As filed with the Securities and Exchange Commission on March 3, 1997
Registration No. 333-5268
- --------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
INTERNATIONAL HERITAGE, INC.
(Exact name of Registrant as specified in its charter)
North Carolina 5122 56-1921093
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
of incorporation or Code Number)
organizaiton)
2626 Glenwood Avenue
Suite 200
Raleigh, North Carolina 27608
(919) 571-4646
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
----------------------
Stanley H. Van Etten
President and Chief Executive Officer
International Heritage, Inc. 2626 Glenwood
Avenue
Suite 200
Raleigh, North Carolina 27608
(919) 571-4646
(Name, address, including zip code, and telephone number, including
area code, of agent of service)
-------------------------------
Copies to:
Georgina Marie Mollick, Esq. Steven Wolosky, Esq.
Wood & Francis, PLLC Olshan Grundman Frome &
P.O. Box 164 Rosenzweig LLP
Raleigh, North Carolina 27602 505 Park Avenue
(919) 828-0801 New York, New York 10022
(212) 753-7200
-----------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
-------------------------------
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. [X]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. []
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
If delivery of the Prospectus is expected to be made pursuant
to Rule 434, please check the following box. []
-----------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
Proposed
Maximum Proposed Maximum
Title of Each Class of Amount to Offering Aggregate Offering Amount
to Be Registered Be Price Per Price (1) of Registration
Registered Share(1) Fee
<S> <C> <C> <C> <C>
Common Stock, $0.001
Par value(2) 3,450,000 $5.00 $17,250,000 $5,728.00
Underwriter's Purchase
Options (3) 300,000 .00033 $100 $1.00
300,000 $5.50 $1,650,000 $500.00
Total $18,900,100 $5,728.00(4)
</TABLE>
________________________
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(a) of the Securities Act of 1933, as
amended. (2) Includes 450,000 shares of Common Stock which may be
issued upon exercise of a 45-day option granted to the Underwriter
to cover overallotments, if any. See "Underwriting."
(3) Pursuant to Rule 416, the Registration Statement relates to an
indeterminable number of additional shares of Common Stock issuable
upon exercise of the Underwriter's Purchase Option pursuant to
antidilution provisions contained therein, which shares of Common
Stock are registered hereunder.
(4) $8,620.00 was paid in connection with the initial filing of the
Registration Statement in July 1996.
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, as amended, or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF
REGULATION S-T.
- ---------------------------------------------------------------------
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 3, 1997
3,000,000 Shares
INTERNATIONAL HERITAGE, INC.
[LOGO]
Common Stock
International Heritage, Inc. a North Carolina corporation (the
"Company"), hereby offers up to 3,000,000 shares (the "Shares") of
common stock, $0.00133 par value (the "Common Stock"). It is
currently anticipated that the initial public offering price of the
Shares will be $5.00 per Share.
Prior to this offering, there has been no public market for the
Common Stock and there can be no assurance that any such market will
develop after completion of the Offering, or, if developed, that it
will be sustained. See "Underwriting" for information relating to
the factors considered in determining the initial public offering
price of the Shares. The Company has applied for quotation of the
Common Stock on the Nasdaq National Market under the symbol "NIHI."
The securities offered hereby involve a high degree of risk and
substantial dilution. See "Risk Factors" beginning at page 7 hereof
and "Dilution" at page 14 hereof.
_______________
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 THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
Price Underwrting Proceeds
to Discounts and to
Public Commissions (1) Company(2)
<S> <C> <C> <C>
Per Share of Common Stock $5.00 $.50 $4.50
Total (13) $15,000,000 $1,500,000 $13,500,000
</TABLE>
(1) Does not include a 3% nonaccountable expense allowance which the
Company has agreed to pay to the Underwriter. The Company has also
agreed to sell to the Underwriter an option ("Underwriter's Purchase
Option") to purchase 300,000 shares of Common Stock and to indemnify
the Underwriter against certain liabilities, including liabilities
under the Securities Act of 1933, as amended ("Securities Act").
See "Underwriting."
(2) Before deducting expenses payable by the Company, including the
nonaccountable expense allowance in the amount of $450,000 ($517,500
if the Underwriter's over-allotment option is exercised in full),
estimated at $658,405.
(3) The Company has granted the Underwriter an option, exercisable
within 45 days from the date of this Prospectus, to purchase up to
450,000 additional shares of Common Stock on the same terms set
forth above, solely for the purpose of covering over-allotments, if
any. If such over-allotment option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, and
Proceeds to Company will be $17,250,000, $1,725,000 and $15,525,000,
respectively. See "Underwriting."
The Shares are being offered by the Underwriter subject to
prior sale, when, as and if delivered to and accepted by the
Underwriter and subject to the approval of certain legal matters by
counsel and certain other conditions. The Underwriter reserves the
right to withdraw, cancel or modify this Offering and to reject any
order in whole or in part. It is expected that delivery of
certificates representing the Shares will be made against payment
therefore at the offices of the Underwriter in Bayville, New York on
or about _________, 1997.
WIN Capital Corp.
____________________, 1997.
1
<PAGE>
[INSIDE COVER OF PROSPECTUS]
[PICTURES OF THE COMPANY'S PRODUCTS TO BE INSERTED HERE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
[This Prospectus includes references to trademarks of entities
other than the Company, which have reserved all rights with respect
to their respective trademarks.]
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference
to, and should be read in conjunction with, the more detailed
information and the financial statements (including the notes
thereto) appearing elsewhere in this Prospectus. Each prospective
investor is urged to read this Prospectus in its entirety. Unless
otherwise indicated, all information in this Prospectus has been
adjusted to reflect (i) a stock split of the Common Stock on the
basis of 500 shares of Common Stock for each share of Common Stock
effected in October 1995 (the "October 1995 Stock Split"), (ii) a
stock split of the Common Stock on the basis of 10 shares of Common
Stock for each share of Common Stock effected in July 1996 (the
"July 1996 Stock Split") and (iii) a reverse stock split of the
Common Stock on the basis of 3 shares of Common Stock for every 4
shares of Common Stock effected in October 1996 (the "Reverse Stock
Split," and together with the October 1995 Stock Split and the July
1996 Stock Split, the "Stock Splits"). Certain of the information
contained in this summary and elsewhere in this Prospectus,
including information under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and related strategy
and financing, are forward looking statements.
The Company
The Company was incorporated on April 28, 1995 and is
principally engaged in the direct sale of fine 14K, 18K and 24K gold
jewelry, precious stone jewelry and fine collectibles from some of
the world=s most prestigious manufacturers. The fine collectible
products are from manufacturers such as Waterford (crystal), Lalique
(crystal), Lenox (crystal, china and silver), Mark Hopkins (bronze
sculptures), Sorrento (Italian, hand-made music boxes), Mont Blanc
(writing instruments), Lladro (Spanish porcelain), Coach Leather
(handbags, briefcases, luggage, accessories), Chilmark (bronze
sculptures), Marlene=s Collection (Canadian collectible dolls),
Swarovski (crystal), Reed & Barton (silver & flatware), Kirk Stief
(silver), Gorham (silver and flatware), Hummel (figurines), Precious
Moments (figurines), Barbie (porcelain dolls and collectibles),
Coca-Cola (collectibles), Bill Blass (luggage and accessories),
Enesco Corporation (figurines and bric-a-brack), Armani (sculpture),
Bosca (leather goods), Legends (bronze sculptures), Miller Rogaska
(crystal), The Doll Maker (collectible dolls), Paul Miller
(commemorative prints), Business Telecommunications, Inc.
(telecommunications services), and Callaway, Taylor Made, King
Cobra, Top Flite, Titleist and Odyssey Golf (golf clubs and
accessories). Some of these products are premium incentive products
that are not sold to the general public, but are available only to
sales representatives of the Company as an incentive award. The
Company utilizes a network marketing distribution system which is
essentially a non-storefront means of selling products through a
network of Independent Retail Sales Representatives ("IRSRs").
IRSRs are independent contractors who purchase products from the
Company and either resell them to the public or keep them for
personal use. In addition, IRSRs may supervise or manage one or
more additional IRSRs. The Company currently has over 75,000 IRSRs
throughout the United States and its territories and the provinces
of Alberta, British Columbia and Ontario, Canada. The Company=s
wholly owned subsidiary, International Heritage of Canada, Inc., a
Canadian corporation ("IHI Canada") engages in similar direct retail
sales of jewelry and fine collectibles in the Canadian provinces of
Alberta, British Columbia and Ontario. The Company has had a
history of losses since inception but has achieved profitability
with a net income of $1,312,251 during the year ended December 31,
1996 with an accumulated deficit of $617,572. From the date of
incorporation through December 31, 1996, the Company had accumulated
losses of $617,572. For the year ended December 31, 1995, the
Company had total revenues of $4,852,242; whereas for the year ended
December 31, 1996 the Company had total revenues of $47,705,202.
Net income for the year ended December 31, 1996 was $1,312,251
compared to a net loss at December 31, 1995 of $1,929,823. Although
the Company realized a profit for the year ending December 31, 1996,
there can be no assurance that the Company will be profitable in the
future.
The Company's principal executive offices are located at 2626
Glenwood Avenue, Suite 200, Raleigh, North Carolina 27608, its main
telephone number is (919) 571-4646, its telephone number for
Representative Services is (919) 571-2528, and its fax number is
(919) 571-4620. The Company's Canadian
3
<PAGE>
corporate offices are located at 885 West Georgia Street, Suite
1370, Vancouver, B.C., Canada V6C 3E8, its telephone number is (604)
602- 1275, and its fax number is (604) 602-1285. The Company=s
Internet home page on the World Wide Web is www.aable.com/ihi/. The
International Data Communication Center is 1-888-444-6242 (toll
free).
