSITION OF PROCEEDS ON EXERCISE OF CLASS A WARRANT
CERTIFICATES, ETC.
The Warrant Agent shall account promptly to the Company with respect to
Class A Warrants exercised and concurrently pay to the Company all moneys
received by the Warrant Agent for the purchase of securities or other property
through the exercise of such Class A Warrants.
The Warrant Agent shall keep copies of this Agreement available for
inspection by Class A Warrantholders during normal business hours at its stock
transfer office. Copies of this Agreement may be obtained upon written request
addressed to the Warrant Agent at its stock transfer office in Freeport, New
York.
Section 14. CLASS A WARRANTHOLDER NOT DEEMED A STOCKHOLDER
No Class A Warrantholder, as such, shall be entitled to vote, receive
dividends or be deemed the holder of Common Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Class A
Warrants represented thereby for any purpose whatever, nor shall anything
contained herein or in any Class A Warrant Certificate be construed to confer
upon any Class A Warrantholder, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger, conveyance or otherwise), or to receive notice
of meetings or other actions affecting stockholders (except as provided in
Section 12 hereof), or to receive dividend or subscription rights, or otherwise,
until such Class A Warrant Certificate shall have been exercised in accordance
with the provisions hereof and the receipt of the Exercise Price and any other
amounts payable upon such exercise by the Warrant Agent.
Section 15. RIGHT OF ACTION
All rights of action in respect to this Agreement are vested in the
respective registered holders of the Class A Warrant Certificates; and any
registered holder of any Class A Warrant Certificate, without the consent of the
Warrant Agent or of any other holder of a Class A Warrant Certificate, may, in
his own behalf for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company suitable to enforce, or otherwise
in respect of, his right to exercise the Class A Warrants evidenced by such
Class A Warrant Certificate, for the purchase of shares of the Common Stock in
the manner provided in the Class A Warrant Certificate and in this Agreement.
Section 16. AGREEMENT OF HOLDERS OF CLASS A WARRANT CERTIFICATES
Every holder of a Class A Warrant Certificate by accepting the same
consents and agrees with the Company, the Warrant Agent and with every other
holder of a Class A Warrant Certificate that:
A. The Class A Warrant Certificates are transferable on the registry
books of the Warrant Agent only upon the terms and conditions set forth in this
Agreement; and
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B. The Company and the Warrant Agent may deem and treat the person in
whose name the Class A Warrant Certificate is registered as the absolute owner
of the Class A Warrant (notwithstanding any notation of ownership or other
writing thereon made by anyone other than the Company or the Warrant Agent) for
all purposes whatever and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
Section 17. CANCELLATION OF CLASS A WARRANT CERTIFICATES
In the event that the Company shall purchase or otherwise acquire any
Class A Warrant Certificate or Certificates after the issuance thereof, such
Class A Warrant Certificate or Certificates shall thereupon be delivered to the
Warrant Agent and be canceled by it and retired. The Warrant Agent shall also
cancel any Class A Warrant Certificate delivered to it for exercise, in whole or
in part, or delivered to it for transfer, split-up, combination or exchange.
Class A Warrant Certificates so canceled shall be delivered by the Warrant Agent
to the Company from time to time, or disposed of in accordance with the
instructions of the Company.
Section 18. CONCERNING THE WARRANT AGENT
The Company agrees to pay to the Warrant Agent from time to time, on
demand of the Warrant Agent, reasonable compensation for all services rendered
by it hereunder and also its reasonable expenses, including counsel fees, and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Warrant Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Warrant Agent, arising out of or in
connection with the acceptance and administration of this Agreement.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT
Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor warrant agent
under the provisions of Section 21 hereof. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement, any of
the Class A Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Class A Warrant
Certificates so countersigned; and in case at that time any of the Class A
Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Class A Warrant Certificates either in the
name of the predecessor Warrant Agent or in the name of the successor Warrant
Agent; and in all such cases such Class A Warrant Certificates shall have the
full force provided in the Class A Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Class A Warrant Certificates shall have been
countersigned but not delivered, the
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Warrant Agent may adopt the countersignature under its prior name and deliver
Class A Warrant Certificates so countersigned; and in case at that time any of
the Class A Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Class A Warrant Certificates either in its prior name
or in its changed name; and in all such cases such Class A Warrant Certificates
shall have the full force provided in the Class A Warrant Certificates and in
this Agreement.
Section 20. DUTIES OF WARRANT AGENT
The Warrant Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Class A Warrant Certificates, by their acceptance thereof,
shall be bound:
A. The Warrant Agent may consult with counsel satisfactory to it (who
may be counsel for the Company or the Warrant Agent's in-house counsel), and the
opinion of such counsel shall be full and complete authorization and protection
to the Warrant Agent as to any action taken, suffered or omitted by it in good
faith and in accordance with such opinion; provided, however, that the Warrant
Agent shall have exercised reasonable care in the selection of such counsel.
Fees and expenses of such counsel, to the extent reasonable, shall be paid by
the Company.
B. Whenever in the performance of its duties under this Agreement, the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by a Chairman or co-Chairman of the Board or
the President or a Vice President or the Secretary of the Company and delivered
to the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
C. The Warrant Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
D. The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Class A
Warrant Certificates (except its countersignature on the Class A Warrant
Certificates and such statements or recitals as describe the Warrant Agent or
action taken or to be taken by it) or be required to verify the same, but all
such statements and recitals are and shall be deemed to have been made by the
Company only.
E. The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Class A Warrant Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Class A Warrant
Certificate; nor shall it be responsible for the making of any change in the
number of shares of Common Stock for which a Class A Warrant is exercisable
required under the provisions of Section 6 or responsible for the manner, method
or amount of any such change or the
13
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ascertaining of the existence of facts that would require any such adjustment or
change (except with respect to the exercise of Class A Warrant Certificates
after actual notice of any adjustment of the Exercise Price); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Class A Warrant Certificate or as to whether any shares
of Common Stock will, when issued, be validly issued, fully paid and
non-assessable.
F. The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or take any other action likely to involve
expense unless the Company or one or more registered holders of Class A Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred. All rights of action
under this Agreement or under any of the Class A Warrants may be enforced by the
Warrant Agent without the possession of any of the Class A Warrants or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the registered holders of the Class A Warrant Certificates,
as their respective rights or interests may appear.
G. The Warrant Agent and any stockholder, director, officer or employee
of the Warrant Agent may buy, sell or deal in any of the Class A Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
H. The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from a
Chairman or co-Chairman of the Board or President or a Vice President or the
Secretary or the Controller of the Company, and to apply to such officers for
advice or instructions in connection with the Warrant Agent's duties, and it
shall not be liable for any action taken or suffered or omitted by it in good
faith in accordance with instructions of any such officer.
I. The Warrant Agent will not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Class A Warrant Certificates to be complied with by the Company.
J. The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, however, that reasonable care shall
have been exercised in the selection and continued employment of such attorneys,
agents and employees.
K. The Warrant Agent will not incur any liability or responsibility to
the Company or to any holder of any Class A Warrant Certificate for any action
taken, or any failure to take action, in reliance on any notice, resolution,
waiver, consent, order, certificate, or other paper,
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document or instrument reasonably believed by the Warrant Agent to be genuine
and to have been signed, sent or presented by the proper party or parties.
L. The Warrant Agent will act hereunder solely as agent of the Company
in a ministerial capacity, and its duties will be determined solely by the
provisions hereof. The Warrant Agent will not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, bad faith or willful conduct.
Section 21. CHANGE OF WARRANT AGENT
The Warrant Agent may resign and be discharged from its duties under
this Agreement upon 30 days' prior notice in writing mailed, by registered or
certified mail, to the Company. The Company may remove the Warrant Agent or any
successor warrant agent upon 30 days' prior notice in writing, mailed to the
Warrant Agent or successor warrant agent, as the case may be, by registered or
certified mail. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent and shall, within 15 days following such appointment, give
notice thereof in writing to each registered holder of the Class A Warrant
Certificates. If the Company shall fail to make such appointment within a period
of 15 days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent, then the Company agrees to perform the duties of the Warrant
Agent hereunder until a successor Warrant Agent is appointed. After appointment
and execution of a copy of this Agreement in effect at that time, the successor
Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer to
the successor Warrant Agent, within a reasonable time, any property at the time
held by it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for the purpose. Failure to give any notice provided for
in this Section, however, or any defect therein shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or the appointment
of the successor warrant agent, as the case may be.
Section 22. ISSUANCE OF NEW CLASS A WARRANT CERTIFICATES
Notwithstanding any of the provisions of this Agreement or the several
Class A Warrant Certificates to the contrary, the Company may, at its option,
issue new Class A Warrant Certificates in such form as may be approved by its
Board of Directors to reflect any adjustment or change in the Exercise Price or
the number or kind of shares purchasable under the several Class A Warrant
Certificates made in accordance with the provisions of this Agreement.
Section 23. NOTICES
Notice or demand pursuant to this Agreement to be given or made on the
Company by the Warrant Agent or by the registered holder of any Class A Warrant
Certificate shall be sufficiently given or made if sent by first-class or
registered mail, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent) as follows:
Amazon Herb Company
Jupiter, FL
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Subject to the provisions of Section 21, any notice pursuant to this
Agreement to be given or made by the Company or by the holder of any Class A
Warrant Certificate to or on the Warrant Agent shall be sufficiently given or
made if sent by first-class or registered mail, postage prepaid, addressed
(until another address is filed in writing by the Warrant Agent with the
Company) as follows:
EQUISERVE TRUST COMPANY
150 Royall Street
Canton, MA 02021
Any notice or demand authorized to be given or made to the registered
holder of any Class A Warrant Certificate under this Agreement shall be
sufficiently given or made if sent by first-class or registered mail, postage
prepaid, to the last address of such holder as it shall appear on the registers
maintained by the Warrant Agent.
16
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Section 24. MODIFICATION OF AGREEMENT
The Warrant Agent may, without the consent or concurrence of the Class
A Warrantholders, by supplemental agreement or otherwise, concur with the
Company in making any changes or corrections in this Agreement that the Warrant
Agent shall have been advised by counsel (who may be counsel for the Company)
are necessary or desirable to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, or to make any other provisions in regard to matters or questions
arising hereunder and which shall not be inconsistent with the provisions of the
Class A Warrant Certificates and which shall not adversely affect the interests
of the Class A Warrantholders. As of the date hereof, this Agreement contains
the entire and only agreement, understanding, representation, condition,
warranty or covenant between the parties hereto with respect to the matters
herein, supersedes any and all other agreements between the parties hereto
relating to such matters, and may be modified or amended only by a written
agreement signed by both parties hereto pursuant to the authority granted by the
first sentence of this Section.
Section 25. SUCCESSORS
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 26. FLORIDA CONTRACT
This Agreement and each Class A Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Florida and
for all purposes shall be construed in accordance with the laws of said State.
Section 27. TERMINATION
This Agreement shall terminate as of the close of business on the
Expiration Date, or such earlier date upon which all Class A Warrants shall have
been exercised or redeemed, except that the Warrant Agent shall account to the
Company as to all Class A Warrants outstanding and all cash held by it as of the
close of business on the Expiration Date.
Section 28. BENEFITS OF THIS AGREEMENT
Nothing in this Agreement or in the Class A Warrant Certificates shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent, and their respective successors and assigns hereunder and the
registered holders of the Class A Warrant Certificates any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent, their respective
successors and assigns hereunder and the registered holders of the Class A
Warrant Certificates.
Section 29. DESCRIPTIVE HEADINGS
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The descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
Section 30. Dispute Resolution
The parties shall attempt amicably to resolve disagreements by
negotiating with each other. In the event that the matter is not amicably
resolved through negotiation, any controversy, dispute or disagreement arising
out of or relating to this agreement (a "controversy") shall be submitted to a
nationally recognized arbitration association, such as the American Arbitration
Association, for final binding arbitration, which shall be conducted by a single
arbitrator (the "arbitrator") in West Palm Beach, Florida, pursuant to the
American Arbitration Association Rules (the "rules"). Notwithstanding anything
to the contrary contained in the Rules, the Arbitrator shall not award
consequential, exemplary, incidental, punitive or special damages.
If any part shall desire relief of any nature whatsoever from any other
party as a result of any Controversy, such party will initiate such arbitration
proceedings within a reasonable time, but in no event more than one (1) year
after the facts underlying said Controvery first arise or become known to the
party seeking relief (whichever is later). The failure of such party to
institute such proceedings within said period shall be deemed a full waiver of
any claim for such relief. Arbitrator may award the prevailing party its costs
for the arbitration proceeding; including its reasonable attorneys' fees and
costs. The parties agree that the decision and award of the Arbitrator shall be
taken, but such award or decision may be entered as a judgment and enforced in
any court having jurisdiction over the party against whom enforcement is sought.
Any equitable relief awarded under this paragraph shall be dissolved upon
issuance of the Arbitrator's decision and order.
Notwithstanding the provisions for dispute resolution, in the event of
a breach or threatened breach by any party to this agreement, either party shall
be entitled in order to maintain the status quo and pending the outcome of any
arbitration pursuant to this agreement, seek an injunction or similar equitable
relief restraining either party, as the case may be, from commiting or
continuing any such breach or threatened breach or granting specific performance
of any act required to be performed without the necessity of showing that money
damages would not afford an adequate remedy and without the necessity of posting
any bond or other security. The parties hereto hereby consent to the
jurisdiction of the Federal district courts for the Southern District of
Florida, and the Florida state courts located in 15th Circuit Court for any
proceedings under this paragraph. The parties agree that the availability of
arbitration in the agreement shall not be used by any party as grounds for the
dismissal of an injunctive action instituted by the other party.