Related Party Transactions
* Mayflower Holdings, Inc. ("Mayflower"), a principal shareholder
of the Company, of which Stanley H. Van Etten, President and Chief
Executive Officer of the Company and president and principal
shareholder of Mayflower, provided substantial professional
services, employees, operating capital, corporate office space
(through November 30, 1995), loans, general administrative supplies
and support to the Company during the period March through December
1995. As a result, the Company owed Mayflower $389,068 for services
rendered and expense reimbursements, including $131,812 in notes
payable with interest accrued at a rate of 8% per annum. These
amounts were paid in full as of February 1996. The interest paid on
the note was $6,544.
* In 1996, the Company incurred costs for services provided by
Mayflower totaling approximately $60,667. As of December 31, 1996,
the amount due from Mayflower was $2,163. The Company sublet office
space to Mayflower during 1996 on a monthto-month basis at a rate of
$500 per month. Rental income was $6,000 in 1996.
* In February 1996, the Company issued to Mayflower 187,500 shares
of common stock valued at $250,000 in exchange for consulting fees.
The shares were canceled and fair market value options were granted
in replacement thereof for 375,000 shares at an exercise price of
$1.33 per share. The options expire October 31, 1999, and are
outstanding as of December 31, 1996. These options are not subject
to the International Heritage, Inc. 1996 Stock Option Plan ("Stock
Option Plan").
* In September 1995, the Company entered into an agreement with the
Company's President and Chief Executive Officer, Stanley H. Van
Etten, and his father, Stanley L. Van Etten to create a sales
training handbook for the Company's IRSRs. The agreement called for
a lump sum payment of $10,000 to Stanley L. Van Etten for the
rewrite of an earlier created sales book to create a version
specifically for the Company=s IRSRs, which was paid on October 2,
1995, as well as a $4 per book royalty for all books sold to the
Company. The Company currently includes one copy of the book in
each Retail Business Career Kit ("Kit") and sells copies of the book
for $14.95 individually or in packets of 10 for $100. $132,000 was
paid to these individuals in 1996 and $30,600 was paid in 1995. No
amounts were due at December 31, 1996.
* Mayflower loaned the Company $200,000 in August 1996. The note
required repayment at a rate of $50,000 on the 15th of each month
for the months October 1996 through January 1997 with the final
payment including interest accrued at a rate of 12% per annum. This
loan was secured by the assets of the Company. During 1996, the
Company offset $58,172 in receivables from Mayflower against the
note principal. The loan was repaid and the security interest
released in November 1996.
* Under a 1995 employment contract and based on the Company's
achievement of certain revenue goals, the President of the Company
is entitled to receive stock incentives in the amount of 1% of
issued and oustanding shares as of December 31, 1995, 2% as of
December 31, 1996, and 3% as of each year ended December 31, 1997
through 2000. These stock incentives were granted to the President
as additional compensation and were at no cost to the President. In
1995, the Company did not meet the revenue goals noted in the
President=s contract, but in March 1995, the Board granted the stock
incentives to the President based on accrued sales and deferred
revenue combined. Effective October 31, 1996, the President gave
back the incentive stock and the Company granted additional stock
options of 151,300 shares of Common Stock at an exercise price of
$1.33 per share.
4
<PAGE>
Effective October 31, 1996, the President agreed to and has been
granted stock options for 2,295,000 shares, exercisable at $1.33
per share in exchange for the 1996, 1997, 1998, 1999 and 2000
incentive stock referred to above. As a result of having been
granted these options, the President is no longer entitled to
receive the stock incentives referred to above and the options
are not contingent on the Company's achievement of the specified
revenue goals. These options are outstanding at December 31,
1996, expire on October 31, 2001, and are not subject to the
Stock Option Plan. All other provisions of the President=s
employment agreement remain unchanged.
* One of the Company's jewelry suppliers, Jewels by Evonne, is
principally owned by a shareholder of the Company, Evonne
Eckenroth. The Company sold $1,160,593 (Representative Cost)
worth of products supplied by Jewels by Evonne during 1996, the
majority of which were sold during the Company's Winter Product
Promotion.
Regulation of the Company's Business
No state or federal regulatory body has formally questioned any
of the Company's sales practices for its products or services.
Further, the Company has not received any formal "inquiries" for
investigation from any state or federal regulatory body.
However, the Company was required in connection with the sale
of certain of its securities to make a rescission offer to
shareholders in the State of Washington. From August 1995 through
December 1995, the Company privately offered and sold shares of its
common stock within the State of Washington. A total of 40
Washington residents purchased shares through the offering, which
resulted in proceeds to the Company of $100,650. The offering was
not registered with the Securities Division of the Department of
Financial Institutions of Washington ("Securities Division"), and
the Company did not file a notification of claim of exemption for
the offering with the Securities Division. The Company notified the
Securities Division upon discovering that the offering may not
qualify for an exemption from the registration requirements under
the Securities Act of Washington. The Company then filed an
application with the Securities Division to register a rescission
offer. The Company subsequently withdrew the application and, on
March 8, 1996, refunded Washington shareholders their initial
investment plus interest totaling $104,538.49. The Company, without
admitting or denying any wrongdoing, entered into a Consent
Agreement with the Securities Division on September 5, 1996.
The Offering
Common Stock Offered.................3,000,000 shares. See "Description
of Capital Stock."
Common Stock Outstanding Prior to the Offering. . . . .7,273,246 shares
Common Stock to be Outstanding After the Offering. . .10,273,246 shares
Proposed Nasdaq National Market Symbol................NIHI
Use of Proceeds
The Company intends to apply the net proceeds of this Offering
approximately as follows: (i) $2,000,000 for corporate expansion;
(ii) $3,000,000 to develop a fulfillment center; (iii) $2,000,000
for general marketing efforts; (iv) $2,000,000 for information
system upgrades; (v) $1,000,000 for expanded sales training; and
(vi) $2,671,595 for working capital and general corporate purposes.
See "Use of Proceeds."
5
<PAGE>
Risk Factors
The Shares offered hereby involve a high degree of risk including,
without limitation, network marketing industry compliance, ability
to manage growth, history of losses and uncertainty of future
profits, refund policy and money back guaranty, dependence on IRSRs,
dependence on third party manufacturers, possible need for
additional financing, immediate and substantial dilution, no
dividends, experience of management, competition, rescission offer,
prior transactions with affiliates, independent board members,
suppliers, dependence on consumer spending, limited prior
underwritings, no prior market, control by current shareholders and
the effect of outstanding options and shares eligible for future
sale. See "Risk Factors."
Summary Financial Information
The summary financial information set forth below is derived from
the financial statements of the Company appearing elsewhere in this
Prospectus. This information should be read in conjunction with
such financial statements, including the notes thereto.
<TABLE>
From Inception
(April 28, 1995)
Year Ended through
December 31, 1996 December 31, 1995
<S> <C> <C>
Statement of Operations Data:
Total revenues $47,705,502 $4,852,242
Cost of sales 37,839,789 4,918,337
Selling and administrative expenses 8,553,162 1,863,728
Net income (loss) 1,319,251 (1,929,823)
Weighted average number of common and
common equivalent shares outstanding
13,569,147 12,737,149
Earnings (loss) per common and common
equivalent share at period ended $0.11 $(0.14)
Fully diluted earnings (loss)
per common and common equivalent
share at period ended $0.11 $(0.14)
At December 31, 1996 At December 31, 1995
Consolidated Balance Sheet:
Cash $ 38,004 $ 306,099
Current assets 3,436,783 884,909
Current liabilities 5,101,173 2,802,923
Total assets 5,407,000 1,729,446
Long-term debt, less current maturities
-0- -0-
Stockholders' equity 305,827 (1,073,477)
Consolidated Balance Sheet Data: At December 31, 1996 As Adjusted(1)
Working capital $ (1,664,390) $11,007,205
Total assets 5,407,000 18,078,595
Long-term debt,
less current maturities -0- -0-
Stockholders' equity 305,827 12,977,422
</TABLE>
(1) Gives effect to the receipt of the net proceeds (at an assumed
initial public offering price of $5.00 per Share) of
approximately $12,671,595 from the sale of the Shares offered
hereby. Unless otherwise indicated, the information in this Prospectus
does not give effect to the exercise of the Underwriter's
over-allotment option or the Underwriter's Purchase Option and does
not include: 7,750,550 shares of Common Stock reserved for issuance
upon exercise of stock options with a weighted average exercise
price of $1.33. See "Management - Executive Compensation" and "-
Option Grants," "Certain Relationships and Related Transactions,"
"Principal Shareholders" and "Description of Capital Stock."
6
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following
factors, in addition to the other information contained in this
Prospectus, in evaluating an investment in the Common Stock offered
hereby. This Prospectus contains forward- looking statements which
involve risks and uncertainties. The Company=s actual results could
differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth
in the following risk factors and elsewhere in this Prospectus.
Network Marketing Industry Compliance
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, franchise, securities, anti-pyramid,
network distribution, and state lottery statutes, as well as U.S.
Post Office, lottery and Federal Trade Commission fraud regulations,
among others. 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. Any limitation on the
Company's ability to operate in a jurisdiction could have a material
and adverse effect on the Company. See "Business - Network Marketing
Industry Compliance."