Section 31. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
Amazon Herb Company
By:_________________________________________
Title:______________________________________
EQUISERVE TRUST COMPANY
By:_________________________________________
Title:______________________________________
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EXHIBIT A
VOID AFTER 5 P.M. EASTERN TIME ON DECEMBER __, 2001
----------
CLASS A WARRANTS TO PURCHASE COMMON STOCK
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
or registered assigns, is the registered holder of the number of Class A
Warrants ("Class A Warrants") set forth above. Each Class A Warrant entitles the
holder thereof to purchase from Amazon Herb Company, a Corporation incorporated
under the laws of the State of Florida ("Company"), subject to the terms and
conditions set forth hereinafter and in the Class A Warrant Agreement
hereinafter more fully described (the "Class A Warrant Agreement") referred to,
at any time on or before the close of business on December 1, 2001 or, if such
Class A Warrant is redeemed as provided in the Class A Warrant Agreement, at any
time prior to the effective time of such redemption (the "Expiration Date"), one
fully paid and non-assessable share of Common Stock of the Company ("Common
Stock") upon presentation and surrender of this Class A Warrant Certificate,
with the instructions for the registration and delivery of Common Stock filled
in, at the stock transfer office in Boston, Massachusetts, of EQUISERVE TRUST
COMPANY, Warrant Agent of the Company ("Warrant Agent") or of its successor
warrant agent or, if there be no successor warrant agent, at the corporate
offices of the Company, and upon payment of the Exercise Price (as defined in
the Class A Warrant Agreement) and any applicable taxes paid either in cash, or
by certified or official bank check, payable in lawful money of the United
States of America to the order of the Company. Each Class A Warrant initially
entitles the holder to purchase one share of Common Stock for $7.50 until after
9 months after the date of the initial sales prospectus, and $9 thereafter. The
number and kind of securities or other property for which the Class A Warrants
are exercisable are subject to further adjustment in certain events, such as
mergers, splits, stock dividends, recapitalizations and the like, to prevent
dilution. The Company may redeem any or all outstanding and unexercised Class A
Warrants at any time if the Daily Price has exceeded $6.00 for ten consecutive
trading days immediately proceeding the date of notice of such redemption, upon
30 days notice, at a price equal to $.25 per Class A Warrant. For the purpose of
the foregoing sentence, the term "Daily Price" shall mean, for any relevant day,
the closing bid price on that day as reported by the principal exchange or
quotation system on which prices for the Common Stock are reported. All Class A
Warrants not theretofore exercised or redeemed will expire on December ___,
2001.
This Class A Warrant Certificate is subject to all of the terms,
provisions and conditions of the Class A Warrant Agreement, dated as of November
30, 1999 ("Class A Warrant Agreement"), between the Company and the Warrant
Agent, to all of which terms, provisions and conditions the registered holder of
this Class A Warrant Certificate consents by acceptance hereof. The Class A
Warrant Agreement is incorporated herein by reference and made a part hereof and
reference is made to the Class A Warrant Agreement for a full description of the
rights, limitations of rights, obligations, duties and immunities of the Warrant
Agent, the Company and the holders of the Class A Warrant Certificates. Copies
of the Class
<PAGE>
A Warrant Agreement are available for inspection at the stock transfer office of
the Warrant Agent or may be obtained upon written request addressed to the
Company at 1002 Jupiter Park Lane, Jupiter, Florida 33458.
The Company shall not be required upon the exercise of the warrants
evidenced by this Class A Warrant Certificate to issue fractions of Class A
Warrants, Common Stock or other securities, but shall make adjustment therefor
in cash on the basis of the current market value of any fractional interest as
provided in the Class A Warrant Agreement.
In certain cases, the sale of securities by the Company upon exercise
of Class A Warrants would violate the securities laws of the United States,
certain states thereof or other jurisdictions. The Company has agreed to use all
commercially reasonable efforts to cause a registration statement to continue to
be effective during the term of the Class A Warrants with respect to such sales
under the Securities Act of 1933, and to take such action under the laws of
various states as may be required to cause the sale of securities upon exercise
to be lawful. However, the Company will not be required to honor the exercise of
Class A Warrants if, in the opinion of the Board of Directors, upon advice of
counsel, the sale of securities upon such exercise would be unlawful. In certain
cases, the Company may, but is not required to, purchase Class A Warrants
submitted for exercise for a cash price equal to the difference between the
market price of the securities obtainable upon such exercise and the exercise
price of such Class A Warrants.
This Class A Warrant Certificate, with or without other Certificates,
upon surrender to the Warrant Agent, any successor warrant agent or, in the
absence of any successor warrant agent, at the corporate offices of the Company,
may be exchanged for another Class A Warrant Certificate or Certificates
evidencing in the aggregate the same number of Class A Warrants as the Class A
Warrant Certificate or Certificates so surrendered. If the Class A Warrants
evidenced by this Class A Warrant Certificate shall be exercised in part, the
holder hereof shall be entitled to receive upon surrender hereof another Class A
Warrant Certificate or Certificates evidencing the number of Class A Warrants
not so exercised.
No holder of this Class A Warrant Certificate, as such, shall be
entitled to vote, receive dividends or be deemed the holder of Common Stock or
any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose whatever, nor shall anything contained in the
Class A Warrant Agreement or herein be construed to confer upon the holder of
this Class A Warrant Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof or give or withhold
consent to any corporate action (whether upon any matter submitted to
stockholders at any meeting thereof, or give or withhold consent to any merger,
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, conveyance or
otherwise) or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Class A Warrant Agreement) or to receive
dividends or subscription rights or otherwise until the Class A Warrants
evidenced by this Class A Warrant Certificate shall have been exercised and the
Common Stock purchasable upon the exercise thereof shall have become deliverable
as provided in the Class A Warrant Agreement.
If this Class A Warrant Certificate shall be surrendered for exercise
within any period during which the transfer books for the Company's Common Stock
or other class of stock
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purchasable upon the exercise of the Class A Warrants evidenced by this Class A
Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.
Every holder of this Class A Warrant Certificate by accepting the same
consents and agrees with the Company, the Warrant Agent, and with every other
holder of a Class A Warrant Certificate that:
(a) this Class A Warrant Certificate is transferable on the registry
books of the Warrant Agent only upon the terms and conditions set forth in the
Class A Warrant Agreement, and
(b) the Company and the Warrant Agent may deem and treat the person in
whose name this Class A Warrant Certificate is registered as the absolute owner
hereof (notwithstanding any notation of ownership or other writing thereon made
by anyone other than the Company or the Warrant Agent) for all purposes whatever
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary.
The Company shall not be required to issue or deliver any certificate
for shares of Common Stock or other securities upon the exercise of Class A
Warrants evidenced by this Class A Warrant Certificate until any tax which may
be payable in respect thereof by the holder of this Class A Warrant Certificate
pursuant to the Class A Warrant Agreement shall have been paid, such tax being
payable by the holder of this Class A Warrant Certificate at the time of
surrender.
This Class A Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
WITNESS the facsimile signatures of the proper officers of the Company
and its corporate seal.
Dated:
Amazon Herb Company
By:_______________________________
Chief Executive Officer
Attest:
By:_______________________________
Secretary
3
Registration Statement Form S-4
December 28, 1999
Amazon Herb Company
1002 Jupiter Park Lane
Jupiter, FL 33458
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We are counsel for Amazon Herb Company, a Florida corporation (the
"Company") in connection with its proposed public offering under the Securities
Act of 1933, as amended, of up to 5,000,000 shares of common stock of $.01 par
value Common Stock ("Common Stock") through a Registration Statement on Form S-4
("Registration Statement") as to which this opinion is a part, to be filed with
the Securities and Exchange Commission (the "Commission").
In connection with rendering our opinion as set forth below, we have
reviewed and examined originals or copies identified to our satisfaction of the
following:
(1) Articles of Incorporation, and amendment thereto, of the Company as
filed with the Secretary of State of the State of Florida.
(2) Corporate minutes containing the written deliberations and
resolutions of the Board of Directors and shareholders of the Company.
(3) The Registration Statement and the Preliminary Prospectus contained
within the Registration Statement.
(4) The other exhibits to the Registration Statement.
We have examined such other documents and records, instruments and
certificates of public officials, officers and representatives of the Company,
and have made such other investigations as we have deemed necessary or
appropriate under the circumstances.
Based upon the foregoing and in reliance thereon, it is our opinion
that the Common Stock will, upon the purchase, receipt of full payment, issuance
and delivery in accordance with the terms of the offering described in the
Registration Statement, be fully and validly authorized, legally issued fully
paid and non-assessable.
We hereby consent to the use of this opinion, as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus constituting a part thereof.
Very truly yours,
Hackney & Miller, P.A.
EXHIBIT 10.0
AMAZON HERB COMPANY
1998 STOCK OPTION PLAN
Amazon Herb Company, a Florida corporation (the "Company"), hereby
establishes this 1998 Stock Option Plan (the "Plan") effective as of May 1,
1998.
1. Purpose. The purpose of the Plan is to attract and retain the best
available talent and encourage the highest level of performance by executive
officers, key employees, directors, advisors and consultants, and to provide
them with incentives to put forth maximum efforts for the success of the
Company's business, in order to serve the best interests of the Company and
its stockholders. All options granted under the Plan are intended to be
nonstatutory stock options.
2. Definitions. The following terms, when used in the Plan with initial
capital letters, will have the following meanings:
(a) "Act" means the Securities Exchange Act of 1934, as in effect from time
to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the U. S. Internal Revenue Code, as in effect from time to
time.
(d) "Common Stock" means the common stock, par value $.01 per share, of the
Company or any security into which such common stock may be changed by
reason of any transaction or event of the type described in Paragraph
6.
(e) "Compensation Committee" means the Compensation Committee which is a
committee of the Board whose members are appointed by the Board from
time to time. All of the members of the Compensation Committee, which
may not be less than two, are intended at all times to qualify as
"outside directors" within the meaning of Section 162(m) of the Code
and as "Non-Employee Directors" within the meaning of Rule 16b-3;
provided, however, that the failure of a member of such committee to so
qualify shall not be deemed to invalidate any Stock Option granted by
such committee.
(f) "Date of Grant" means the date specified by the Compensation Committee
or the Board, as applicable, on which a grant of Stock Options will
become effective (which date will not be earlier than the date on which
such committee or the Board takes action with respect thereto).
<PAGE>
(g) "Market Value per Share" means the fair market value per share of the
Common Stock on the Date of Grant as determined by the Compensation
Committee or the Board, as applicable.
(h) "Option Price" means the purchase price per share payable on exercise
of a Stock Option.
(i) "Participant" means a person who is selected by the Compensation
Committee or the Board, as applicable, to receive Stock Options under
Paragraph 5 of the Plan and who is at that time (i) an executive
officer or other key employee of the Company or any Subsidiary, (ii) an
advisor or consultant to the Company or any Subsidiary, or (iii) a
member of the Board.
(j) "Rule 16b-3" means Rule 16b-3 under Section 16 of the Act, as such Rule
is in effect from time to time.
(k) "Stock Option" means the right to purchase a share of Common Stock upon
exercise of an option granted pursuant to Paragraph 5.
(l) "Subsidiary" means any corporation, partnership, joint venture or other
entity in which the Company owns or controls, directly or indirectly,
not less than 50% of the total combined voting power or equity
interests represented by all classes of stock issued by such
corporation, partnership, joint venture or other entity.
3. Shares Available Under Plan. The shares of Common Stock which may be issued
under the Plan will not exceed in the aggregate 1,000,000 shares, subject
to adjustment as provided in this Paragraph 3. Such shares may be shares of
original issuance or treasury shares or a combination of the foregoing.
(a) Any shares of Common Stock which are subject to Stock Options that are
terminated unexercised, forfeited or surrendered or that expire for any
reason will again be available for issuance under the Plan.
(b) The shares available for issuance under the Plan also will be subject
to adjustment as provided in Paragraph 6.
4. Individual Limitation on Stock Options. The maximum aggregate number of
shares of Common Stock with respect to which Stock Options may be
granted to any Participant during any calendar year will not exceed
100,000 shares.
5. Grants of Stock Options. The Compensation Committee or the Board may
from time to time authorize grants to any Participant of Stock Options
upon such terms and conditions as such committee or the Board, as
applicable, may determine in accordance with the provisions set forth
below.
<PAGE>
(a) Each grant will specify the number of shares of Common Stock to which
it pertains.
(b) Each grant will specify the Option Price, which will not be less than
100% of the Market Value per Share on the Date of Grant.
(c) Each grant will specify whether the Option Price will be payable (i) in
cash or by check acceptable to the Company, (ii) by the transfer to the
Company of shares of Common Stock owned by the Participant for at least
six months (or, with the consent of the Compensation Committee or the
Board, as applicable, for less than six months) having an aggregate
fair market value per share at the date of exercise equal to the
aggregate Option Price, (iii) with the consent of the Compensation
Committee or the Board, as applicable, by authorizing the Company to
withhold a number of shares of Common Stock otherwise issuable to the
Participant having an aggregate fair market value per share on the date
of exercise equal to the aggregate Option Price or (iv) by a
combination of such methods of payment; provided, however, that the
payment methods described in clauses (ii) and (iii) will not be
available at any time that the Company is prohibited from purchasing or
acquiring such shares of Common Stock. Any grant may provide for
deferred payment of the Option Price from the proceeds of sale through
a bank or broker of some or all of the shares to which such exercise
relates.
(d) Successive grants may be made to the same Participant whether or not
any Stock Options previously granted to such Participant remain
unexercised.
(e) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any
Subsidiary and/or any other conditions to be satisfied before the Stock
Options or installments thereof will become exercisable, and any grant
may provide, or may be amended to provide, for the earlier exercise of
the Stock options in the event of a change in control of the Company
(as defined in the stock option agreement evidencing such grant or in
any agreement referred to in such stock option agreement) or in the
event of any other similar transaction or event.
(f) Each Stock Option granted pursuant to this Paragraph 5 may be made
subject to such transfer restrictions as the Compensation Committee or
the Board, as applicable, may determine.
(g) Each grant will be evidenced by a stock option agreement executed on
behalf of the Company by the Chief Executive Officer (or another
officer designated by the Compensation Committee or the Board, as
applicable) and delivered to the Participant and containing such
further terms and provisions, consistent with the Plan, as such
committee or the Board, as applicable, may approve.
6. Adjustments. The Compensation Committee or the Board will make or provide
for such adjustments in the maximum number of shares specified in Paragraph 3
and Paragraph
<PAGE>
4, in the number of shares of Common Stock covered by outstanding Stock
Options granted hereunder, in the Option Price applicable to any such Stock
Options, and/or in the kind of shares covered thereby (including shares of
another issuer), as such committee or the Board, as applicable, in its sole
discretion, exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company,
merger, consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase securities or any
other corporate transaction or event having an effect similar to any of the
foregoing. In the event the Compensation Committee disagrees with the Board
with respect to the foregoing adjustments, the Board's determination will be
final and conclusive. Any fractional shares resulting from the foregoing
adjustments will be eliminated.
7. Withholding of Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any
benefit realized by a Participant under the Plan, or is requested by a
Participant to withhold additional amounts with respect to such taxes, and
the amounts available to the Company for such withholding are insufficient,
it will be a condition to the realization of such benefit that the
Participant make arrangements satisfactory to the Company for payment of the
balance of such taxes required or requested to be withheld. In addition, if
permitted by the Compensation Committee or the Board, a Participant may elect
to have any withholding obligation of the Company satisfied with shares of
Common Stock that would otherwise be transferred to the Participant on
exercise of the Stock Option.
8. Administration of the Plan.
(a) The Plan will be administered by Compensation Committee and the Board.
(b) The Compensation Committee and the Board have the full authority and
discretion to administer the Plan and to take any action that is
necessary or advisable in connection with the administration of the
Plan, including without limitation the authority and discretion to
interpret and construe any provision of the Plan or of any agreement,
notification or document evidencing the grant of a Stock Option. The
interpretation and construction by the Compensation Committee or the
Board, as applicable, of any such provision and any determination by
the Compensation Committee or the Board pursuant to any provision of
the Plan or any such agreement, notification or document will be final
and conclusive; provided, that in the event the Compensation Committee
disagrees with the Board with respect to such interpretation,
construction or determination, the Board's determination will be final
and conclusive. No member of the Compensation Committee or the Board
will be liable for any such action or determination made in good faith.
(c) Notwithstanding any provision of the Plan to the contrary, the
Compensation Committee will have the exclusive authority and discretion
to take any action required or permitted to be taken under the
provisions of Paragraph 6, Paragraph 8(b),
<PAGE>
Paragraph 9(a) and Paragraph 9(b) with respect to Stock Options granted
under the Plan that are intended to comply with the requirements of
Section 162(m) of the Code.
9. Amendments and Related Matters.
(a) The Compensation Committee or the Board, as applicable, may, without
the consent of the Participant, amend any agreement evidencing a Stock
Option granted under the Plan, or otherwise take action, to accelerate
the time or times at which the Stock Option may be exercised, to extend
the expiration date of the Stock Option, to waive any other condition
or restriction applicable to such Stock Option or to the exercise of
such Stock Option, to reduce the exercise price of such Stock Option,
to amend the definition of a change in control of the Company (if such
a definition is contained in such agreement) to expand the events that
would result in a change in control of the Company and to add a change
in control provision to such agreement (if such provision is not
contained in such agreement) and may amend any such agreement in any
other respect with consent of the Participant.
(b) The Plan may be amended from time to time by the Board or any duly
authorized committee thereof. In the event any law, or any rule or
regulation issued or promulgated by the Internal Revenue Service, the
Securities and Exchange Commission, the National Association of
Securities Dealers, Inc., any stock exchange upon which the Common
Stock is listed for trading, or any other governmental or
quasi-governmental agency having jurisdiction over the Company, the
Common Stock or the Plan, requires the Plan to be amended, or in the
event Rule 16b-3 is amended or supplemented (e.g., by additional of
alternative rules) or any of the rules under Section 16 of the Act are
amended or supplemented, in either event to permit the Company to
remove or lessen any restrictions on or with respect to Stock Options,
the Compensation Committee and the Board each reserves the right to
amend the Plan to extent of any such requirement, amendment or
supplement, and all Stock Options then outstanding will be subject to
such amendment.
(c) The Plan may be terminated at any time by action of the Board. The
termination of the Plan will not adversely affect the terms of any
outstanding Stock Option. The term of all options may not exceed ten
years. If not terminated earlier, the 1998 Stock Option Plan will
terminate on May 1, 2008.
(d) The Plan will confer upon any Participant any right with respect to
continuance of employment or other service with the Company or any
Subsidiary, nor will it interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate a
Participant's employment or other service at any time.
EXHIBIT 10.1
PURCHASE AGREEMENT BY AND BETWEEN
AMAZON HERB COMPANY AND TERRADYNE NATURALE, INC.
AGREEMENT
IT IS HEREBY AGREED, by and between, Terradyne Naturale, Inc., hereinafter
referred to as "Supplier" and Amazon Herb Company, hereinafter referred to as
"Purchaser", for and in consideration of the covenants contained herein as
follows:
WHEREAS, the Supplier can supply a sufficient amount of "Cat's Claw Extract"
hereinafter referred to as "Extract" to meet the needs of the Purchaser, and
WHEREAS, in order for the Supplier to produce the amount of "Extract" needed
they will need to purchase a substantial amount of new equipment, and
WHEREAS, it will be approximately April 1, 1998, before sufficient "Extract" can
be produced, and
WHEREAS, said parties desire to document this supply-purchase agreement,
SAID PARTIES AGREE AS FOLLOWS:
1. That the Supplier will supply and the Purchaser will purchase 1,000 kilos
of "Cat's Claw Extract" per month, starting April 1, 1998.
2. That the Purchaser will pay the sum of $44.00 per kilo of said Extract,
f.o.b. Woodbine, Iowa.
3. That the purchaser will purchase 1,000 kilos of Extract per month
commencing April 1, 1998, and will continue for a total of 12 months a
minimum order for this product.
4. That the Purchaser shall pay for said "extract" within 30 days, and any
delinquent account shall bear interest at the rate of 1.5 percent per
month until paid.
5. That the Supplier agrees not to market or sell any of said "Extract" to
another purchaser within the period of this initial contract.
6. That the Supplier does guarantee that it can process the volume of
"Extract" as stated herein. This guarantee is subject to the condition
that the purchaser supplies the necessary raw materials of "Cat's Claw
Herb", on a timely basis so that the supplier can process said "Extract."
<PAGE>
7. As liquidated damages, in the event the purchaser does not purchase the
full amount of "Extract" in accordance with this purchase agreement, the
purchaser agrees that the supplier shall be entitled to 25% of the gross
contract price remaining unpaid at the time as liquidated damages for its
failure to complete the contract.
Dated this 5th day of February, 1998.
TERRADYNE NATURALE, INC. AMAZON HERB COMPANY
BY:/S/ SHANE HINZE, PRESIDENT BY: /S/ JOHN EASTERLING, PRESIDENT
-------------------------- -------------------------------
Shane Hinze, President John Easterling, President
EXHIBIT 10.2
BUSINESS LEASE
STANDARD LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into the date first appearing below, by
and between the below specified Landlord, Tenant and Guarantor(s).
For and in consideration of these premises, the rents reserved, and the
agreements and covenants herein contained, the Landlord does hereby lease and
demise unto the Tenant, and the Tenant hereby lease from the Landlord, the
premises specified below upon the terms and conditions set forth herein.
ARTICLE I. GENERAL SPECIFICATIONS
<TABLE>
<S> <C> <C>
DATE: 5/8/98
LANDLORD: Name JUPITER INDUSTRIAL ASSOCIATES
Address 880 JUPITER PARK DRIVE, #14 Phone 747-0600
TENANT: Name: AMAZON HERB COMPANY
Address 725 N A1A, #C-115 Phone 575-7663
BROKER: Name(s) REBEL COOK REAL ESTATE & COLLINS GROUP Phone 622-9920
GUARANTOR(S): Name(s)
__________________________________________________________________
Address
__________________________________________________Phone_________________
PREMISES: Address 1002 JUPITER PARK LANE
Unit Number 1 Approximate Sq. Ft 5,194 Percentage__________
PARKING: ________________________ USE: OFFICE WAREHOUSE
SECURITY DEPOSIT: $4111.91 1st $4358.62 Last Month $4358.62
TERM: Original Term for _24 Months, commencing the _15TH_ day of __JULY____ 1998
______ Option(s) to Extend Term for _________ Months (each) (adjusted
each year according to Article IV).
BASE RENTS: $36,358.00 per year for year 1, payable $3029.83 per month
(adjusted each year according to Article IV).
</TABLE>
<PAGE>
OTHER CHARGES: $12,985.00_ per year for year 1, payable $_1,082.08_
per month (estimated cost for taxes, insurance and
maintenance) at the rate of $2.50_ per square foot of tenant
square footage for the first year and subject to adjustment as
per Article IV.
Plus 6% SALES TAX $ 2,960.58 Annually, Payable $246.71 per
month.
TOTAL RENT & CHARGES: Year 1 $4358. per month.
Initialed by: _______________ ________________
Landlord Tenant
ARTICLE II. DEFINITIONS
The following definitions shall apply:
A. Base Rent: The Base Rent to be paid by Tenant pursuant to the provisions
herein and the rental of the first term.
B. Adjusted Annual Rent: The Base Rent as defined above, hereafter increased
in accordance with the provisions hereof, but in no event less then the Base
Rent stipulated for the applicable term.
C. Rentable Area: All space in the building rentable to tenants, whether or
not rented or occupied.
D. Tenant's Share: The percentage which the area of said premises is of the
total rentable area of the building, which percentage is agreed upon as
specified under Article I. In the event that additional areas shall be added to
or included under this Lease, said agreed percentage shall be proportionately
increased.
E. Common Areas and Facilities: All that part of the Premises not leased to
tenants of the premises and intended for the common use of all tenants of the
Premises, including among other facilities, parking areas, private streets and
allies, landscaping, curbs, loading areas, sidewalks and lighting facilities,
pylon signs, maintained by the Landlord in the Premises.
ARTICLE III. TERM OF LEASE
A. ORIGINAL TERM: The Tenant hereby takes and holds the Premises specified
under Article I for the entire duration of the Original Term as specified
thereunder.
B. COMMENCEMENT DATE: The Original Term will commence on the date specified
under Article I.. The Premises will be ready for occupancy by the Tenant on or
prior to the commencement date. However, in the event the Landlord is unable to
deliver possession of the premises to the Tenant as soon as practicable
thereafter, and the rental under this lease will be abated proportionately
during such time Tenant does not have possession. Tenant shall be deemed to have
possession upon issuance of a certificate of completion or certificate of
occupancy for the demised premises. In no event shall the Tenant have any claim
for damages (except for the abatement of rent as herein specified) due to the
failure of the Landlord to deliver possession of the premises to the Tenant on
or before said date.
C. OPTIONS TO EXTEND: Providing Tenant is not in default in respect to any
provision of this lease at the time of extension, Tenant shall have the right to
extend the term of this lease for the number of additional periods of time, and
for the length of each such additional period, as designated in Article I,
provided however that written notice is given the Landlord of such intention to
extend the lease not less than one hundred twenty days prior to the expiration
of the Original Term or any prior extended term thereof. During any extended
term of the lease, all provisions of this lease shall remain in full force and
effect, except that the Base Rent for each year of any Option Term shall be
adjusted as herein provided, but in no event to be less than the year previous
to the option term. Lessee shall have no further right or option to renew or
extend the term of this Lease.
<PAGE>
D. HOLDING OVER: In the event Tenant remains in possession of the Premises
after the expiration of this lease or any extended term thereof, it shall be
deemed a tenancy from month to month, subject to all conditions, provisions and
obligations of such tenancy, except that the monthly rental shall be twice the
monthly rental last in effect on this Lease.
ARTICLE IV. RENT AND OTHER CHARGES
A. BASE RENT: Tenant shall pay in advance to the Landlord, without prior
demand, in lawful money of the United States, on the first day of each month,
without any deduction or off-set whatsoever throughout the term of this Lease,
the sum specified as Base Rent under Article I, together with all other
additional rent and all other sums and charges payable by Tenant hereunder as
herein provided, plus any Florida State Sales or Use Tax. Such payment shall be
made at the office of the Landlord or at such place Landlord may from time to
time designate by written notice directed to Tenant at the Demised Premises. In
the event the commencement date of the Original Term is other than the first day
of a month, then the Tenant shall pay rent for such fractional month prorated on
basis of a thirty day month.
B. ADJUSTED ANNUAL RENT: The base rent shall be adjusted for each lease year,
as of the first day of January, in proportion to the increase in the Consumer
Price Index as of January 1st, to the CPI index at the commencement date of this
lease. The standard for measuring such adjustments shall be the Consumer Price
Index, United States average on all items and commodity groups, issued by the
Bureau of Labor Statistics of the United States, hereinafter referred to as the
"Index". The "Index" for the first month of the first term of this lease shall
be the comparison number from which future adjustments are made. Not
withstanding anything contained herein to the contrary the annual minimum base
rent adjustment shall be Three Percent (3%) for each lease year and the maximum
adjustment to base rent shall be Five Percent (5%) for each lease year.
C. TAXES PAYABLE BY TENANT: The Tenant agrees to pay to Landlord, as
additional rental, in addition to the rental and other sums due hereunder,
during the term of this lease and any extended term thereof, his proportionate
share of all Real Estate Taxes, and all assessments which may be levied against
the Complex, immediately when first due, together with all costs and expenses
(including attorneys' fees and expenses) incurred by Landlord in connection
therewith, for such calendar year. The copy of the tax bill submitted by
Landlord to Tenant shall be sufficient evidence of the amount of taxes assessed
or levied against the parcel of real property to which such bill relates. CAM
rent increases shall be a maximum of Five Percent (5%) increase over the
previous year excluding increases for real estate taxes and insurance which will
be billed at Tenants actual proportionate share.
D. MANNER OF PAYMENT OF TAXES BY TENANT: The amounts payable by Tenant
pursuant to the foregoing provision of this Lease shall be estimated by Landlord
for such period as Landlord may determine, not exceeding one year, and Tenant
agrees to deposit with Landlord such amounts in monthly installments in advance
on the first day of each calendar month during such period, such installments to
be in addition to all other payments of rent provided for in this Lease.
E. PRORATIONS OF TAXES: Proportionate share of all Real Property Taxes
required to be paid by Tenant hereunder during the first and last calendar years
of the term of this Lease shall be prorated as of the first and last days of the
term of this lease.
F. INSURANCE: Tenant shall pay as additional rent its proportionate share of
all premiums for insurance policies carried by the Landlord for its protection
of the complex against all perils, liability and rent loss due to perils, and
Tenant shall pay such amounts to Landlord in the manner hereinafter specified.