Uncertain Ability to Manage Growth
The Company's officers and key employees have had limited
experience in managing companies as large and as rapidly growing as
the Company. The Company=s strategy of continuing its growth and
expansion will place additional demands upon the Company's current
management and other resources and will require additional
information systems, management personnel and operational and
financial resources. The continued growth of the Company will
depend on various factors, including, among others, its relations
with IRSRs, the capacity of the Company's computer systems to
continue to handle the growing number of IRSRs and the increasing
sales, the ability of the Company's suppliers to fulfill orders, the
ability of the Company to provide adequate IRSR training and to open
new markets in other countries. Not all of the foregoing factors
are within the control of the Company. The Company's ability to
manage growth successfully will require the Company to continue to
enhance its operational, management, financial and information
systems and controls. No assurance can be given that the Company
will be able to manage its expanding operations and, if the
Company's management is unable to manage growth effectively, the
Company's business, operating results, and financial condition could
be materially and adversely affected. Furthermore, there can be no
assurance that the growth experienced by the Company in the past
will continue. See "Business" and" Management."
History of Operating Losses; Uncertainty of Future Profitability
The Company was incorporated on April 28, 1995, and from that
date until June 21, 1995, the Company's operations consisted
primarily of raising capital, developing a business plan,
implementing business policies, recruiting professional advisors and
administrative activities. During this development stage, the
Company incurred losses of approximately $225,000. From the date of
inception through December 31, 1996, the Company had accumulated
losses of $617,572. As of December 31, 1996, the Company had
stockholders' equity of $305,827, and its current liabilities exceed
its current assets by $1,664,390. This situation has been caused by
the high cost associated with building and developing an
international direct sales company. The Company had actual
expenditures of $880,000, $471,000 and $1,999,000 for professional
fees, computer hardware, software and other related costs, and sales
and training material development, production costs and inventory,
respectively. The Company has recently enacted various measures to
achieve additional profitability including, but not limited to: (1)
raising the price of the Kit from $75 to $100 (effective November
19, 1996); (2) raising the annual technology maintenance fee from
$25 to $50 (effective December 1996); (3) raising sales aid prices
so that the Company will earn a 25%
7
<PAGE>
minimum profit; (4) adding additional shipping and handling charges
to all transactions and, (5) establishing the commission pay-out to
IRSRs at 65% of the weekly commission calculation (effective January
4, 1997). Even though most of these changes were made in the last
quarter of 1996 they will not have a material effect on the Company
until the first quarter of 1997. The Company had net income of
$1,312,251 for the year ended December 31, 1996. However, there can
be no assurance that the Company's strategy to increase
profitability will be successful or that the Company will be
profitable in the future. See "Management's Discussion and Analysis
of Financial Condition" and "Results of Operations-Results of
Operations."
Refund Policy & Money-Back Guaranty
The Company provides a one hundred percent (100%) money back
guarantee to IRSRs for all Kits, sales aids and promotional
materials returned within 60 days of receipt. Additionally, the
Company offers the same money back guaranty for product purchases,
shipping, handling and administrative fees. This policy exceeds the
industry standard set by the Direct Seller's Association which
recommends an 80% buyback and conforms with regulations in the
states and provinces in which the Company conducts business. The
following states, by statute, require longer periods for refunds:
Georgia, Maryland, Massachusetts, Oklahoma and Texas. However, none
of these states require a refund after one year, thus the Company's
maximum exposure for refunds in these states is one year. All other
states have no defined refund and/or return provision. The Company
had returns (or refunds) of approximately 10% in 1996. The rate of
returns or refunds in the traditional retail market, selling
products similar to those sold by the Company (i.e. department
stores), is approximately 10%, the same rate as experienced by the
Company. The Company has predicted the percentage of returns or
refunds in the future at approximately 12.5%.
The amounts refunded by the Company for returns of Kits and
products for the period ended December 31, 1995 and through the year
ended December 31, 1996 were $23,475 and $4,535,643, respectively.
If there is an unusually high number of refunds in any particular
period there could be a material and adverse effect on the
profitability of the Company.
Dependence on Independent Retail Sales Representatives
The Company's success depends in significant part upon its
ability to attract, maintain, and motivate a large base of IRSRs
who, in turn, recruit other IRSRs, all of whom solicit purchasers
for the Company's products. Any significant turnover among IRSRs
requires the sponsoring of new IRSRs by existing IRSRs in order to
maintain or increase the overall IRSR sales force. For the year
ended December 31, 1995, the Company experienced an attrition rate
of approximately 9.3% for IRSRs (using the method for measuring
attrition used by the Direct Selling Association). For the year
ended December 31, 1996, the Company experienced an attrition rate
of approximately 10%. The industry average attrition rate is
significantly higher than the Company. The industry average is in
excess of 22% according to the Direct Seller's Association.
Activities of the IRSRs in obtaining new IRSRs are particularly
impacted by: (i) changes in the level of motivation, which in turn
can be positively or negatively affected by general economic
conditions; (ii) modifications to the pay-out under the IHI
Bi-Lateral Compensation Plan (the "Plan"); (iii) the availability of
training and leadership conferences; (iv) the quality and diversity
of product availability; and, (v) a number of intangible factors.
See "Business - Bi-Lateral Compensation Plan." The Company's ability
to attract IRSRs could be negatively affected by adverse publicity
relating to the network marketing industry, the Company, its
products, or its operations, as well as competition with other
network marketing companies who may recruit the Company's IRSRs. The
Company does not pay any commissions or fees for recruiting IRSRs.
The Company only pays commissions on product sales. Because of the
number of factors that impact the recruiting of IRSRs, the Company
cannot predict when or to what extent such increases or decreases in
the level of IRSR retention will occur. In addition, the number of
IRSRs (as a percentage of the population) may reach levels that
become difficult to exceed due to the finite number of persons
inclined to pursue work in the independent direct selling business.
However, the Company's success and the success of its IRSRs is not
dependent upon the recruitment or the sponsorship of new IRSRs into
the Company.
8
<PAGE>
The success of the Company and the success of each IRSR is dependent
upon the sale of IHI products. There can be no assurance that the
number or productivity of IRSRs will be sustained at current levels
or will increase in the future.
Dependence on Third Party Manufacturers
The products bought by the Company and resold to its IRSRs are
manufactured by third party manufacturers and therefore the Company
does not have direct control over the quality of manufacturing.
Additionally, some of the third party manufacturers market their own
products and/or supply their products to more traditional retailers
to which preferential treatment may be given. Any of the foregoing
would adversely affect the Company's revenues from the sale of such
products. Approximately 88% of the Company's products are
manufactured or fulfilled by four suppliers. See "Suppliers."
There can be no assurance that in the future these third parties'
manufacturing or fulfillment capacities will be sufficient to
satisfy the Company's requirements, that interruptions or delays in
manufacturing or fulfillment will not adversely affect the Company's
operations, or that alternative manufacturing or fulfillment sources
will be available to the Company on commercially reasonable terms or
at all. See "Business."
Possible Need for Additional Financing
Management believes that the net proceeds of this Offering,
together with the Company's existing resources and cash generated
from its operations will be adequate for the Company's cash
requirements for at least the next twelve months. However, there
can be no assurance that the Company's working capital requirements
during this period will not exceed its available resources or that
these funds will be sufficient to meet the Company's longer-term
cash requirements. There can be no assurance that any additional
financing will be available to the Company on acceptable terms, if
at all, when required by the Company. Any inability by the Company
to obtain additional financing, if required, could have a material
and adverse effect on the financial condition and results of
operations of the Company. See AManagement's Discussion and
Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources and "Use of Proceeds."
Immediate and Substantial Dilution
Purchasers of the Shares offered hereby will incur an immediate
and substantial dilution of approximately 75% of their investment in
the Common Stock because the pro forma net tangible book value of
the Company's Common Stock after this Offering will be approximately
$1.26 per Share as compared with the initial public offering price
of $5.00 per Share. See "Dilution."
No Dividends
The Company has never paid cash dividends on its Common Stock.
The Company intends to retain any future earnings to finance its
growth. Accordingly, any potential investor who anticipates the
need for current dividends from an investment in the Common Stock
should not purchase any of the Shares offered hereby. See "Dividend
Policy."
Experience of Management; Dependence Upon Key Personnel
The Company is dependent upon key personnel, including its
President and Chief Executive Officer, Stanley H. Van Etten, and
upon recruiting and retaining skilled IRSRs. In addition, the
Company's other officers, executive directors and management
personnel have a greater than usual importance to the Company
because of the complexity of a network marketing/independent
contractor based business. Any loss of or failure to retain key
personnel, especially Mr. Van Etten, the Company's President and
Chief Executive Officer, could have a material and adverse effect
upon the Company. See "Business."
9
<PAGE>
Key-Man Life Insurance; Management Contracts
The Company maintains a $2,500,000 key-man life insurance
policy on its President and Chief Executive Officer, Stanley H. Van
Etten. The Company currently carries no key-man life insurance on
any other officers, executive directors or members of management.
All officers, executive directors and managers are required to enter
into confidentiality and non-competition agreements with the
Company. The Company has entered into a long-term employment
contract with Mr. Van Etten. The loss of any officers, executive
directors or managers, especially Mr. Van Etten, could have a
material and adverse effect on the Company's ability to maintain
operations. See "Management" and "Certain Relationships and Related
Transactions."