G. INSURANCE - MANNER OF PAYMENT OF INSURANCE PREMIUMS BY TENANT: The
Proportionate Share of Insurance premiums payable by Tenant pursuant to the
foregoing provision of this Lease may, at the option of Landlord, be estimated
by Landlord for such period in advance as Landlord may determine not exceeding
one (1) year, and Tenant agrees, upon the request of the Landlord, to deposit
with Landlord such
<PAGE>
amounts in monthly installments in advance on the first day of each calendar
month during such period; such installments to be in addition to all other
payments of rent provided for in this Lease.
H. COST OF MAINTENANCE OF COMMON AREAS AND FACILITIES: In each Lease year,
Tenant will pay to Landlord, in addition to the rental specified in Article I
hereof, as additional rent, its Proportionate Share of Landlord's costs and
expenses of maintaining, operating and repairing the Common Areas and Facilities
(including parking areas), during such Lease Year, including all common area
utilities (gas, water, sewer, trash removal and electric), monthly condominium
dues if any, and administrative fee of fifteen (15%) percent of such total
costs.
I. MANNER OF PAYMENT OF TENANT'S PROPORTIONATE SHARE OF MAINTENANCE OF COMMON
AREAS: The amounts of which Tenant is to pay its proportionate share pursuant to
Section H above, shall be estimated by Landlord for such period as Landlord may
determine not exceeding one year, and Tenant agrees to pay Landlord such
estimated amount of its proportionate share of such amounts in monthly
installments in advance on the first day of each month together with and in
addition to all other rental payments provided for in this Lease.
J. UTILITY CHARGES: Tenant shall be solely responsible for and shall promptly
pay all charges for heat, air conditioning, water, electricity, telephone, storm
and sanitary sewer service, janitor service, garbage removal, window cleaning,
and all other services and utilities supplied to or used or consumed in the
Leased Premises. In no event shall Landlord be liable for any interruption or
failure in the supply of any such utilities to Tenant or to the Leased Premises,
nor shall any such failure or interruption constitute an actual or constructive
eviction of Tenant from the Leased Premises or result in or give rise to any
abatement in any rent received hereunder, unless such interruption continues for
more than Three (3) business days and has not been caused by an act of God. Rent
will be abated for the length of interruption provided Tenant does not occupy
space during interruption. In the event of an electrical outage where Tenant is
able to occupy the space, should the electrical outage continue for more than
One (1) business day Landlord agrees to reimburse Tenant for the price of
Tenant's cost to rent a generator for Tenant's humidor. In this event, Tenant
shall be responsible for full rental payment.
K. LATE PAYMENT CHARGE: In the event any monthly installment of rent is not
paid within ten (10) days after it is due and payable as set forth in this
lease, Tenant agrees to pay as a late charge an amount equal to five (5%)
percent of the monthly installment of rent that is due and payable. In the event
Tenant tenders any payment(s) to Landlord as required under this lease, which
are returned due to insufficient or uncollected funds in Tenant's account,
Tenant agrees to promptly pay to Landlord the sum of Two-Hundred Dollars ($200.)
per check as a service charge. In such event, Landlord may, at its option,
request Tenant's replacement check to be in the form of a certified check or
cashiers check.
L. INTENTIONALLY DELETED.
M. SECURITY DEPOSIT: As security for the faithful performance by Tenant of
all the terms and conditions of this Lease, Tenant has deposited with Landlord a
sum specified under Article I as the Security Deposit. The Landlord may
commingle the security deposit with its other funds and, in the event of a sale
of the building or of the land on which it stands, the Landlord shall transfer
the security deposit to the Buyer or Tenant and the Landlord shall be released
from all Liability to Tenant for the return of such security, and the Tenant
shall look only to the new Landlord for the return of said Security Deposit. The
security deposit shall not be mortgaged, assigned or encumbered by the Tenant
without the written consent of the Landlord. In the event of a permitted
assignment of this lease by Tenant, the security deposit shall be held by
Landlord as a deposit made by the assignee and the Landlord shall have no
further liability with respect to the return of said security deposit to the
Tenant. The security deposit shall be returned to the Tenant, without interest,
upon the expiration of the lease term and any extended term thereof, providing
that Tenant has fully carried out all the terms, covenants and conditions of
this lease.
ARTICLE V. NET LEASE
<PAGE>
A. NET LEASE INTENDED UNLESS EXPRESSLY PROVIDED OTHERWISE: Tenant
acknowledges and agrees that it is intended that this Lease shall be a
completely net lease for Landlord, that Landlord shall not be responsible during
the term of the Lease for any costs, charges, expenses and outlays of any nature
whatsoever arising from or relating to the Leased Premises, or the contents
thereof, excepting only Landlord's income tax in respect to income received from
leasing the Leased Premises, Landlord's corporation franchise tax, and any
payments to be made by Landlord in connection with any mortgage or mortgages
executed by landlord affecting the Leased Premises, and, Tenant shall pay all
charges, costs and expenses of every nature and kind relating to the Leased
Premises and the operation of Tenant's business, and Tenant covenants with
Landlord accordingly.
ARTICLE VI. PREMISES
A. QUIET ENJOYMENT: Tenant, upon paying the rents and performing all of the
terms on its part to be performed, shall peaceably and quietly enjoy the Demised
Premises subject, nevertheless, to the terms of this Lease and to any mortgage,
ground lease or agreements to which this lease is subordinated.
B. USE OF THE PREMISES: During the entire lease term, and all extended terms
thereof, the Demised Premises must be used and occupied for the sole use
specified under Article I and for no other purpose or purposes without the prior
written consent of the Landlord, at the Landlord's sole discretion.
C. SOLICITATION OF BUSINESS: Tenant and Tenant's employees shall not solicit
business in the parking lot or other common areas of the premises, and Tenant
shall not distribute any handbills or other advertising matter in automobiles
parked in the parking areas or in other Common areas of the premises, nor shall
Tenant display any merchandise outside the Leased Premises.
D. PERMITS AND LICENSES: Tenant shall procure at its sole expense any permits
and licenses required for the transaction of business in the Leased Premises and
will at all times comply with all applicable laws, ordinances and governmental
regulations relating to the business of the Tenant conducted at the Leased
Premises.
E. FIRE SALES, AUCTIONS, ETC., PROHIBITED: Tenant shall not conduct within or
from the Leased Premises any fire, auction, bankruptcy, "going-out-of-business"
, "lost-our-lease" , or similar sales, and shall not advertise the same on the
Leased Premises, or operate within the Leased Premises a "wholesale" or "factory
outlet" store, a "second hand" store, or any store conducted in whole or
principally for the sale of second-hand goods or surplus articles, insurance
salvage stock, fire-sale stock or bankruptcy stock.
F. BUSINESS OPERATIONS: Tenant agrees to conduct its business at all times in
a high class and reputable manner. Tenant agrees to comply with all laws, rules
and regulations of Landlord and all governmental authorities respecting the use
of and operations and activities on the premises and in the Complex, including
sidewalks, streets, approaches, drives, parking areas, and shall not make,
suffer or permit any unlawful, improper or offensive use of the premises or
permit any nuisance therein. Tenant shall not make any use of the premises which
would make void or voidable any policy of fire or extended coverage insurance
covering the Complex, and if by reason of any use by Tenant of the Premises or
the keeping by tenant of any inflammable substance in the premises, the hazard
insurance premiums on policies maintained by Landlord shall be increased over
normal rates for the Complex, the amount of the increase in the premium shall be
paid to Landlord by Tenant on Demand. Tenant shall not burn any trash of any
kind in or about the Complex, nor shall Tenant permit rubbish, refuse or garbage
to accumulate or any fire or health hazard to exist in or about the premises.
Tenant shall not display any merchandise of install any showcase, or other
obstructions on the outside of the premises, or in any lobby or passageway
adjoining the same that will extend beyond the borderline of the premises, nor
shall Tenant maintain any loudspeaker devise or any noise making device in such
manner as to be audible to anyone not within the Tenant's premises. Without
consent of the Landlord, the Tenant shall not use the common areas as herein
defined except for ingress and egress to the Complex and the premises.
G. EXAMINATION OF PREMISES: Tenant, having examined the premises, is familiar
with the condition thereof and relying solely on such examination will take them
in their present condition, unless otherwise expressly agreed upon in writing.
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H. ACCEPTANCE: upon the issuance of a certificate of completion or a
certificate of occupancy for the demised premises, Tenant shall be deemed to
have certified to the Landlord and to the holder of any mortgage encumbering all
or part of the Landlord's estate, That the premises have been delivered to it in
accordance with the terms of this Lease and that possession has been accepted by
Tenant, that the term of this lease and the obligation to pay rents have
commenced, that the premises and all other portions of the Complex have been
completed in accordance with the requirements of this lease, and that there is
not then available to Tenant any defense or offset against rent or any violation
of the lease terms on the part of the Landlord. The foregoing provisions shall
be self-operative and no other instrument or certificate shall be required by
the Landlord or any mortgagee unless the Landlord or mortgagee shall deem the
same appropriate, in which event, in confirmation of the foregoing Tenant shall
promptly execute in writing a certificate containing the foregoing.
I. MAINTENANCE BY TENANT: Tenant shall at all times keep and maintain the
interior of the Leased Premises, and all partitions, doors, fixtures, equipment
thereof and improvements thereto, in good order, condition and repair, normal
wear and tear excepted including, but not limited to , plate glass windows, door
closure devices and other exterior openings; window and door frames, molding,
locks and hardware, interior ( lighting, heating, air-conditioning, plumbing and
other electrical, mechanical and electromotive installation, equipment and
fixtures; sign, placards, decoration or advertising media of any type).
J. ACCESS: Landlord shall have the right to place, maintain and repair all
utility conduits and equipment of any kind, upon and under the Demised Premises
as may be necessary for the servicing of the Demised Premises and other portions
of the Complex. Landlord shall also have the right to enter the Demised Premises
at all reasonable times, upon 24 hours prior notice, to inspect or to exhibit
the same to prospective purchasers, mortgagees, lessees and tenants and to make
such repairs, additions, alterations or improvements as Landlord may deem
desirable. Landlord shall be allowed to take all material into and upon said
premises that may be required therefore without the same constituting an
eviction of Tenant in whole or in part and the rents reserved shall not abate
while said work is in progress by reason of loss or interruption of Tenant's
business or otherwise and Tenant shall have no claim for damages. If Tenant
shall not be personally present to permit an entry into said premises when for
any reasonable reason an entry therein shall be permissible, Landlord may enter
the same by a master key or by the use of force without rendering Landlord
liable therefor and without in any manner affecting the obligations of this
Lease. The provisions of this paragraph shall not be construed to impose upon
Landlord any obligation whatsoever for the maintenance or repair of the building
or any part thereof except as otherwise herein specifically provided. During the
one hundred twenty days prior to the expiration of the Lease or any renewal
term, Landlord may place upon Demised Premises signs indicating that the Demised
Premises are available for rent or sale, which Tenant shall permit to remain
thereon.
K. EASEMENTS: Landlord reserves all rights to the air space over and under
the Demised Premises and the Complex. Site plan schematically portraying the
general lay-out of the Complex and other improvements shall not be deemed to be
a warranty, or representation that such plan will not be altered from time to
time. Landlord reserves the right to make changes, additions and alterations in
and to the Site Plan and the proposed or completed buildings, and common areas,
provided the same do not unreasonably interfere with Tenant's use of the
premises. Landlord reserves the right to use common areas to accommodate future
construction activities in, around, over and under the Complex. The attachment
of a Site Plan to this lease shall not imply any obligation on the part of
Landlord to construct the building as shown thereon nor prohibit a future
modification thereof. Neither Landlord nor any agents or employee of Landlord
has made any representations or promises with respect to the demised premises or
the Complex other than those expressly set forth in this lease: and no rights,
privileges, easements or licenses shall be acquired by Tenant except as
expressly set forth in this lease.
L. IMPROVEMENTS: Should Tenant install air conditioning or other equipment on
the roof of the Demised Premises, Tenant shall assume primary responsibility for
the maintenance and repair of the roof and such installation, operation and
maintenance shall be made in such manner that the right of Landlord under any
roofing bond then in force shall not be affected. Within twenty days from the
date this Lease is executed by Landlord and Tenant and before any of Tenant's
work is started, Tenant shall submit for Landlord's approval detailed plans and
specifications for all Tenant's work, which must include the extent such work
will require mechanical or electrical
<PAGE>
installations which will be connected to utilities furnished by Landlord or will
affect the exterior appearance of the Demised Premises or its structural,
mechanical or electrical components.
All improvements, additions or fixtures that may be made or installed on the
premises by either party (including floor coverings cemented or otherwise
affixed to the floor) shall be the property of the Landlord.
Tenant shall not make any structural alterations in or additions to the
Demised Premises. If alterations become necessary because of the application of
laws or ordinances or of the directions, rules or regulations of any regulatory
body to the business carried on by the tenant or because of any act of default
on the part of the Tenant or because Tenant has overloaded any electrical or
other facility, Tenant shall make any required alterations whether structural or
non-structural at its own cost and expense after first obtaining Landlord's
written approval of plans and specifications and furnishing to Landlord such
indemnification against liens, costs, damages and expenses as Landlord may
reasonably require. All improvements shall be in accordance with all Federal,
State and Local regulations and codes and will not commence prior to obtaining
all applicable permits.
Tenant shall not place or suffer to be placed or maintained on any exterior
door, roof, wall or window of the Complex or demised premises including the
storefront or any other part of the Demised Premises visible from any part of
the common area any sign, awning or canopy, or advertising matter or other thing
of any kind, and will not place or maintain any decoration, lettering or
advertising matter on the glass of any window or door of the demised premises
without first obtaining Landlord's written approval and consent. Landlord agrees
to grant approval of any sign which is in conformity with the sign criteria for
the Complex prepared by Landlord's architect. Tenant further agrees to maintain
such sign, awning, canopy, decoration, lettering, advertising matter or other
thing as may be approved in good condition and repair at all times and to remove
the same at the end of the term if requested by Landlord to do so. Upon removal
thereof Tenant agrees to repair any damage to the premises caused by such
installation.
Landlord shall have at all times a valid lien for all rentals and other sums
of money becoming due hereunder from the Tenant upon all goods, wares,
equipment, fixtures, furniture and other personal property of Tenant situated on
the premises without liability for trespass or conversion, and sell the same
with or without notice at public or private sale, with or without having such
property at the sale, at which Landlord or its assigns may purchase, and apply
the proceeds thereof, less any all expense connected with the taking of
possession and sale of the property, and as a credit against any sums due by
Tenant to Landlord. Any surplus shall be paid to Tenant, and Tenant agrees to
pay any deficiency forthwith. Alternatively, the lien hereby granted may be
foreclosed in the manner and form provided by law or in any form provided by
law. Tenant agrees to execute such Financing Statements and other documents as
may be required by the commercial Code of the state in which the demised
premises are located in order to preserve the priority of the lien created. The
statutory lien for rent is not hereby waived, the express contractual lien
herein granted being in addition and supplementary thereto. Landlord agrees to
subordinate the lien granted herein to a third party institutional lender
financing tenants inventory as well as specific equipment listed on Exhibit A.
Upon expiration of the term of this Lease Tenant agrees to promptly remove
its personal property, trade fixtures and signs and upon Tenant's failure to do
so, the said fixtures, signs and property shall be deemed abandoned by Tenant
and shall become the property of the Landlord. The Landlord shall not be liable
for trespass, conversion or negligence by reason of its acts or acts of anyone
claiming under it or by reason of the negligence of any person with respect to
the acquisition and/or disposition of such property.
Tenant agrees that it will repair any damage done to the premises by the
installation and/or removal of its trade fixtures and signs, and upon failure of
Tenant to do so promptly at the end of the term Tenant agrees to pay Landlord
any cost incurred by Landlord in making such repairs or affecting such removal.
Notwithstanding anything contained herein to the contrary, all renovations that
have been approved by Landlord may be left in the approved state and the end of
the lease. Furthermore Tenant shall have the option to repair any equipment ,
fixtures, etc., in good working order , in leu of replacing any of the above.
M. CONTROL OF COMMON AREAS AND FACILITIES BY LANDLORD: All common areas and
facilities from time to time provided by Landlord, including all automobile
parking areas, driveways, entrances and exits thereto, and other facilities
furnished by Landlord in or near the Premises, including employee parking areas,
loading docks, package pick-up stations, pedestrian sidewalks, ramps, landscaped
areas, exterior stairways, elevators, escalators, restrooms and other areas and
improvements provided by Landlord for the general use, in common, of tenants of
the Premises, their officers, agents, employees and customers, shall at all
times be subject to the exclusive control and management of Landlord, and
Landlord shall have the right from time to time to
<PAGE>
establish, modify and enforce reasonable rules and regulations with respect to
all Common Areas and Facilities. In addition to the rights of Landlord with
respect to the Common Areas and Facilities set forth in this Lease, Landlord
shall have the right to construct, maintain and operate lighting facilities on
all Common Areas and Facilities; to police the same; from time to time to change
the area, level, location and arrangement of parking areas and other Common
Areas and Facilities herein above referred to; to restrict parking by Tenants,
their officers, agents and employees to employee parking areas; to enforce
parking charges, with appropriate provisions for free parking ticket validation
by tenants; to close all or any portion of the Common Areas and Facilities to
such extent as may, in the opinion of Landlord's counsel, be legally sufficient
to prevent a dedication thereof or the accrual of any rights to any person or to
the public therein; to obstruct or close off any or all of the Common Areas and
Facilities to discourage non-customer parking; and to do and perform such other
acts in and to the Common Areas and Facilities or any part thereof, as Landlord
shall determine in its sole discretion. Landlord will operate and maintain the
Common Areas and Facilities in such manner as Landlord, at its sole discretion,
shall determine from time to time. Without limiting the scope of such
discretion, Landlord shall have the full right and authority to employ all
personnel and to make rules and regulations pertaining to and necessary for the
proper operation and maintenance of the Common Areas and Facilities.
N. LIENS: Tenant agrees that it will make a prompt payment when due, of all
costs and expenses incurred in carrying out its agreement herein and of all
costs and expenses of any repairs, constructions or installations which are the
responsibility of Tenant hereunder. Tenant agrees to indemnify and save Landlord
harmless from and against any/all liabilities incurred by Tenant including any
mechanics, materialsmen's, laborers' liens asserted or claimed against the
premises or any part thereof on account of work, labor or materials used in the
premises or in any improvement or change thereof made at the request of, or upon
the order of, or to discharge the obligation of Tenant. Should any mechanic's or
other lien be filed against the Demised Premises or any part thereof for any
reason whatsoever, Tenant shall cause the same to be canceled and discharged of
record by bond or otherwise within twenty (20) days after notice of such filing.
In no event shall anything contained in this paragraph or elsewhere in the Lease
be deemed to subject Landlord's interest in the premises to the lien of any
person doing work or furnishing materials at the instance and request of Tenant.
O. COMMON AREAS: In addition to the premises, Tenant shall have the right to
the non-exclusive use, in common with the Landlord and others to whom Landlord
may grant similar rights, of automobile parking areas, driveways, malls and
footways, and such loading facilities, elevators, escalators and other
facilities as may be located and designated from time to time by landlord
subject to the terms and conditions of this lease. The common areas shall be
subject to the exclusive control and management of Landlord and Landlord shall
have the right to establish, modify, change and enforce reasonable rules and
regulations with respect to common areas so long as such rules are not
discriminatory against Tenant, and Tenant agrees to abide by and conform with
such rules and regulations. Tenant agrees that it and its officers and employees
will park their automobiles only in such areas as Landlord from time to time
designate for employee parking, which areas may be within or without the
Complex. Tenant agrees that it will, within five days after written request
therefor by Landlord, furnish Landlord with the state automobile license numbers
assigned to its cars of all its employees. Tenant has right to accept delivery
and ship in designated area. In the event it is deemed necessary to prevent the
acquisition of public rights, Landlord may from time to time temporarily close
portions of the common areas, and may erect private boundary markers or take
such steps as deemed appropriate for this purpose. Such actions shall not be
considered an eviction or disturbance of Tenant's quiet possession of the
demised premises.
P. DESTRUCTION: If the Demised Premises shall be partially damaged by any
casualty insurable under Landlord's insurance policy, Landlord shall, upon
receipt of the insurance proceeds, repair the same and the minimum rent shall be
abated proportionately as to that portion of the Demised Premises rendered
untenable. If the Demised Premises by reason of such occurrence are rendered
wholly untenable or whether the Demised Premises are damaged or not, if all of
the buildings which then comprise the Complex should be damaged to the extent of
seventy-five percent or more of the then monetary value thereof, or seventy-five
percent of the buildings or common areas of the Complex are damaged, whether or
not the Demised Premises are damaged to such an extent that the Complex cannot,
in the sole judgment of the Landlord, be operated as an integral unit, then or
in any such event, Landlord may elect to repair the damage or may cancel this
Lease by notice of cancellation within one hundred eighty (180) days after such
event and thereupon this lease shall expire, and Tenant shall vacate and
<PAGE>
surrender the Demised Premises to Landlord. Tenant's liability for rent upon the
termination of this lease shall cease as of the day following the event or
damage. Unless this lease is terminated by Landlord, Tenant shall hold the
proceeds of all insurance carried by Tenant on its property and improvements in
trust for the purpose of repair and replacement. In the event Landlord elects to
repair the damage any abatement of rent shall end five days after notice by
Landlord to Tenant that the Demised Premises have been repaired. If any damage
is caused by the negligence of Tenant or its employees, the damages shall be
repaired by Landlord, upon receipt of insurance proceeds, but there shall be no
abatement of rent.
Q. CONDEMNATION: If title to all of the demised premises is taken for any
public or quasi-public use by eminent domain by private purchase in lieu
thereof, on if title to so much of the premises or the Complex is taken that a
reasonable amount of reconstruction thereof will not in Landlord's sole
discretion result in the premises or the Complex being a practical improvement
and reasonably suitable for use for the purpose for which they are designed, the
in either event, this lease shall terminate at the option of either party on the
date that title vests in the condemning authority; provided that Tenant shall
not have the right to terminate this lease unless the taking is such as to
render the premises inaccessible to pedestrian traffic, or unless Tenant's
premises is reduced in size or utility so to be practically unusable for the
purposes for which the premises are requited to be used, If this lease is
terminated under the provisions of this paragraph, rent shall be apportioned and
adjusted as of the date of termination. Tenant shall have no claim against
Landlord or against the condemning authority for the value of its leasehold
estate or for the value of the unexpired term of the lease. If there is a
partial taking of the demised premises or the Complex and this lease is not
thereby terminated under the provisions of this paragraph, then this lease shall
remain in full force and effect, and the Landlord shall, within reasonable time
thereafter, repair and restore the remaining portion of the premises, should
they be affected, to the extent necessary to render the same reasonably suitable
for the purposes for which the premises were leased, and shall repair and
reconstruct the remaining portion of the Complex to the extent necessary to make
the same a complete architectural unit: provided that such work shall not exceed
the scope of the work required to be done by Landlord in originally constructing
such Complex or the demised premises and the landlord shall not be required to
expend more than the net proceeds of the condemnation award which are paid to
Landlord in complying with its obligations hereunder. All compensation awarded
or paid upon a total or partial taking of the demised premises or the Complex
shall belong to and be the property of the Landlord without any participation by
Tenant. Nothing herein shall be construed to preclude Tenant from prosecuting
any claims directly against the condemning authority for loss of business,
damage to, and cost of removal of trade fixtures, furniture and other personal
property belonging to Tenant; provided however, that no such claim shall
diminish or adversely affect the Landlord's award. After any partial taking of
the Demised Premises which does not result in the termination of this lease the
Base Annual Rent for the remainder of the term shall be reduced by the same
percentage as the floor area of the space taken bears to the Leased Square Feet
in the entire demised premises.
R. SUBORDINATION: Tenant agrees that this lease shall be subordinate to any
mortgages, now or hereafter encumbering the Complex or any part or component
thereof, and to all advances made upon the security thereof. This shall be
self-operative and no further instrument of subordination shall be required by
any mortgagee. However, the Tenant, upon request of any party in interest shall
execute promptly such instruments or certificates to carry out the intent hereof
as shall be required by the Landlord. If Tenant does not execute and deliver
such instruments within five (5) business days after receipt of a request by
Landlord, Tenant hereby constitutes and appoints Landlord as its
attorney-in-fact to execute and deliver the instruments on behalf of Tenant.
Tenant shall, in the event any proceedings are brought for the foreclosure of
or in the event of exercise of the power of sale under any mortgage made by the
Landlord covering the demised premises or in the Complex or any part thereof or
to the Landlord certifying (if such be the case) that this lease is unmodified
and is in full force and effect (and if there has been modification, that the
same is in full force and effect as modified and stating the modifications);
that there are no defenses or offsets against the enforcement thereof or stating
those claimed by the Tenant; and stating the day to which rentals and other
charges are paid. Such certificate shall also include such other information as
may be reasonably required by mortgagee.
Tenant shall, in the event any proceedings are brought for the foreclosure of
or in the event of exercise of the power of sale under any mortgage made by the
Landlord covering the demised premises, or in the event of a termination of any
lease under which Landlord may hold title, attorney to the purchaser of the
encumbered interest or the Landlord as the case may be, and recognize such
person as the Landlord under this lease. Tenant
<PAGE>
agrees that the institution of any suit, action or other proceeding by a
mortgagee to realize on Landlord's interest in the Complex or as sale of
Landlord's interest in the Complex pursuant to the powers granted to a mortgagee
under its mortgage, shall not, by operation of law or otherwise, result in the
cancellation or termination of this lease or of the obligations of the Tenant
hereunder. Landlord and Tenant agree that notwithstanding that this lease is
expressly subject and subordinate to any mortgages, any mortgagee, its
successors and assigns or other holder of a mortgage or a note secured thereby,
may sell the Complex in the manner provided in the mortgage and may, at the
option of such mortgagee, his successor's and assigns or other holder of the
mortgage or the note secured thereby make such sale of the complex subject to
this lease.
S. ASSIGNMENT: Tenant shall not assign, mortgage or encumber this lease nor
sublet or suffer or permit the premises or any part thereof to be used by others
without the prior written consent of Landlord in each instance; which consent
shall not be unreasonably withheld. Any request for consent to a subletting or
assignment shall be in writing and accompanied by a true copy of a bonafide
offer to sublet, and the Tenant shall furnish to Landlord all information
requested by Landlord as to the proposed subtenant. If Landlord has not
consented to such request within 15 days after receipt by Landlord of such
request for consent and of any information requested by the Landlord, the
Landlord shall be deemed to have withheld consent. If consent is granted Tenant
shall sublet or assign only upon the terms set forth in the offer submitted to
Landlord. If Tenant is a corporation, any transfer, sale or other disposition of
the controlling stock of the Tenant shall be deemed an assignment of this lease
provided, however, that if the stock of such corporation is regularly traded on
any recognized securities market; the transfer of stock will not be prohibited
hereby. Landlord consents to a transfer of this lease to a wholly owned
subsidiary of Tenant provided that Tenant shall remain primarily liable for the
performance of Tenant's covenants hereunder. If this lease is assigned or if the
premises or any part thereof is sublet or occupied by anyone other than Tenant
whether with or without the written consent of Landlord, Landlord may collect
rent from the assignee, sub-tenant or occupant and apply the net amount
collected to the rents herein reserved, but no assignment, subletting, occupancy
or collection shall be deemed waiver of any covenants or be deemed an acceptance
of the assignee, sub-tenant or occupant, or a release of tenant from any
liability hereunder.
T. SURRENDER: Upon the expiration of the term hereof Tenant shall surrender
the premises to Landlord as in good order and condition as they were in at the
commencement of the term (except for ordinary wear and tear and damage by fire
or other casualties, or causes beyond the Tenant's control) together with all
additions, alterations and improvements which may have been made in or to the
premises pursuant to this lease. Landlord may, at its option, require the Tenant
to remove all such alterations and additions and to restore the premises to the
condition they were in when originally delivered to Tenant, save ordinary wear
and tear except that if tenant has received approval from landlord for
alterations and or additions tenant may at their option leave additions and
alterations at the end of the lease. In good condition ordinary wear and tear
excepted. In the event Tenant continues to occupy the premises after the
expiration of the term, without being given or being entitled to a renewal or
new lease, such occupancy shall be considered a tenancy from month-to-month at a
monthly rental equal to double the rent payment due for the last full month of
the lease term. This provision shall not give Tenant any right to continue
occupancy following the expiration of this lease, except with the consent of
Landlord. Tenant shall be liable to Landlord for all damages occasioned by such
holding over, including claims by any succeeding occupancy of the premises for
such delay.