Competition
The Company operates in a highly competitive business. The
Company competes with a number of established network marketing
companies, some of which also sell jewelry. In addition, the
Company competes with retail sellers of fine jewelry and fine
collectibles, many of which are typically located in shopping malls
and other more traditional retail outlets. Some of the Company's
competitors may have substantially greater financial resources than
the Company. The Company's future success will depend to a
significant extent upon its ability to remain competitive in the
areas of cost control, service responsiveness, reliability, and
marketing. See "Business."
Rescission Offer and Related Contingent Liabilities
On August 15, 1995, the Company privately offered to rescind
all of its prior sales of securities to its then 57 shareholders
("August Rescission Offer"). On December 15, 1995, the Company
privately offered to rescind all of its prior sales of securities to
its then 194 shareholders ("December Rescission Offer" and together
with the August Rescission, the "Rescission Offers"). A total of
four shareholders accepted the Rescission Offers for a total stock
value of $20,000. The Rescission Offers by the Company were
voluntary. The Company, in its private offering of securities, to
which the Rescission Offers applied, had relied on various
exemptions which in some respects may have been technically
deficient. The Company determined it would be in its best interest
to voluntarily offer rescission to all shareholders so as to treat
all shareholders equitably.
In addition, the Company privately sold securities to 40
Washington State residents for proceeds totaling $100,650. The
Company, upon discovering that such offering might not qualify for
an exemption from registration under the Washington Securities Act,
then filed an application to register a rescission offer. The
Company withdrew the application and opted to return to each of the
Washington investors their original investment along with interest
at the legal rate rather than register the rescission or the shares
subject to the proposed rescission. The Company, without admitting
or denying any wrongdoing, entered into a Consent Agreement with the
Securities Division on September 5, 1996.
Upon the completion of the Rescission Offers, the Company had
offered the right to rescind to all shareholders other than those
who had received their shares by gift or for services for which no
value had been assigned at the time rescission was offered.
The Company can give no assurances that it will not be liable
for administrative penalties and sanctions as a result of these
transactions, which could have a material and adverse effect on the
Company. The Company intends to file a subsequent registration
statement sometime after the completion of the Offering to register
the 7,273,246 outstanding shares of Common Stock held by the
shareholders who previously rejected the Company's offer of
rescission. See "Shares Eligible for Future Sale; Subsequent
Registration of Privately Held Shares" and "Prior Sales of
Securities."
10
<PAGE>
The Rescission Offers were not registered under the Securities
Act and the Company relied on Section 4(2) of the Securities Act to
voluntarily offer rescission to 194 shareholders who did not receive
their stock by gift or in exchange for services for which no value
had been determined at the time of the rescission offer. The
Company offered rescission because certain notice filings were not
made to perfect exemptions at the state level in some of the states
where the securities were offered. In order to treat all
shareholders equitably, rescission was offered to all shareholders,
even where there were proper exemptions in place. The Company is
unaware of any liability, contingent or otherwise, growing out of
unregistered sales of the securities; however, there can be no
assurance that no liabilities are outstanding. Any future liability
could have a material and adverse effect on the Company's financial
condition and results of operations.
Prior Transactions With Affiliates
The Company has in the past entered into and may in the future
enter into transactions and agreements with its officers, directors
and principal shareholders and entities controlled by such
individuals. While the Company believes that the terms of the
transactions and agreements have been no less favorable to the
Company than could have been obtained from unaffiliated third
parties, no assurance can be given that unaffiliated third parties
would not have offered terms more advantageous to the Company. All
future material affiliated transactions and loans will be made or
entered into on terms that are no less favorable to the Company than
those that can be obtained from unaffiliated third parties. In
addition, pursuant to the listing requirements of the Nasdaq
National Market ("Nasdaq NMS"), the Company is required to add two
independent directors to its Board of Directors, one of whom will be
chosen by the Underwriter. The independent directors, who do not
have an interest in the particular transaction(s), may determine the
fairness of transactions and agreements with Company officers,
directors and principal shareholders and entities controlled by such
individuals. See "Certain Relationships and Related Transactions."
Independent Board Members
The Board of Directors of the Company currently consists of
seven members. Currently all directors hold office until the next
annual meeting of shareholders and until their successors have been
duly elected and qualified.
Pursuant to the listing requirements of the Nasdaq NMS, the
Company is required to add two independent directors to its Board of
Directors and to establish an independent audit committee. The
Nasdaq National Market Qualifications Committee has granted the
Company 90 days following the date of this Prospectus to satisfy
these requirements. A failure by the Company to comply with these
requirements may result in the delisting of the Common Stock from
the Nasdaq NMS. The Board in preparation for meeting the Nasdaq NMS
requirements has taken action to increase its membership from seven
to nine directors serving staggered terms of one and two years, and
has undertaken to add at least two independent directors, one of
whom will be chosen by the Underwriter, by nominating three
independent candidates for the 1997 Board of Directors.
Suppliers
The Company currently secures its jewelry products that it
markets from A&A Jewelers, Inc.- Canada/E.B. Harvey, Inc.-USA
(collectively "E. B. Harvey"), Jewels by Evonne and John Kragh
Jewelers. The Company can procure any of the jewelry products
featured in its catalogs from any of these suppliers. The Company's
current access to the fine collectibles products it offers to the
public is maintained through E.B. Harvey and the agreements that
this supplier has with the individual fine collectibles suppliers.
The Company does not anticipate entering into direct agreements with
the fine collectible manufacturers and vendors. The Company secures
access to various golf products and accessories through a strategic
relationship with Golf Dimensions, Inc. The Company also plans to
introduce at its national convention, March 13- 15, 1997,
telecommunications products through a strategic relationship with
Business Telecommunications, Inc. ("BTI"). The Company does not
have formal written agreements with any of its suppliers in
accordance with common industry practice. Any interruption of the
supply of products
11
<PAGE>
could have a material and adverse effect on the
Company's ability to fill customer orders. Such an interruption
could lead to loss of IRSRs and retail customers. The Company,
therefore, can give no assurance that it will be able to continue to
offer any of its current products. See "Business - Product Sales
and Development."
Dependence on Consumer Spending
The success of the Company's operations depends upon a number
of factors relating to consumer spending, including, but not limited
to, future economic conditions affecting disposable consumer income
such as employment, business conditions, interest rates and
taxation. There can be no assurance that consumer spending will not
decline in response to economic conditions, potentially adversely
affecting the Company's growth, net sales and profitability.
Management Has Broad Discretion to Allocate Proceeds
A significant portion of the estimated proceeds of the Offering
($2,671,595 or 21.0%) is intended to be used for working capital
purposes. Accordingly, management shall have broad discretion in
how it allocates the net proceeds of this Offering. See "Use of
Proceeds."
Limited Prior Underwritings
The Underwriter has been a broker-dealer since 1995. Although
its individual principals have had prior experience while associated
with other broker-dealers in the underwriting of securities, the
Underwriter has not served as managing underwriter of public
offerings prior to the Offering. In addition, the Underwriter is a
relatively small firm and no assurance can be given that it will be
able to participate as a market maker in the Common Stock, and no
assurance can be given that any broker-dealer will make a market in
the Common Stock. See "Underwriting."
No Prior Market; Potential Loss of Active Trading Market;
Arbitrary Offering Price; Possible Volatility of Stock Price
There has been no prior market for the Company's Common Stock,
and there can be no assurance that a public market for the Common
Stock will develop or be sustained after the Offering. Application
has been made for listing the Company's Common Stock on the Nasdaq
NMS, although there can be no assurance that an active trading
market in the Common Stock will develop or be maintained. To
continue to be listed on Nasdaq NMS after the Offering, the Company
must satisfy certain maintenance criteria. The failure to meet
these maintenance criteria in the future may result in the Common
Stock not being eligible for quotations on Nasdaq NMS and trading,
if any, of the Common Stock would thereafter be conducted on the
Nasdaq NMS or on the OTC Bulletin Board. If the Common Stock were
downgraded to the OTC Bulletin Board, the Common Stock may be
ineligible for quotations, and an investor may find it more
difficult to dispose of, or obtain accurate quotations as to the
market value of the Common Stock. The public offering price of the
Shares being offered hereby were established by negotiation between
the Company and the Underwriter and may not be indicative of prices
that will prevail in the trading market. In the absence of an
active trading market, purchasers of the Common Stock may experience
substantial difficulty in selling their securities. The trading
price of the Company's Common Stock is expected to be subject to
significant fluctuations in response to variations in quarterly
operating results, changes in analysts' earnings estimates, general
conditions in the network marketing industry and other factors. In
addition, the stock market is subject to price and volume
fluctuations that affect the market prices for companies and that
are often unrelated to operating performance. See "Description of
Capital Stock" and "Underwriting."
12
<PAGE>
Control by Current Shareholders
Upon consummation of this Offering, the officers and the
directors of the Company, will beneficially own an aggregate of
approximately 25.9% of the Company's Common Stock, and, along with
Derrick L. Rodgers, a former director of the Company, the officers
and directors of the Company will beneficially own an aggregate of
approximately 30.0% of the Company's Common Stock. The Company has
7,750,550 shares reserved for issued options, 3,579,250 under the
Stock Option Plan and 4,171,300 issued outside of the Stock Option
Plan. Options under the Stock Option Plan are exercisable at $1.33
per share. Options outside the Stock Option Plan are also
exercisable at a weighted average price of $1.33. Options
convertible into 5,766,300 shares of Common Stock are held by
officers and directors and others who may be deemed control persons
of the Company. If exercised, this group would own approximately
49.1% of the Company's issued and outstanding stock after the
Offering, assuming the exercise of all options. As a result, the
Company's officers and directors will have significant influence
over the outcome of all matters submitted to the shareholders for
approval, including the election of directors of the Company,
thereby enabling such individuals to control all major decisions of
the Company. The benefits to officers and directors as a result of
this Offering shall be $6,221,753, or 49.1% of the net proceeds of
the offering. See "Principal Shareholders" and "Capital Stock -
Common Stock."