ARTICLE VII. LIABILITY
A. INDEMNITY: Not withstanding gross negligence, Tenant hereby indemnifies
Landlord and agrees to save Landlord harmless from suits, actions, damages,
liability and expense in connection with loss of life, bodily or personal
injury, property damage or loss of income arising from or out of any occurrence
in, upon or at or from the Demised Premises or the occupancy or use by Tenant of
said premises or any part thereof, or occasioned wholly or in part by any act or
omission of Tenant, its agents, contractors, employees, servants, invitees,
licensees or concessionaires, including the sidewalks and common areas and
facilities within the Complex. Tenant shall store its property in and shall
occupy the Demised Premises and all other portions of the Complex at its own
risk. Landlord shall not be responsible or liable to Tenant or to those claiming
by, through or under Tenant for any loss or damage to either the person or
property of Tenant that may be occasioned by or through the
<PAGE>
acts or omissions of persons occupying adjacent, connecting or adjoining
premises. Landlord shall not be responsible or liable for any defect, latent or
otherwise, in any building in the Complex, or any of the equipment, machinery,
utilities, appliances or apparatus therein nor shall it be responsible or liable
for any injury, loss or damage to any person or to any property of Tenant or
other person caused by or resulting from bursting, breakage or by or from
leakage, steam, running or the overflow of water or sewerage in any part of said
premises or for any injury or damage caused by or resulting from acts of God or
the elements, or for any injury or damage caused by or resulting from any defect
or negligence in the occupancy, construction, operation or use of any of said
premises, buildings, machinery, apparatus or equipment by any person or by or
from the acts of negligence of any occupant of the premises, unless caused by
grossly negligent acts of landlord. Tenant shall give prompt notice to Landlord
in case of fire or accidents in the Demised Premises or in the building of which
the Demised Premises are a part, or of defects therein or in any fixtures or
equipment. In case Landlord shall, without fault on its part, be made a party to
any litigation commenced by or against Tenant, then Tenant shall , at its own
cost and expense, defend any such suits or actions. Tenant shall satisfy and
discharge any judgments that may be recovered against Landlord, and if Tenant
fails to repay the amount for which Landlord becomes liable, Landlord may pay
the same with any interest costs or other charges which may have accrued
thereon. The amount paid by Landlord, with interest at the rate of fifteen
percent (15%) per annum from the date of payment , shall be due and payable by
Tenant as additional rent with the next installment of rent coming due.
B. FORCE MAJEURE: Landlord shall be excused for the period of any delay in
the performance of any obligations hereunder when prevented from so doing by
cause or causes beyond Landlord's control which shall include, without
limitation, all labor disputes, civil commotion, war, war-like operations,
invasion, rebellion, hostilities, military or usurped power, sabotage,
governmental regulations or controls, fire or other casualty, inability to
obtain any material or services or through acts of God.
C. INSURANCE - PROPERTY DAMAGE, LIABILITY, AND OTHER INSURANCE : Tenant shall
maintain at its own cost and expense (with coverage to commence at the time
Tenant enters the Demised Premises to install equipment, etc., or at the
commencement of the term of this Lease, whichever occurs earlier) (1) FIRE
INSURANCE in an amount adequate to cover the cost of replacement of all
decorations and improvements, fixtures, and contents in the Demised Premises in
the event of fire. This insurance must be procured on an "All Risk" basis and
comply with the Southeastern Underwriters Association. Tenant must also procure
"Fire Legal Liability" in an amount not less that $100,000.00. (2) PUBLIC
LIABILITY INSURANCE on a occurrence basis with minimum limits of liability in an
amount of $1,000,000.00 with respect to damage to property (3) PLATE GLASS
INSURANCE covering all outside plate glass in the Demised Premises. In the event
Tenant fails to obtain or maintain the insurance required hereunder, Landlord
may obtain same and any cost incurred by Landlord in connection therewith shall
be deemed additional rent to be paid by Tenant and is payable as such.
Any insurance procured by Tenant as herein required shall be issued in the
name of Landlord or such agents as Landlord may designate and Tenant by a
company licensed to do business in the State of Florida and with a current
Best's Rating of no lower than "A" and shall contain endorsements that (1) such
insurance may not be canceled or amended with respects to Landlord without
thirty (30) days written notice by registered mail to Landlord by the insurance
company; (2) Tenant shall be solely responsible for payment of premiums and
Landlord shall not be required to pay any premiums for such insurance; (3) any
insurance policies herein required to be procured by Tenant shall contain an
express waiver of any right or subrogation by the insurance company against
Landlord. The original policy or policies of all such hazard and liability
insurance shall be delivered to Landlord by Tenant within ten (10) days of the
issuance of each such policy by the respective insurance company.
Tenant shall not stock, use or sell any article or do anything in or about
the Demised Premises which may be prohibited by Landlord's insurance policies or
any endorsements or forms attached thereto, or which will increase any insurance
rates or premiums on the Demised Premises, the building of which they are a part
and all other buildings in the Complex. Tenant shall pay on demand any increase
in premiums for Landlord's insurance that may be charged on such insurance e
carried by Landlord resulting from Tenant's use, occupancy or vacancy of the
Demised Premises. A schedule issued by the organization making the fire
insurance, extended coverage, vandalism and malicious mischief, special extended
coverage or any all-risk insurance rates for said premises or any rule books
issued by the rating organizations or similar bodies or by rating procedures or
rules of Landlord's insurance companies shall be conclusive evidence of the
several items and charges which make-up the insurance rates and premiums on the
Demised Premises and the Complex. If, due to the occupancy, abandonment, or
<PAGE>
Tenant's failure to occupy the Demised Premises as herein provided, any
insurance shall be canceled by the insurance carrier or if the premiums for any
such insurance shall be increased, then, in any of such events, Tenant shall
indemnify and hold Landlord harmless and shall pay on demand the increased cost
of such insurance. Tenant also shall pay in such events, any increased premium
on the rent insurance that my be carried by Landlord for its protection against
rent loss through fire or other casualty.
ARTICLE VIII. PERFORMANCE
A. DEFAULT: The following events shall be deemed to be events of default by
Tenant under this lease:
(1) Tenant shall fail to pay any installment of rent, including
Percentage Rent and additional rent hereby reserved and such failure shall
continue for a period of ten (10) days.
(2) Tenant shall fail to comply with any term, provision, or covenant
of this lease, other than payment of rent and shall not cure such failure within
fifteen (15) days after written notice thereof to tenant, or if the compliance
cannot reasonably be completed within such time, then tenant shall fail to
commence and diligently pursue the compliance and complete same within one
hundred twenty (120) days after notice thereof is provided.
(3) Tenant or guarantor shall become insolvent or shall make a transfer
in fraud of creditors of shall make an assignment for the benefit of creditors.
(4) Tenant or guarantor shall file a petition under any section or
chapter of the National Bankruptcy Act, as amended, or under any similar law or
statute of the United States or any State thereof, or there shall be filed
against Tenant a petition in bankruptcy or insolvency or a similar proceeding,
and any such proceedings shall not have been dismissed within ninety (90) days
after its commencement, or Tenant shall be adjudged bankrupt or insolvent in
proceeding filed against tenant thereunder.
(5) A receiver or Trustee shall be appointed for the Demised Premises
or for all or substantially all the assets of Tenant.
(6) Tenant shall abandon or vacate all or any portion of the premises
or fail to take possession or open for business within the time required by this
lease. Notwithstanding any statutory definition to the contrary, the premises
will be deemed abandoned if Tenant fails to open and operate for the purpose of
conducting business for ten (10) consecutive business days.
(7) Tenant shall do or permit to be done anything which creates a lien
upon the Demised Premises, which is not bonded or released within twenty (20)
days after notice of filing.
B. REMEDIES: Upon the occurrence of any such events of default, Landlord
shall have the option to pursue any one or more of the following remedies
without any notice or demand whatsoever:
(1) Terminate this lease, in which event Tenant shall immediately
surrender the Demised Premises to Landlord, and, if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which he may have for
possession or arrearages in rent, enter upon and take possession of the Demised
Premises and expel or remove Tenant and any other person who may be occupying
said premises or any part thereof, by reasonable force if necessary, without
being liable for prosecution or any claim of damages therefore; and Tenant
agrees to pay to Landlord on demand the amount of all loss and damage which
Landlord may suffer by reason of such termination, whether through inability to
re-let the premises on satisfactory terms or otherwise.
(2) Enter upon and take possession of the Demised Premises and expel or
remove Tenant and any other person who may be occupying said premises or any
part thereof, by reasonable force if necessary, without being liable for
prosecution or any claim for damages therefor, and, if Landlord so elects,
re-let the premises on such terms as Landlord may deem advisable and receive the
rent therefore. If Tenant is not in possession of the Demised premises and
Landlord terminates this Lease due to Tenant's default hereunder, Tenant shall
surrender Tenant's copy of the lease to Landlord and Tenant shall have no
further rights hereunder. Tenant agrees to pay to landlord on demand any
deficiency, expenses and/or brokerage fees that may arise by reason of such
re-letting.
(3) Enter upon the demised premises by force if necessary without being
liable for prosecution or any claim for damages therefore, and do whatever
Tenant is obligated to do under the terms of this lease; and Tenant agrees to
reimburse Landlord on demand for any expenses including reasonable attorneys
fees which Landlord may incur in thus effecting compliance with Tenant's
obligations under this lease, and Tenant further agrees that Landlord shall not
be liable for any damages, resulting to the Tenant for such action, whether
caused by the negligence of Landlord or otherwise.
<PAGE>
(4) All rent and other charges due under this lease may, at the option
of Landlord, become immediately due and payable.
C. NO WAIVER: Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies herein provided or any other remedies
provided by law, nor shall pursuit of any remedy herein provided constitute a
forfeiture or waiver of any rent due to Landlord hereunder or of any damages
accruing to Landlord by reason of the violation of any of the terms, provisions
and covenants herein contained. No action taken by or on behalf of the Landlord
shall be construed to be acceptance of a surrender of this lease. Forbearance by
Landlord to enforce one or more of the remedies herein provided upon an event of
default shall not be deemed or construed to constitute a waiver of such default.
In determining the amount of loss of damage which Landlord may suffer by reason
of termination of this lease or the deficiency arising by reason of any
re-letting of the demised premises by landlord as above provided, allowance
shall be made for the expense of repossession, any repairs or remodeling
undertaken by Landlord following repossession. Tenant agrees to pay to Landlord
all costs and expenses incurred by Landlord in the enforcement of this lease,
including all reasonable fees of Landlord's attorneys when such attorneys are
employed by Landlord to effect collection of any sums due hereunder or to
enforce any obligation of the Tenant and right or remedy of Landlord. The
failure of the landlord to insist, in any one or more instances upon strict
performance of any of the covenants or agreements in this Lease, or to exercise
any option herein contained, shall not be construed as a waiver or a
relinquishment for the future of such covenant, agreement, or option, but the
same shall continue and remain in full force and effect. The receipt by the
Landlord of rent, with knowledge of the breach of any covenant or agreement
thereof, shall not be deemed a waiver of such breach and no waiver by the
Landlord of any provision hereof shall be deemed to have been made unless
expressed in writing and signed by the Landlord.
D. RIGHT TO CURE: If Tenant defaults under this lease, Landlord may, at its
option, immediately or at any time thereafter, without waiving any claim for
breach of agreement, and without notice to Tenant, cure such default for the
account of tenant. If the Landlord shall institute an action or summary
proceeding against the Tenant based upon such default, or if the Landlord shall
cure such default or defaults for the account of Tenant, then the Tenant will
pay all costs and expenses incurred by Landlord in curing such default including
reasonable attorney's fees, which sums, together with interest at the rate of
fifteen (15%) percent per annum shall be due and payable on demand, and shall be
deemed to be additional rent. Landlord shall not be responsible to Tenant for
any loss or damage resulting in any manner by reason of its undertaking any acts
in accordance with the provisions of this lease, unless such acts or omissions
of landlord were grossly negligent. Tenant shall have 10 day right to cure for
non-monetary default upon written notification.
E. TIME OF ESSENCE: Time is of the essence of this lease and each and every
provision hereof.
F. NOTICES: Any notice required or permitted to be given under this lease
shall be in writing and shall be posted in the United States mail, registered,
return receipt requested, addressed to the party to be served at the address
shown in Article I of this lease, or to such other address as either the
Landlord or the Tenant shall designate, in the manner herein set forth for the
giving of notice. Any notice required to be given by the Tenant to the Landlord
to be effective hereunder shall also be given in writing by registered mail to
each mortgagee of the Landlord's estate provided that the Tenant shall have
previously received written notice of the name and address of any such
mortgagee. A mortgagee shall have the same rights to cure any default that the
Landlord has under the terms of this lease.
G. SUBMISSION OF LEASE: Submission of this lease for examination does not
constitute an option for the demised premises and becomes effective as a lease
only upon execution and delivery thereof by Landlord to Tenant. If any
provisions contained in a rider is inconsistent with the printed provision of
this lease, the provision contained in said writing shall supersede said printed
provision. The captions, numbers and index appearing herein are inserted only as
a matter of convenience and are not intended to define, limit, construe or
describe the scope or intent of any paragraph, nor in any way affect this Lease.
H. RECORDING: Tenant shall not record this lease or a memorandum thereof
without the written consent of Landlord.
<PAGE>
I. PARTIAL INVALIDITY: If any provision of this lease or application thereof
to any person or circumstance to any extent be invalid, the remainder of this
lease 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 and each
provision of this lease shall be valid and enforced to the fullest extent
permitted by law.
J. BROKER'S COMMISSION: Tenant represents and warrants that there are no
claims for brokerage commissions or finder's fees in connection with the
execution of this lease except for those payable to landlord's broker(s) and
agrees to indemnify Landlord against and hold it harmless from all liabilities
arising from any such claim, including cost of counsel fees, other than those
claims of landlord's brokers.