Effect of Outstanding Options
Immediately after this Offering, there will be outstanding
stock options to purchase an aggregate of 7,750,550 shares of Common
Stock at a weighted average per share exercise price of $1.33. The
exercise of such outstanding stock options, and the Underwriter's
Purchase Option will dilute the percentage ownership of the
Company's shareholders, and any sales in the public market of Common
Stock underlying such stock options and the Underwriter's Purchase
Option may adversely affect prevailing market prices for the Common
Stock. Moreover, the terms upon which the Company will be able to
obtain additional equity capital may be adversely affected because
the holders of such outstanding securities can be expected to
exercise them at a time when the Company would, in all likelihood,
be able to obtain any needed capital on terms more favorable to the
Company than those provided in such stock options and the
Underwriter's Purchase Option. In addition, the Company has granted
certain demand and piggy-back registration rights to the Underwriter
with respect to the securities issuable upon exercise of the
Underwriter's Purchase Option. See "Management - Option Grants,"
"Certain Relationships and Related Transactions," "Description of
Capital Stock" and "Underwriting."
Shares Eligible for Future Sale; Subsequent Registration of
Privately Held Shares
Sales of a substantial number of shares of Common Stock in the
public market following this Offering could adversely affect the
market price of the Common Stock. Upon completion of the Offering,
the Company will have 10,273,246 shares of Common Stock outstanding.
Of these shares, the 3,000,000 shares sold in the Offering will be
freely transferable without restriction under the Securities Act of
1933, as amended (the "Securities Act"), unless they are held by
"affiliates" of the Company as that term is used under the
Securities Act and the rules and regulations promulgated thereunder.
The remaining 7,273 246 shares of Common Stock, constituting
approximately 71% of the outstanding shares of Common Stock
(approximately 68.8% if the Underwriters' over-allotment option is
exercised in full) may be sold in accordance with Rule 144
promulgated under the Securities Act. The Company's officers and
directors and more than five percent of shareholders have agreed not
to, directly or indirectly, offer to sell, sell, grant an option for
the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of any securities issued by the Company for a
period of one year from the effective date of the Registration
Statement of which this Prospectus is a part without the prior
written consent of WIN Capital Corp. See "Underwriting." After
expiration of such period, such shares may be sold (i) in accordance
with Rule 144 promulgated under the Securities Act, (ii) in private
offerings or (iii) upon registration under the Securities Act
without regard to the volume limitations of Rule 144. See "Shares
Eligible for Future Sale."
13
<PAGE>
At present the Company plans to file a subsequent registration
statement to register the 7,273,246 outstanding shares of Common
Stock and all of the 7,750,550 shares subject to options granted by
the Company. There can be no assurance that the Company will be
able to achieve the registration of these shares. Further, the
Company cannot predict the effect of the subsequent registration
statement, if any, on the market price of the Company's Common
Stock.
14
<PAGE>
DILUTION
The difference between the initial public offering price per
share of Common Stock and the net tangible book value per share of
Common Stock after this Offering constitutes the dilution per share
of Common Stock to investors in this Offering. Net tangible book
value per share is determined by dividing the net tangible book
value (total tangible assets less total liabilities) by the number
of outstanding shares of Common Stock. Net tangible book value per
share at $1.26 in the following discussion and tables gives effect
to the Offering as if it occurred as of December 31, 1996.
As of December 31, 1996, the Company had a net tangible book
value of $305,827, or approximately $0.04 per share of Common Stock
(based on 7,273,246 shares of Common Stock outstanding at December
31, 1996). After giving effect to the sale of the Shares offered
hereby (less underwriting discounts and estimated expenses of this
Offering) and the application of the net proceeds therefrom, the net
tangible book value at that date would have been $12,977,422, or
approximately $1.26 per share. This represents an immediate
increase in net tangible book value of approximately $1.22 per share
to existing stockholders and an immediate dilution of approximately
$3.74 per share or approximately 75% to investors in this Offering.
The following table illustrates the per share dilution without
giving effect to results of operations of the Company subsequent to
December 31, 1996.
Public offering price of the Securities $5.00
Net tangible book value before offering $0.04
increase attributable to new investors 1.22
-----
Net tangible book value after Offering 1.26
-----
Dilution to new investors 3.74
=====
The following table summarizes the number and percentage of shares
of Common Stock purchased from the Company, the amount and
percentage of consideration paid and the average price per share
paid by existing shareholders and by investors pursuant to this
Offering.
Shares Purchased Total Consideration Average
Number Percent Amount Percent Price
Per Share
Existing Sharholders 7,273,246 71% $856,190 5% $0.12
Investors in this offering
3,000,000 29% 15,000,000 95% $5.00
--------- --- ---------- ---
Total 10,273,246 100% $15,856,190 100%
========= === =========== ====
The foregoing analysis assumes no exercise of outstanding options
or the Underwriter's Purchase Option. In the event any such options
are exercised, the percentage ownership of the investors in this
Offering will be reduced and dilution per share of common stock to
investors in this Offering will increase. The Company received the
following consideration for its initial issuance of Common Stock,
$111,491 in cash, including services with a value of $69,485.
Subsequent to the initial private offering, the Company received
$744,699 in cash, including services with a value of $54,045 from
additional investors as consideration for shares of Common Stock.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares
offered hereby are estimated to be approximately $12,671,595
(approximately $14,696,595 if the Underwriter's over-allotment
option is exercised in full). The Company intends to apply the net
proceeds approximately as follows:
Application of Proceeds Amount Percent
Expansion Program $2,000,000 15.8%
Develop Fulfillment Center 3,000,000 23.7
Marketing Efforts 2,000,000 15.8
Information System Upgrade 2,000,000 15.8
Sales Training 1,000,000 7.9
Working Capital and General
Corporate purposes 2,671,595 21.0
---------- ----
Total $12,671,595 100.0%
The feasibility of expansion into other markets is an ongoing
evaluative process with a number of factors affecting the decision
to expand. The Company recognizes that time is critical, and the
Company must reserve funds for expansion to perform appropriate due
diligence. If and when a market is targeted for expansion, funds
need to be available for such items as developing training
materials, conducting feasibility studies, learning and adapting to
native culture and implementation of the Company's operations in a
new country, province or territory.
The Company intends to purchase or construct a fulfillment
center to be used for warehousing and distributing products sold by
the Company's IRSRs. The purpose of owning the fulfillment center is
to reduce fulfillment costs and to have more control over
fulfillment operations. An information gathering and evaluative
process has been ongoing. Different sites have been identified,
visited, and evaluated although no site is currently targeted.
The Company intends to use a portion of the proceeds from the
Offering to enhance its marketing efforts by planning various
incentive trips to motivate and recognize IRSRs who excel in their
business, engaging in various forms of advertising and public
relations in industry publications and other media to attract more
IRSRs and to achieve greater name recognition, engaging in expanding
product lines from new and existing manufacturers and developing
additional sales and marketing materials such as video tapes, audio
tapes, catalogs and brochures. Presently the Company purchases only
about four weeks worth of inventory of marketing materials due to
limited cash. One use of proceeds from the Offering will be to
purchase these materials in larger quantities, which will allow the
Company to take advantage of price breakpoints at higher volumes,
which could result in significant cost savings to the Company.
Proceeds will also be used to hire additional marketing staff so as
to have more Company control over marketing design, development and
production. The Company also intends to use proceeds to purchase
equipment, software and supplies to be used for the Company's own
design and production of the its marketing materials. This will
afford the Company the opportunity to directly control the design
and production of such materials and to save the costs associated
with using third parties for such design and production tasks.
The Company intends to use a portion of the proceeds from the
Offering to develop an in-house programming department that will be
responsible for maintenance and upgrades to its existing IRSR
system. The Information Systems Department designs and maintains
the Company's computer and telecommunications systems including all
software residing on these systems. This includes: the Windows8 NT
server, the computers and workstations throughout the Company's
principal office, the IRSR Unix based HP 9000 K220 and HP Vectra
automated voicemail system. The Information Systems Department is
planning to purchase redundant systems and power supply to ensure
the 24 hour operation necessary for service
16
<PAGE>
and processing and to purchase 24 additional lines for the
International Data Communication Center ("IDCC"), an automated,
comprehensive, multi-functional communication and support service
linking IRSRs, via telephone and facsimile, to the Company's
computer system in order to access information relevant to the
IRSR's business. See "Business-Network Development and Training."
In an effort to have more control over fulfillment operations
and to increase efficiency, the Information Systems Department is
planning to link computer systems with each product vendor. The
Information Systems Department is actively involved in the process
of the Company's procurement of its own fulfillment center. If a
fulfillment center is acquired, it will require an extensive
information system.
The Company is also exploring other areas of technology such as
an enhanced Internet product, optical character recognition for data
entry and many other enhanced services that will assist the IRSRs.
The telecommunications department also plans the installation
of redundant communications systems and long distance switches as
well as enhancements to the IDCC to better handle the increased
usage caused by the Company's growing IRSR base.
A portion of the net proceeds will be used for sales training
expansion as follows: (1) enhanced communications, conference calls
and print material; (2) training tools, such as audio tapes, video
tapes and manuals; (3) training events, seminars, retreats and
special meetings; and (4) IDCC upgrades.
Working capital and general corporate purposes may include, among
other things, payment of expenses incurred or to be incurred by the
Company, additional inventory and increases in accounts receivable,
payment of general corporate expenses (including the costs of being
a public company), salaries of additional financial and management
personnel, salaries of executive officers, and the costs of possible
license or acquisition of fully-developed products or businesses
complementary to the Company's operations (although the Company is
not currently negotiating to acquire any business and has no
commitments, understandings or arrangements with respect to any such
acquisition), expansion of the corporate office space and increase
cash reserves in order to lower banking fees. If the Underwriter
exercises the over-allotment option in full, the Company will
realize additional net proceeds of approximately $ 2,025,000, which
will also be added to the Company's working capital.
Based on its current operating plan, the Company anticipates
that the proceeds of the Offering, together with existing resources
and cash generated from operations, if any, should be sufficient to
satisfy the Company's contemplated working capital requirements for
at least the next twelve months. The Company's management does not
believe that it will be necessary to raise additional funds to meet
the expenditures required for operating the business of the Company
for the next six months. This opinion is based on the Company's
current cash flow from operations and increased profitability.
There can be no assurance, however, that the Company's working
capital requirements during this period will not exceed its
available resources or that these funds will be sufficient to meet
the Company's longer term cash requirements for operations. In the
event the Company's plans or assumptions change or prove to be
inaccurate, or the net proceeds of the Offering together with cash
generated from future revenues, if any, prove to be insufficient to
fund operations (due to unanticipated expenses, problems or
otherwise), the Company may find it necessary and/or advisable to
reallocate some of the net proceeds within the above-described
categories or to use portions thereof for other purposes and
therefore management will have significant discretion regarding how
and when such proceeds will be applied.
Proceeds not immediately required for the purposes described
above will be invested in United States government securities,
short-term certificates of deposit, money market funds or other
short-term interest-bearing investments.
17
<PAGE>
DIVIDEND POLICY
The Company has never paid any cash dividends on the Common Stock
and it is currently the intention of the Company not to pay cash
dividends on its Common Stock for the foreseeable future.
Management intends to reinvest earnings, if any, in the development
and expansion of the Company's business. Any future declaration of
cash dividends will be at the discretion of the Board of Directors
and will depend upon the earnings, capital requirements, financial
position of the Company, general economic conditions and other
pertinent factors.
CAPITALIZATION
The following table sets forth the capitalization of the
Company: (i) as of December 31, 1996 and (ii) as adjusted to give
effect to the sale of the 3,000,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $5.00 per
Share and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
<TABLE>
December 31, 1996
---------------------------
Actual As Adjusted
<S> <C> <C>
Long-term debt $ -0- $ -0-
Stockholders' equity:
Common Stock, $0.00133 par value;
25,000,000 shares authorized; 7,273,246
shares issued and outstanding, actual;
10,273,246 shares issued and
outstanding, as adjusted 9,693 13,693
Additional paid-in capital 910,903 13,578,498
Equity adjustment for foreign currency 2,803 2,803
transaction (617,572) (617,572)
Accumulated deficit
Total stockholders' equity (deficit)
305,827 12,977,422
Total capitalization $ 305,827 $ 12,977,422
</TABLE>
Prior to this Offering, the Company sold and issued a total of
7,273,246 Shares of Common Stock for a total consideration of
$856,190. The Company received cash consideration of $732,660
including notes which were converted to stock. The balance of the
consideration was for services rendered, sales awards and incentives
and management awards, having a value of $123,530. The Company
relied upon the Regulation D, Rule 504 and the Section 4(2)
exemption from the registration requirements of the Securities Act
for these sales. The Company made rescission offers to each of
these investors in August and December 1995. All investors who
accepted the offer of rescission were repaid the amount of their
investment plus interest at the legal rate. Four investors accepted
the Company's offer of rescission for a total stock value of
$20,000.
18
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented in the following table
has been derived from the Company's audited consolidated financial
statements which have been audited by the Company's independent
certified public accountants. All information set forth below is
qualified by reference to and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Financial Statements of the Company
and Notes to Financial Statements appearing elsewhere in this
Prospectus.
<TABLE>
Fiscal Year Ended Period Ended
December 31, 1996 December 31,1995
<S> <C> <C>
Consolidated Statement of Operations Data:
Revenues:
Sales - Product $ 41,261,709 $ 4,254,278
Sales - Other 6,443,493 597,964
Total revenues . . . . . . . 47,705,202 4,852,242
Expenses:
Cost of sales 37,839,789 4,918,337
Selling & administrative expenses 8,304,606 1,784,298
Depreciation & amortization . 221,552 69,343
Total expenses . . . . . . . . . . . . 46,365,947 6,771,978
Income (Loss) from operations. . . 1,339,255 (1,919,738)
Other income (expense):
Interest (expense) net . . . . (25,453) (8,062)
Other income (expense) . .. . . . . (1,551) (2,025)
(27,004) (10,087)
Income (loss) before income taxes: 1,312,251 (1,929,823)
Income taxes . . . . . . . . . -0- -0-
Net income (loss) . . . . . $ 1,312,251 $ (1,919,823)
Earnings (loss) per share outstanding. $ 0.11 $ (0.14)
Earnings (loss) per share fully diluted .
$ 0.11 $ (0.14)
Weighted average common and common equivalent shares outstanding. .
13,569,147 12,737,149
</TABLE>
<TABLE>
At At
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Consolidated Balance Sheet Data:
Working capital . . . . . . . . . (1,664,390) (1,918,014)
Total assets. . . . . . . . . . . 5,407,000 1,729,446
Long-term debt, excluding current portion: .
Convertible mortgages and notes -0- -0-
Other debt. . . . . . . . . . -0- -0-
Stockholders equity . . . . . . . 305,827 (1,073,477)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis below should be read in connection
with the Financial Statements of the Company and the Notes to
Financial Statements included elsewhere in this Prospectus.
Overview
The Company was incorporated in North Carolina on April 28,
1995, and has a wholly owned Canadian subsidiary, IHI Canada. The
Company is a network marketing company, whose ownership includes
some of its IRSRs, management, and employees. The Company
distributes a variety of fine jewelry
19
<PAGE>
and collectible products through its network of IRSRs throughout the
United States and three provinces of Canada.
In June 1995 when the Company commenced its operations, it
offered 27 products and by December 1995, the Company was offering
over 500 products in two categories of goods: fine 14K, 18K and 24K
gold and precious stone jewelry and fine collectibles from some of
the world's most prestigious manufacturers. The fine collectible
products are from manufacturers such as: Waterford (crystal),
Lalique (crystal), Lenox (crystal, china and silver), Mark Hopkins
(bronze sculptures), Sorrento (Italian hand-made music boxes), Mont
Blanc (writing instruments), Lladro (Spanish porcelain), Coach
Leather (handbags, briefcases, luggage, accessories), Chilmark
(bronze sculptures), Marlene's Collection (Canadian collectible
dolls), Swarovski (crystal), Reed & Barton (silver and flatware),
Kirk-Stief (silver), Gorham (silver and flatware), Hummel
(figurines), Precious Moments (figurines), Barbie (porcelain dolls
and collectibles), Coca-Cola (collectibles), Bill Blass (luggage and
accessories), Enesco Corporation (figurines and bric-a-brack),
Armani (sculpture), Bosca (leather goods), Legends (bronze
sculptures), Miller Rogaska (Crystal), The Doll Maker (collectible
dolls), Paul Miller (commemorative prints), Business
Telecommunications, Inc. (telecommunications products) and Callaway,
Taylor Made, King Cobra, Top Flite, Titleist and Odyssey Golf (golf
clubs and accessories). The products from Lladro, Lalique,
Swarovski and Waterford featured in the IHI Collectibles Catalog
("Premium Incentive Products") are only available through the
Company's Earn-Out program. This program affords an IRSR the
opportunity to purchase Premium Incentive Products by applying
commissions from the sale of other products to "earn-out" the
purchase price of these Premium Incentive Products. Premium
Incentive Products are not available to the public. These products
may only be earned as an award or bonus by an IRSR. This limitation
on the purchase method of Premium Incentive Products was a
requirement imposed by E. B. Harvey and the respective manufacturers
due to the nature of their exclusivity agreements with more
traditional retailers. Currently the Company has over 5,000
products that it offers for sale. The Company is constantly
expanding its product lines of jewelry and fine collectibles, and
looking at other value-based products to add to its offerings in the
future. See "Business-Product Sales and Development."
Results of Operations
<TABLE>
Audited Period Ended Audited Year Ended
December 31, 1995 December 31, 1996
Amount Percent Amount Percent
(in thousands) (in thousands)
-------- ------------ -------- ---------
<S> <C> <C> <C> <C>
Total Revenues . . . . $4,852 100.00% $47,705 100.00%
Cost of sales . . . . . . . 4,918 101.36 37,840 79.32
Gross profit . . . . . . . . (66) (1.36) 9,865 20.68
Operating expenses. . . . . . . . . . . . . . . . . . . .