K. INTERPRETATION: The covenants and agreements herein contained shall bind,
and the benefits and advantages hereof shall inure to the respective heirs,
legal representatives, successors and assigns of the parties hereto. Whenever
used, the singular number shall include the plural, the plural shall include the
singular, and the use of any gender shall include all genders. This lease may
not be changed orally, but only by an agreement in writing and signed by the
party against whom enforcement of any waiver, change, modification, or discharge
is sought. The marginal notes and headings of this lease are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope or intent or otherwise affect in any way this lease. This agreement
shall create the relationship of Landlord and Tenant between the parties hereto.
No estate shall pass out of the Landlord. Tenant shall have only a lease not
subject to levy and sale, and not subject to assignment except in accordance
with the provisions hereof. This lease shall be governed by, construed and
enforced in accordance with the laws of the state in which the Complex is
located. Should any of the printed provisions of this lease require judicial
interpretation, it is agreed that the court interpreting or construing the same
shall not apply a presumption that the terms of any such printed provision shall
be more strictly construed against one party by reason of the rule of
construction that a document is to be construed most strictly against the party
who itself or through its agent prepared the same, it being agreed that the
agents of all parties have participated in the preparation of the printed
provisions of this lease, and that all terms were negotiable.
L. ENTIRE AGREEMENT: Notwithstanding anything herein contained or contained
in any other writings concerning the Demised Premises by either of the parties
hereto, the parties hereto agreeing hereby that all such other writings are
hereby superseded and/or merged into this Lease which shall be the entire
agreement of the parties concerning said Demised Premises, this Lease shall not
become binding as such upon Landlord unless all preliminary conditions required
to be performed by Tenant are so performed and unless the requirements of the
zoning ordinances and rules and regulations of all public authorities have
jurisdiction are met. Tenant acknowledges that Landlord makes no representations
as to his ability to build or Tenant's ability to conduct the business intended
to be conducted on the premises under said zoning laws and the rules and
regulations of said public authorities having jurisdiction.
Tenant acknowledges that Landlord has not made any statement, promise or
agreement or taken upon itself any engagement whatsoever, verbally or in
writing, in conflict with the terms of this Lease, or that in any way modifies,
varies, alters, enlarges or invalidates any of its provisions, and that no
obligation of the Landlord shall be implied in addition to the obligation herein
expressed.
M. ENFORCEMENT COSTS: If any legal action or other proceeding is brought for
the enforcement of this lease or because of alleged dispute, breach, default in
connection with any provisions of this lease, the successful or prevailing party
shall be entitled to recover reasonable attorney's fees, court cost and all
expenses incurred in that action or proceeding.
ARTICLE IX. GUARANTEE
A. Landlord has accepted financial statement of tenant.
ARTICLE X. RULES AND REGULATIONS
<PAGE>
A. RULES AND REGULATIONS: Tenant agrees to observe and comply with and Tenant
agrees that his agents and all persons visiting in the Demised Premises will
observe and comply with the Rules and Regulations and such other and further
Rules and Regulations as Landlord may from time to time deem needful and
prescribe for reputation, safety, care and cleanliness of the Building, and the
preservation of good order therein and the comfort, quiet and convenience of
other occupants of the Building, which Rules and Regulations shall be deemed
terms and conditions of this Lease.
B. GARBAGE AND REFUSE: All garbage and refuse shall be kept in the containers
specified by Landlord and prepared for collection in the manner and at the
places specified by Landlord. If Landlord shall provide or designate a service
for picking up refuse and garbage, Tenant shall use the same and pay the cost
thereof as reasonably determined by the Landlord for, and shall pay the cost of,
removal of all of Tenant's garbage, refuse or rubbish from the Leased Premises
on a regular periodic basis. Tenant shall not burn any trash or garbage of any
kind in or about the Leased Premises.
C. RADIO AND TELEVISION ANTENNAE: No exterior antennas, electric wires.
telegraph call boxes, or any other electric equipment or apparatus shall be
erected or installed on Leased Premises without the prior written consent of
Landlord. Any antennae so installed without such written consent shall be
subject to removal without notice at any time, at the cost of Tenant.
D. ADJACENT AREAS: The areas immediately adjoining the Leased Premises shall
be kept clean and free from dirt and rubbish by Tenant and Tenant shall not
place any obstructions or merchandise in such areas.
E. PARKING: Tenant and Tenant's employees shall park their motor vehicles
only in those portions of the parking area designated for that purpose by
Landlord. In the event that Tenant or its employees fail to park their motor
vehicles in designated employee parking areas as aforesaid, then Landlord at its
option shall be entitled to charge Tenant, and Tenant agrees to pay to Landlord
on demand as additional rent, Ten Dollars ($10.00) per day per motor vehicle
parked in any area other than those designated as employee parking areas.
F. WINDOWS AND PROJECTIONS: Nothing shall be affixed to or projected beyond
the outside of the Building by Tenant without the prior written consent of
Landlord. If Tenant desires, and Landlord permits, blinds, shades, or other form
of outside or inside window coverings, they shall be furnished and installed at
the expense of Tenant and must be of such shape, color, material and make as are
approved by Landlord.
G. ADVERTISING AND SIGNS: Unless expressly permitted by Landlord, no sign,
advertisement, notice or other lettering shall be exhibited, inscribed, painted
or affixed on any part of the outside or inside of the Building, except on the
glass or panels of the doors of the Leased Premises, and then only of subject
matter and in such color, size, style and material as shall conform to the
specifications of Landlord. Landlord reserves the right to remove all other
signs or lettering, without notice to Tenant, at the expense of Tenant..
H. BICYCLES AND ANIMALS: Landlord permits bicycles on premises.
I. MACHINERY: Unless Landlord gives prior written consent in each and every
instance, Tenant shall not install or operate any steam or internal combustion
engine, boiler, machinery, refrigerating or heating device or air-conditioning
apparatus in or about said Premises. All equipment of any electrical or
mechanical nature shall be placed in settings which absorb and prevent
vibration, noise, or annoyance, or the spillage or leakage of fluids, oils or
grease on the floors of said Premises. Fork lift allowed on premises.
J. LOCKS: Unless expressly permitted by landlord, no visible additional locks
or similar devises shall be attached to any door or window. Upon termination of
this Lease or of Tenant's possession, Tenant shall surrender all keys of said
Premises and shall provide Landlord with the then-current combinations for any
combination locks or safes, cabinets and vaults.
K. NOISES AND OTHER NUISANCES: Tenant shall not make or permit any noise,
odor, or vapor that is objectionable to Landlord or to other occupants of the
Building to emanate from said Premises, and shall not
<PAGE>
create or maintain a nuisance therein, and shall not disturb, solicit or canvass
any occupant of the Building, and shall not do any act tending to injure the
reputation of the Building. Tenant shall not install or operate any phonograph,
musical instrument, radio or television receiver or similar device in the
Building without prior approval of Landlord. The use thereof, if permitted,
shall be subject to control by Landlord to the end that others shall not be
disturbed or annoyed.
L. SAFES OR HEAVY ARTICLES: Tenant shall not overload any floor. Safes,
furniture and all large articles shall be brought into said Premises or removed
therefrom at the Tenant's sole risk and responsibility.
M. HANDIWORK: Tenant will not use or allow the rented space, or surrounding
parking and landscape area to be used for any type of auto repair work, painting
of any kind, fiber glassing of any kind or woodworking of any kind.
N. AWNINGS AND COVERINGS: No awnings, metal bars or metal frame work shall be
placed by the Tenant on any windows, any interior location visible from the
exterior of the Building, any exterior portions of the Building or grounds
without prior written consent of the Landlord.
ARTICLE XI. MISCELLANEOUS
A. GOVERNING LAW: This Lease shall be construed in accordance with and
governed by the laws of the State of Florida..
B. PLUMBING FACILITIES: The plumbing facilities in the Leased Premises shall
not be used for any other purpose than that for which they are constructed, and
no foreign substances of any kind shall be thrown therein; the expense of any
breakage, stoppage, or damage resulting from a violation of this provision shall
be borne by Tenant.
C. HAZARDOUS SUBSTANCES: Tenant shall not cause or permit any Hazardous
Substances to be used, stored, generated or disposed of in, on or about the
Land, Building or Premises by Tenant, its agents, employees, contractors or
invitees, except for such Hazardous Substances as are normally utilized in an
office, warehouse, light manufacturing/assembly and distribution center
environment and are necessary to Tenant's business. Any such Hazardous
Substances permitted on the Premises as herein above provided, and all
containers therefore, shall be used, kept, stored and disposed of in a manner
that complies with all federal, state and local laws or regulations applicable
to any such Hazardous Substances. Tenant shall indemnify and hold Landlord
harmless from any and all claims, damages, fines, judgments, penalties, costs,
expenses or liabilities (including, without limitation, any and all sums paid
for settlement of claims, attorneys' fees, consultant and expert fees) arising
during or after the Lease term from or in connection with the use, storage,
generation or disposal of Hazardous Substances in, on or about the Land,
Building or Premises by Tenant, Tenant's agents, employees, contractors,
invitees, subtenants, or assigns.
D. WAIVER: The waiver by Landlord of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The Subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No covenant, term or condition of this Lease shall be deemed to have been
waived by Landlord, unless such waiver be in writing by Landlord.
E. WAIVER OF JURY TRAIL; The parties hereby waive trial by jury in any
action, proceedings or counter claim brought by either against the other on any
matters whatsoever arising out of or any way connected with this lease and
Tenants use or occupancy thereunder.
<PAGE>
F. ADDENDUM AND SCHEDULES: See Addendum and Schedules attached hereto and
made a part hereof.
IN WITNESS WHEREOF this Lease has been duly executed by the parties hereto,
under seal, as of the day and year first above.
Signed, sealed and delivered in the presence of:
LANDLORD:
<TABLE>
<S> <C>
__________________________ L. S. BY: _________________________________
__________________________ L. S. BY: _________________________________
TENANT:
__________________________ L. S. BY: _________________________________
__________________________ L. S. BY: _________________________________
GUARANTOR(S):
__________________________ L. S. BY: ________________________________
__________________________ L. S. BY: ________________________________
</TABLE>
<PAGE>
ADDENDUM
ADDENDUM TO LEASE BY AND BETWEEN PARK PLAZA , J.V. (LANDLORD), AND
_______________________________________________, (TENANT) DATED JANUARY ______,
1998.
1. TENANT IS RESPONSIBLE FOR ALL COSTS OF ALL RENOVATIONS TO UNIT TO MEET ITS
NEEDS. ANY ALTERATIONS OR RENOVATIONS MUST BE APPROVED BY LANDLORD PRIOR TO WORK
COMMENCING.
2. UPON EXECUTION OF THIS LEASE AGREEMENT AND PAYMENT OF SECURITY DEPOSIT, FIRST
MONTH, AND LAST MONTH RENT WHICH TOTALS $12,999.99, TENANTS WILL HAVE COMPLETE
ALTERATIONS. RENT WILL COMMENCE FEBRUARY 1, 1998.
SIGNED:
WITNESS HEREOF:
- ------------------------------ -----------------------------
TENANT
- ------------------------------
- ----------------------------- ----------------------------------------
Park Plaza (J.V.)
- -----------------------------
EXHIBIT 10.3
FINANCIAL ADVISORY AND
INVESTMENT ADVISING AGREEMENT
This Agreement is made and entered into as this ____ day of __________,
1999 by and between Crown Capital Advisors, Inc. ("the Investment Adviser") and
Amazon Herb Company ("the Company"), for the purpose of defining and
acknowledging the terms of this Agreement.
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EXCLUSIVITY. The Company hereby engages the Investment Adviser on an
exclusive basis for the term specified in Paragraph Two (2) hereof to
render services to the Company as its corporate finance consultant,
financial advisor and investment adviser upon the terms and conditions
set forth herein.
2. TERM. This Agreement shall be effective for a period of one year,
commencing upon the date this contract is executed by both parties and
may be extended as the parties shall mutually agree in writing, subject
to the establishment of arrangements for additional compensation and
other appropriate terms for such extension.
3. SERVICES TO BE PROVIDED. During the term of this Agreement, the
Investment Adviser shall provide the Company with such regular and
customary consulting advice as is reasonably requested by the Company,
provided that the Investment Adviser shall not be requested to
undertake duties not reasonably within the scope of the financial
advisory or investment advising services contemplated by this
agreement. It is understood and acknowledged by the parties that the
value of Investment Adviser's advice is not readily quantifiable, and
that Investment Adviser shall be obligated to render advice upon the
request of the Company, in good faith, and shall use its best efforts
to perform the contemplated duties as set forth herein. Investment
Adviser's duties may include, but will not necessarily be limited to,
providing recommendations and assisting in the following:
1. disseminating information about the Company to the investment
community at large;
2. rendering advice and assistance in connection with the
preparation of annual and interim reports and press releases;
3. assisting in the company's financial public relations;
4. arranging, on behalf of the Company, at appropriate times,
meetings with securities analysts of investment banking firms;
Page 1
<PAGE>
5. rendering advice with regard to internal operations,
including, but not limited to:
1. the formation of corporate goals and their
implementation;
2. the Company's financial structure and its divisions
or subsidiaries;
3. securing, when and if necessary and possible,
additional financing through banks, insurance
companies or other institutions; and
4. corporate organization and personnel;
6. rendering advice with regard to any of the following corporate
finance matters:
1. changes in the capitalization of the Company;
2. changes in the corporate structure;
3. redistribution of shareholdings of the Company's
stock;
4. sales of securities in public or private transactions
and the structuring thereof;
5. alternative uses of corporate assets; and
6. structure and use of debt;
7. rendering advice or assistance with regard to any of the
following merger or acquisition activities:
1. the acquisition and/or merger of or with other
companies;
2. divestiture or any other similar transaction; and
3. the sale of the Company itself (or any significant
percentage, assets, subsidiaries or affiliates
thereof);
8. rendering advice and/or assistance with regard to bank
financing or any other financing from financial institutions
or individuals (including but not limited to revolving credit
facilities, lines of credits, term loans, rediscounted credit
facilities, senior and junior loans, whether collateralized or
unsecured, etc.);
9. act as an information agent in connection with any tender
offers or share exchange;
Page 2
<PAGE>
10. it is understood by both parties that Investment Advisor will
not act as an underwriter or placement agent for the Company's
securities.