Selling and administrative . .1,856 38.25 8,528 17.86
Operating income (loss). . . .(1,922) (39.61) 1,377 2.82
Interest expense. . . . . . . . -0- .16 25 0.05
Provision for income taxes . . -0- -0- -0- 0.01
Net income (loss) . . . . . . $(1,930) (39.77)% $1,312 2.76%
</TABLE>
Net Sales
The level of the Company's net sales is directly dependent upon
the efforts of the IRSRs. Because of the number of factors that
impact the frequency with which IRSRs sponsor ("downline") IRSRs
(see "Business-Bi-Lateral Compensation Plan") the Company cannot
predict when or to what extent increases and decreases in the level
of sponsoring (as measured by IRSR applications) will occur in
future periods. Net sales in any particular period are also
affected by a variety of other factors, such as shifts in product
mix, pricing, product improvements and the introduction of major new
products which tend to stimulate IRSR interest and thus sales. In
addition, net sales are affected by certain external factors, such
as current economic conditions.
20
<PAGE>
Cost of Sales
Product costs for jewelry, fine collectibles, sales aids, and
business kits are recognized when shipped. Development costs for
the items in the Kit and other training materials are capitalized
and amortized over the estimated useful life of such materials
(normally twelve months).
A significant expense for the Company is cost of sales. As of
December 31, 1996, approximately 52% of the Company's cost of sales
represented commissions and costs of goods sold. Because the most
significant component of the Company's cost of sales is IRSR
commissions, a significant portion of the Company's cost of sales
fluctuates with the volume of sales. See "Business-Bi- Lateral
Compensation Plan."
Selling and Administrative Expenses
Operating expenses consist of selling and administrative expenses
which include, in addition to corporate staff overhead, the cost of
motivational sales meetings, training sessions and IRSR leadership
seminars. Corporate image advertising, and other promotional
activities, are also selling and administrative expenses.
Interest and Other Expenses
Interest and other expenses include interest from accounts
receivable, interest earned on deposits, interest paid on loans,
miscellaneous income, gain/loss on sales of fixed assets, tax
penalties, late fees and service charges, non deductible expenses,
and interest expense.
Income Taxes
The provision for income taxes consisted of:
1996
Current taxes payable
Federal $594,000
State 147,000
741,000
Deferred taxes
Federal (181,500)
State (27,500)
(209,000)
Less NOL Carryforward (532,000)
$ -0-
No income tax provision was calculated for 1995 since the Company
had a net loss. As of December 31, 1996, the Company has used all
of its net operating loss carryforward for Federal and State income
tax purposes.
Deferred taxes result from timing differences in the recognition
of revenue and expense for tax and financial reporting purposes.
The source of these differences and the tax effect of each is as
follows:
1996
Excess of tax over book
depreciation and amortization $ 49,000
Nondeductible bad debt expense (177,000)
Nondeductible expenses related
to certain book liabilities (81,000)
-----------------
$ (209,000)
=================
21
<PAGE>
The Company's total deferred tax assets, deferred tax liabilities,
and deferred tax asset valuation allowances at December 31, 1996 are
as follows:
1996
Total deferred tax assets $ 258,000
Less valuation allowance -0-
------------
258,000
Total deferred tax liabilities (49,000)
------------
Net deferred tax asset $ 209,000
============
The following table reconciles the tax provision with the expected
provision obtained by applying statutory rates to pretax income:
1996
Expected tax provision $ 446,000
State income taxes, net of federal income tax
benefit 67,000
Canadian income tax effect (5,000)
Nondeductible expenses 24,000
--------------
$ 532,000
==============
For financial statement purposes, the Company has approximately
$620,000 of net operating loss carryforwards as of December 31,
1996, which expire in 2010.
General
IRSRs may join the Company and sell Company products at retail
price at no cost other than to purchase a $100 not-for profit Kit.
When an IRSR makes a retail sale, the sale is recognized for
accounting purposes when the product is shipped. An IRSR may
purchase a product directly, may "earn-out" a product by applying
commissions earned from retail sales toward the purchase of a
product or may open a Retail Business Center without making a
product purchase. However, to earn override commissions, an IRSR
must certify his or her Retail Business Center by accumulating a
minimum of 200 Retail Sales Business Volume. See
"Business-Bi-Lateral Compensation Plan." The Company defers a
portion of all other revenue from sales aids, fees (optional
administrative, technology maintenance and IDCC) and other sources
at the time of receipt by the Company and after the 60-day time
period for refunds under the Company's money back guaranty has
elapsed, the remaining revenue is recognized. The Company provides
a 100% satisfaction guarantee on all products and sales aids
purchased by an IRSR. The Company recognizes revenue on an annual
$25 optional administrative fee when an IRSR first joins the Company
and every year thereafter, and an annual $50 technology maintenance
fee. Commissions are earned by IRSRs based on sales volume levels.
The Company periodically conducts sales contests and various
incentive plans to enhance revenue growth. See "Business."
Revenue for the year ended December 31, 1996 was $47,705,202 as
compared to the period of inception through December 31, 1995 of
$4,852,242. The average increase by month from 1995 to 1996 is
$3,166,726. This increase in sales is the result of an increase in
the number of IRSRs, 50,000, at December 31, 1996 compared to 5,000
at December 31, 1995 and increases in the Company's product line.
The only product vendor the Company had in 1995 was E. B. Harvey.
The only products offered in 1995 were various gold jewelry
products. In 1996 the Company added two additional gold jewelry
vendors, Jewels by Evonne and John Kragh Jewelers. The Company's
three jewelry suppliers provide access to products and fulfillment
services for over a dozen vendors of fine collectibles. The vendors
include Waterford, Lalique, Lenox, Mark Hopkins, Sorrento, Mont
Blanc, Lladro, Coach Leather, Chilmark, Marlene's Collection,
Swavorski, Reed & Barton, Kirk Stief, Gorham, Hummel, Precious
Moments, Barbie, Coca-Cola, Bill Blass, Enesco, Armani, Bosca,
Legends, Miller Rogaska, The Doll Maker and Paul Miller. During the
first quarter of 1997 the Company entered into strategic
relationships with BTI and Golf Dimensions, Inc. Who provide access to
22
<PAGE>
telecommunications products and Callaway, Taylor Made, King Cobra,
Top Flite, Titleist and Odyssey Golf products respectively. There
were various promotions designed to enhance and increase sales as
well as to recruit new IRSRs through incentive awards throughout
1996. Also, additional sales aids and training materials were
developed, primarily in 1996, which contributed to the increase in
sales.
Selling and administrative expenses increased from $1,863,728 for
the period ended December 31, 1995 to $8,553,162 for the year ended
December 31, 1996, or 459%. As a percent of revenues, the selling
and administrative expenses decreased from 38% to 18%. The decrease
in selling and administrative expenses as a percent of revenue is
due primarily to the economies of scale relative to growth and the
Company's focus on efficiency through technology.
Net income for the ten months ended December 31, 1996 was
$1,312,251 as compared to a loss of $1,929,823 for the period of
inception through December 31, 1995.
Liquidity and Capital Resources
Until recently, the Company's internally generated cash flow has
not been sufficient to finance its operating expenses and working
capital needs including development of sales aids and training
materials, selling and administrative expenses and the expansion of
its business. As a result, the Company has experienced working
capital shortfalls in the past, which have restricted the Company's
ability to conduct and develop its business as quickly as management
had hoped. To counter such shortfalls in the future, the Company
has implemented an established commission pay-out to IRSRs of 65%
effective January 4, 1997. Management believes the 65% pay-out will
ensure a 35% operating profit margin before overhead expenses.
Since the Company averaged less than a 50% commission pay-out for
1996, management believes the 65% pay-out will motivate existing
IRSRs, attract new IRSRs and prevent the Company from loosing money
by having a pay-out which diminishes operating profit. The Company
historically did not generate positive cash flows from operations
until December 1995.
The liquidity of the Company has historically been dependent on
revenue remaining constant or increasing. The internal support
structure has been built to service the current level of revenue. A
material deficiency in liquidity will occur if sales drop for a
period of time.
The Company has no material commitments for capital expenditures.
All material capital expenditures are contingent upon the proceeds
of the Offering.
The Company has met its capital requirements to date in part
through the investment of the initial 57 shareholders ("Founding
Shareholders"), shareholder loans, and more recently, cash flow from
operations.
The Company lost $1,929,823 from its inception to December 31,
1995, but thereafter experienced a turn- around in cash flow and
operating profitability. For the year ended December 31, 1996, the
Company had a profit of $1,312,251, based on a total revenue of
$47,705,202. For the year ended December 31, 1996, the Company had
net cash provided by the operating activities of $1,490,534. This
increase in positive cash flow is a direct result of management's
ongoing efforts to cut costs and improve operating efficiencies.
However, management attributes the losses incurred prior to it
achieving profitability directly to the high cost of start-up, the
need for professional assistance and planning expertise, the
development of an IRSR network, the costs associated with developing
and producing marketing and sales materials, the cost of computer
hardware and software development and other technical and
specialized issues.
Although the Company has reduced its losses since December 1995, and
the net proceeds of this Offering are anticipated to fund continued
growth for at least the next twelve months, unforeseen events may
occur which would require the Company to seek additional capital in
the future. The extent and timing of such requirements will depend
upon many factors, including, but not limited to, economic
conditions, the
23
<PAGE>
level of product sales, competition and cash flow
levels. The Company believes that the funds generated by this
Offering, together with existing resources and cash generated from
operations, will be sufficient to fund its operations for at least
the next twelve months. However, no assurances can be given that
unforeseen circumstances will not alter the Company's capital
requirements, or that adequate funds will be available on acceptable
terms, if at all. The Company's shareholders will have no
obligation to provide any such funds that may be required in the
future. Management believes the Offering proceeds, existing cash
and cash from operations will satisfy the Company's funding
requirements indefinitely.