4. UNDERTAKINGS OF THE COMPANY. In order to facilitate financing, the
Company shall afford to the Investment Adviser and its representatives
full and complete access to all of its properties and records and the
full cooperation of management in the prompt preparation of a
confidential placement memorandum containing all of the information the
Investment Adviser may deem necessary to effect the successful
placement of the transaction.
5. COMPENSATION. In consideration for the services rendered by Investment
Advisers to the Company pursuant to this agreement (and in addition to
the expenses provided for in Paragraph Seven hereof), the Company shall
compensate the Investment Adviser as follows:
1. INITIAL RETAINER. None.
2. INITIAL WARRANTS. At closing of the first transaction, credit
facility or equity financing transaction, as contemplated
herein, the Company shall issue to the Investment Adviser
and/or its designees Warrants to purchase two percent (2%) of
the Company's fully diluted common stock at a purchase price
of $4.00 (the "Warrant Option"). All Warrants shall expire
five (5) years from the date of issuance and shall have "piggy
back" and demand registration rights and anti-dilution
provisions acceptable to the Investment Adviser.
1. CASHLESS EXERCISE . In lieu of paying the shares
purchase price in cash, the Investment Adviser may,
at its option, deliver to the Company for
cancellation shares of common stock or other
outstanding securities of the Company convertible
into the Company's common stock (including rights
represented by this Warrant) that have a value equal
to the shares purchase price. The determination of
value shall be made by agreement between the Holder
and the Company, but, failing such agreement, by
reference to the trading price of the Company's
common stock on the date of exercise.
3. MERGER AND ACQUISITION FEE. If any transaction (as hereinafter
defined) is consummated during the Term of this Agreement with
any parties, whether introduced or contacted by the Company or
Investment Advisers during the term of this agreement, the
Company shall pay at the closing of each such transaction a
cash fee equal to the sum of:
1. Five percent (5%) of the first fifteen million
dollars ($15,000,000) of the aggregate consideration
(as herein defined) of a transaction;
Page 3
<PAGE>
2. Four percent (4%) of the next ten million dollars
($10,000,000) of the aggregate consideration of a
transaction;
3. Three percent (3%) of the next ten million dollars
($10,000,000) of the aggregate consideration of a
transaction;
4. Two percent (2%) of the aggregate consideration over
thirty five million dollars ($35,000,000); and
5. In no event shall the fee provided for above within
this subparagraph be less than $25,000.
4. AGGREGATE CONSIDERATION is defined and computed as follows:
1. The total sale proceeds and other consideration
received (which shall be deemed to include amounts
paid into escrow) by the Company and/or its
shareholders or by a target and/or its shareholders
upon the consummation of the transaction (including
payments made in installments), inclusive of cash,
securities, notes, consulting agreements and
agreements not to compete, plus the total value of
liabilities assumed.
2. If a portion of such consideration includes
contingency payments (whether or not related to
future earnings or operations), aggregate
consideration will include 75% of the face value of
such payment without regard to whether the conditions
for the payment of such contingent amounts have been
or may be satisfied.
3. If the aggregate consideration for the transaction
consists in whole or in part of securities, for the
purposes of calculating the amount of aggregate
consideration, the value of such securities will be
the value thereof on the day preceding the
consummation of the transaction as the company and
investment adviser agree; provided, in the case of
securities for which there is a public trading
market, however, the value will be determined by the
average last sales price for such securities for the
last twenty (20) days prior to such consummation as
determined by Investment Adviser and communicated by
Investment Adviser to the Company. If there is no
public trading market for such securities but
securities have been sold in a private placement
within the past twenty-four (24) months, the fair
market value shall be based upon the gross sales
price in the last such private placement. For other
property received or receivable as a part of the
aggregate consideration and the parties are unable to
agree, then each of Investment Adviser and the
Company will select an investment banking firm
respected in the merger and acquisition field
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to determine a value and the midpoint between the two
values established by the two independent experts
will be the fair market value for the purpose hereof.
4. For purposes of this agreement, any of the following
transactions shall constitute a "transaction":
(1) the sale, outside of the ordinary course of
business, of the Company or any of its
assets, securities, or business by means of
a merger, consolidation, joint venture,
exchange offer or purchase or sale of stock
or assets, or any transaction resulting in
any change of control of the Company or its
assets or business; or
(2) the purchase by the Company, outside of the
ordinary course of business, or another
company or any of its assets, securities or
business by means of a merger,
consolidation, joint venture, exchange
offer, tender offer or purchase or sale of
stock or assets.
(3) Notwithstanding the above, the proposed
initial transaction involving the public
offering of the Company's Securities as
described by the Form S-4 filed by Hackney &
Miller, P.A., shall be aggregated as a
single transaction.
5. THIRD-PARTY DEBT PLACEMENTS. In the event Investment Adviser
is involved in originating a debt facility, inclusive of
revolving credit facilities, lines of credits, term loans,
rediscounted credit facilities, senior and junior loans,
whether collateralized or unsecured, etc., (the "credit
facility") with a bank or other institutional lender (the
"lending source"), the Company will pay Investment Adviser a
fee of two percent (2%) of the maximum amount of the Credit
Facility. In the event Investment Adviser is involved in
arranging an increase in a Credit Facility, the Company will
pay Investment Adviser a fee of two percent (2%) of the
increase from the maximum amount of the existing Credit
Facility to the maximum amount of the new Credit Facility. In
no event, however, shall the fee provided for within this
subparagraph be less than $25,000.
6. STRATEGIC ALLIANCES AND PARTNERSHIPS. In the event Investment
Adviser introduces the Company to a joint venture partner or
customer and sales develop as a result of the introduction,
the Company agrees to pay a fee of two percent (2%) of total
sales generated directly from this introduction during the
first five (5) years following the date of the first sale.
Total sales shall mean cash receipts less any applicable
refunds, returns, allowances, credits and shipping charges and
monies paid by the Company by way of settlement or judgment
arising out of claims made or threatened against the
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Company. Commission payments shall be paid on the 15th day of
each month following the receipt of customers' payment. In the
event any adjustments are made to the total sales after the
commission has been paid, the Company shall be entitled to an
appropriate refund or credit against future payments due under
this Agreement.
7. FAIRNESS OPINIONS, VALUATIONS AND OTHER SERVICES. Fees and
expenses payable to Investment Adviser with regard to fairness
opinions, valuations, and services not specifically set forth
herein will be determined by mutual agreement in writing at
such time as the nature and terms of such transactions are
determined.
6. PAYMENT OF FEES. All fees to be paid pursuant to this Agreement are due
and payable to the Investment Adviser in cash at the closing or
closings of any transaction as specified in Paragraph Three hereof. The
Company hereby irrevocably authorizes and instructs third party funding
sources, including Lending Sources and private equity groups, (the
"Funding Sources"), to pay directly to Investment Adviser cash sums
provided for in Paragraph Five above and further authorizes Investment
Adviser to notify the Funding Sources of this provision and the terms
of this agreement for purposes of this provision and payment of the
sums due under Paragraph Five of this Agreement. The Company agrees
that Investment Adviser is a direct beneficiary of any eventual
financing agreement between the Company and the Funding Sources. The
Company hereby expressly agrees that in the event any dispute or
disagreement arises with respect to the payment to Investment Adviser
under this agreement, that the Financing Sources shall immediately
place all disputed sums in an interest bearing Escrow account pending
resolution of the dispute. The Company hereby irrevocably authorizes
and instructs the Funding Sources to escrow such disputed sums. The
Company further agrees that any sums due under this agreement which are
not in dispute shall not be escrowed, but shall be paid upon closing to
Investment Adviser by the Funding Sources as provided for under the
terms of this Agreement.
7. CONTINUING OBLIGATION. In the event that this agreement shall not be
renewed or if terminated for any reason notwithstanding any such
renewal or termination, Investment Adviser shall be entitled to a full
fee as provided under Paragraph Five hereof, for any transaction for
which the discussions were initiated during the term of this agreement
and which is consummated within a period of twelve (12) months after
non-renewal or termination of this agreement.
8. EXPENSE REIMBURSEMENT. In addition to the compensation payable
hereunder, and regardless whether any transaction set forth in
Paragraph Three or Five hereof is proposed or consummated, the Company
shall reimburse Investment Adviser for all fees and disbursements of
Investment Adviser's counsel, travel and out of pocket expenses
incurred in connection with the services performed by Investment
Adviser pursuant to this Agreement, including without limitation,
hotel, food and associated expenses, telephone calls and legal
expenses. Any travel, accommodations or consultant fees in excess of
$2,000 shall be approved in advance by the Company.
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9. CONFIDENTIALITY. The Company acknowledges that all opinions and advice
(written or oral) given by the Investment Adviser to the Company in
connection with Investment Adviser's engagement are intended solely for
the benefit and use of the Company in considering the transaction to
which they relate, and the Company agrees that no person or entity
other than the Company shall be entitled to make use of or rely upon
the advice of the Investment Adviser to be given hereunder, and no such
opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for
any purpose, nor may the Company make any public references to
Investment Adviser, or use Investment Adviser's name in any annual
reports or any other reports or releases of the Company without
Investment Adviser's prior written consent.
10. INDEPENDENT CONTRACTOR. The Company acknowledges that the Investment
Adviser is in the business of providing financial services and
consulting advice to others. Nothing herein contained shall be
construed to limit or restrict Investment Adviser in conducting such
business with respect to others, or in rendering such advice to others.
Investment Adviser shall perform its services hereunder as an
independent contractor and not as an employee of the Company or an
affiliate thereof. It is expressly understood and agreed to by the
parties hereto that the Investment Adviser shall have no authority to
act for, represent or bind the Company or any affiliate thereof in any
manner, except as may be agreed to expressly by the Company in writing
from time to time.
11. RELIANCE. The Company recognizes and confirms that, in advising the
Company and in fulfilling its engagement hereunder, the Investment
Adviser will use and rely on data, material and other information
furnished to Investment Adviser by the Company. The Company
acknowledges and agrees that in performing its services under this
engagement, Investment Adviser may rely upon the data, material and
other information supplied by the Company without independently
verifying the accuracy, completeness or veracity of same.
12. NOTICES. Any notice or communication permitted or required hereunder
shall be in writing and shall be deemed sufficiently given if
hand-delivered or sent (i) postage prepaid by registered mail, or (ii)
by facsimile, to the respective parties as set forth below, or to such
other address as either party may notify the other of in writing:
John Easterling, President Crown Capital Advisors, Inc.
Amazon Herb Company Admiralty Tower Two
1002 Jupiter Park Lane 4400 PGA Boulevard
Jupiter, FL 33458 Suite 307
561-575-7935 (fax) Palm Beach Gardens, FL 33410
(561) 625-4685 (fax)
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13. INDEMNIFICATION. Investment Adviser and the Company have entered into a
separate letter agreement dated the date hereof ("the indemnity
letter") proving for the indemnification of Investment Adviser by the
Company in connection with Investment Adviser's engagement hereunder.
14. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
original document.
15. ASSIGNABILITY AND MODIFICATION. This agreement is not assignable and
cannot be modified or changed, nor can any of its provisions be waived,
except by the mutual agreement in writing of all parties.
16. GOVERNING LAW. This agreement shall be governed by the laws of the
State of Florida.
17. SEVERABILITY. Each paragraph, term or provision of this agreement shall
be considered severable and if, for any reason, any paragraph, term or
provision is determined to be invalid or contrary to any existing or
future law or regulation, such will not impair the operation, or effect
the remaining portions, of this agreement.
18. DISPUTE RESOLUTION. The parties shall attempt amicably to resolve
disagreements by negotiating with each other. In the event that the
matter is not amicably resolved through negotiation, any controversy,
dispute or disagreement arising out of or relating to this agreement (a
"controversy") shall be submitted to a nationally recognized
arbitration association, such as the American Arbitration Association,
for final binding arbitration, which shall be conducted by a single
arbitrator (the "arbitrator") in West Palm Beach, Florida, pursuant to
the American Arbitration Association Rules ("the rules").
Notwithstanding anything to the contrary contained in the Rules, the
Arbitrator shall not award consequential, exemplary, incidental,
punitive or special damages.
If any part shall desire relief of any nature whatsoever from any other
party as a result of any Controversy, such party will initiate such
arbitration proceedings within a reasonable time, but in no event more
than one (1) year after the facts underlying said Controversy first
arise or become known to the party seeking relief (whichever is later).
The failure of such party to institute such proceedings within said
period shall be deemed a full waiver of any claim for such relief.
Arbitrator may award the prevailing party its costs for the arbitration
proceeding; including its reasonable attorneys' fees and costs. The
parties agree that the decision and award of the Arbitrator shall be
taken, but that such award or decision may be entered as a judgement
and enforced in any court having jurisdiction over the party against
whom
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enforcement is sought. Any equitable relief awarded under this
paragraph shall be dissolved upon issuance of the Arbitrator's decision
and order.
Notwithstanding the provisions for dispute resolution, in the event of
a breach or threatened breach by any party to this agreement, either
party shall be entitled in order to maintain the status quo and pending
the outcome of any arbitration pursuant to this agreement, seek an
injunction or similar equitable relief restraining either party, as the
case may be, from committing or continuing any such breach or
threatened breach or granting specific performance of any act required
to be performed without the necessity of showing that money damages
would not afford an adequate remedy and without the necessity of
posting any bond or other security. The parties hereto hereby consent
to the jurisdiction of the Federal district courts for the Southern
District of Florida, and the Florida state courts located in 15th
Circuit Court for any proceedings under this paragraph. The parties
agree that the availability of arbitration in the agreement shall not
be used by any party as grounds for the dismissal of an injunctive
action instituted by the other party.
Agreed to and accepted by:
_____________________________________ _________________________________
For Amazon Herb Company For Crown Capital Advisors, Inc.
________/__________/__________ ________/__________/__________
Date Date
EXHIBIT 23.0
January 11, 2000
Board of Directors
Amazon Herb Company
1002 Jupiter Park Lane
Jupiter, FL 33458
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our audit report dated September 18,
1999 (and all references to our firm) included in Amazon Herb Company's Form S-4
for he period ended June 30, 1999, which is incorporated by reference in Form
S-4's report for the period ended June 30, 1999.
------------------------------------------------
Bernard J. Donth, Certified Public Accountant
Palm Beach Gardens, Florida
January 11, 2000