Refund Policy & Money-Back Guaranty
The Company provides a one hundred percent (100%) money back
guarantee to IRSRs for all Kits, sales aids and promotional
materials returned within 60 days of receipt. Additionally, the
Company offers the same money back guaranty for product purchases,
shipping, handling and administrative fees. This policy exceeds the
industry standard set by the Direct Seller's Association which
recommends an 80% buyback and conforms with regulations in the
states and provinces in which the Company conducts business. The
following states, by statute, require longer periods for refunds:
Georgia, Maryland, Massachusetts, Oklahoma and Texas. However, none
of these states require a refund after one year, thus the Company's
maximum exposure for refunds in these states is one year. All other
states have no defined refund and/or return provision. The Company
had returns (or refunds) of approximately 10% in 1996. The rate of
returns or refunds in the traditional retail market selling products
similar to those sold by the Company (i.e. department stores) is
approximately 10%, the same rate as experienced by the Company. The
Company has predicted the percentage of returns or refunds in the
future at approximately 12.5%.
The amounts refunded by the Company for returns of Kits and
products for the year ended December 31, 1995 and through the year
ended December 31, 1996 were $23,475 and $4,535,643, respectively.
Rescission Offer
The Company privately offered to rescind all of its prior sales of
securities to its Founding Shareholders in the August Rescission
Offer. The Company then privately offered to rescind all of its
prior sales of securities to its then 194 shareholders in the
December Rescission Offer. A total of four shareholders accepted
the Rescission Offers for a total stock value of $20,000. The
Rescission Offers by the Company were voluntary. The Company, in
its private offering of securities to which the Rescission Offers
applied, had relied on various exemptions which in some respects may
have been technically deficient. The Company determined it would be
in its best interest to voluntarily offer rescission to all
shareholders so as to treat all shareholders equitably.
In addition, the Company privately sold securities to 40
Washington State residents for proceeds totaling $100,650. The
Company, upon discovering that such offering might not qualify for
an exemption from registration under the Washington Securities Act,
then filed an application to register a rescission offer. The
Company withdrew the application and opted to return to each of the
Washington investors their original investment along with interest
at the legal rate rather than register the rescission or the shares
subject to the proposed rescission. The Company, without admitting
or denying any wrongdoing, entered into a Consent Agreement with the
Securities Division on September 5, 1996.
Upon the completion of the Rescission Offers, the Company had
offered the right to rescind to all shareholders other than those
who had received their shares by gift or for services for which no
value had been assigned at the time rescission was offered.
The Company can give no assurances that it will not be liable for
administrative penalties and sanctions as a result of these
transactions, which could have a material and adverse effect on the
Company. The Company intends to file a subsequent registration
statement sometime after the completion of the Offering
24
<PAGE>
to register the 7,273,246 outstanding shares of Common Stock held by
the shareholders who previously rejected the Company's offer of
rescission. See "Prior Sales of Securities."
The Rescission Offers were not registered under the Securities Act
and the Company relied on Section 4(2) of the Securities Act to
voluntarily offer rescission to 194 shareholders who did not receive
their stock by gift or in exchange for services for which no value
had been determined at the time of the rescission offer. The
Company offered rescission because certain notice filings were not
made to perfect exemptions at the state level in some of the states
where the securities were offered. In order to treat all
shareholders equitably, rescission was offered to all shareholders,
even where there were proper exemptions in place. The Company is
unaware of any liability, contingent or otherwise, growing out of
unregistered sales of the securities; however, there can be no
assurance that no liabilities are outstanding. Any future liability
could have a material and adverse effect on the Company's financial
condition and results of operations.
BUSINESS
General
The Company is engaged principally in the direct sale of fine
jewelry and fine collectibles in the United States and Canada. The
Company utilizes a network marketing distribution system to market
its products through catalog sales. Compensation to the Company and
to its network of IRSRs is based on the volume and price of Company
products sold. No commissions or fees are paid on sponsorship,
training or recruitment of new IRSRs. Commissions are only paid on
product sales.
The Company offers IRSRs world class products of recognized quality
and demand which are sold to IRSRs at a significant cost savings as
compared to their suggested retail prices. Many other network
marketing companies mark prices up to their sales representatives,
which does not allow them to sell these products to customers for a
profit or to save money on their own purchases. The Company allows
IRSRs to buy products of the finest quality from some of the most
prestigious manufacturers in the world at competitive prices, which
is the Company's "value-based" philosophy.
Claude W. Savage, Larry G. Smith and Stanley H. Van Etten (the
"Founders") started the Company with the goal of building and
developing an international network marketing company. On June 21,
1995, the Company started operations. The Company started by making
its products available to a small number of highly motivated
professional people in key sales regions. These initial IRSRs
earned sales commissions by selling products through their own
Retail Sales Organizations, or networks. See "Bi-Lateral
Compensation Plan." IRSRs build a Retail Sales Organization by
sponsoring new IRSRs. All IRSRs who join the Company are given the
same opportunities to sell products through a Retail Sales
Organization (defined below, see "Bi-Lateral Compensation Plan"),
and, as the process repeats itself, the Company's distribution
system expands. Currently, the Company has more than 75,000 IRSRs
throughout the United States and its territories (except North
Dakota and South Dakota where the Company believes the demographics
are unfavorable and, therefore, do not warrant the cost for business
expansion), and the provinces of Alberta, British Columbia and
Ontario, Canada.
The Company incurs the costs of developing supporting materials used
by IRSRs, including, but not limited to, sales brochures, audio and
video tapes, training manuals, business forms, and warehousing and
transporting products. The Kit, which contains everything an IRSR
needs to start in his or her business, currently sells for $100 (as
of November 19, 1996). The Kit contains: tri-fold presentation
binder with flip chart, daily planner, conference call audio tape,
Cororate Introduction video, Quick Start Training video, Business
Presentation video, Understanding Your Career Kit video, Jewelry
Value Series Brochure, Collectibles Value Series Brochure, Jewelry
Catalog with price guide, Collectibles Catalog with price guide,
Opportunity Brochure, Money Makers Monthly reprint article, most
recent copy of the IHI Business Journal, Gettin" The Business sales
handbook, Network Marketing Brochure by Jeffrey Babener, Retail
Business Agreement, Certification Letter, Retail Product Order Form,
25
<PAGE>
Sales Aid Order Form, Ret ail Receipt Form, Product Order Form, IDCC
Sign-up Flyer, IDCC Flowchart, IHI Policies and Procedures Manual,
IRS Form W-9, Credit Card Authorization Form, Business Card Order
Form, Check Acceptance Form, Compliance Department Memo and Change
of Address Form. No other material purchases are required for an
individual to become an IRSR and to build a Retail Sales
Organization. However, IRSRs may purchase additional marketing
materials from the Company to help develop his or her sales skills,
to assist the IRSR in marketing Company products and to assist the
IRSR in sponsoring and training new IRSRs within his or her Retail
Sales Organization.
By providing materials and support to IRSRs at an affordable cost,
the Company benefits from reduced advertising expenditures, a highly
motivated sales force, positive word of mouth, a sense of customer
and IRSR loyalty and a high volume of repeat sales. The IRSR should
be able to start his or her own business with minimal start-up costs
and operating expenditures thereby providing the IRSR with a
reasonable expectation of profits and individual business
profitability. Further, the IRSR should benefit from the following:
high earnings potential, the ability to be his or her own boss, the
ability to operate a business from home, the ability to work on a
part-time or full-time basis, the ability to buy products at a
reduced cost, no franchise fees, no legal and accounting costs
associated with starting and running a small business, and the
opportunity to work with family, friends and relatives.
Prior to this Offering, the Company's existing shareholders
consisted primarily of IRSRs, management and employees. A benefit
of this broad basis of stock ownership, especially ownership by
IRSRs, is the creation of a national network to help enforce
compliance with the Company's policies and procedures and to create
Company loyalty among the IRSRs. IRSRs with an ownership stake in
the Company work to assure other IRSRs are selling Company
products, building their Retail Sales Organizations and complying
with Company policies and procedure. The Company has also
developed the IHI Training, Leadership Development, and Support
System (the "System"). The System is a comprehensive plan for
identifying and developing leadership within the IRSR sales force.
The System is designed to give IRSRs the tools and support they
will need to develop a profitable Retail Sales Organization, unlike
many traditional network marketing systems which provide no Company
support for representatives, but rather rely on sponsoring
representatives to train and support new representatives. Network
marketing companies generally have significant attrition among
their representatives because there is no plan or program in place
that is designed to help and support their representatives.
Generally, when a representative sponsors an individual into his or
her network marketing sales organization, the new recruit is
totally dependent on the sponsor to learn how to sell the Company's
products and how to build a network marketing sales organization.
This creates a 'sponsor dependent" environment where each new
recruit is dependent completely on his/her sponsor for training,
help and support. This is problematic because each sponsor is
limited as to the time, energy, and support he/she is able and
willing to devote to each new recruit. When a representative
sponsors several recruits, there is insufficient time to properly
train and support each one of the new recruits. This lack of
support results in many representatives leaving the network
marketing business. The System has created an environment where
the IRSRs are system dependent, rather than sponsor dependent; as a
result, the Company's attrition rate is lower than the industry
average. See "Network Development and Training."
Primary Markets
The Company currently has IRSRs operating throughout the United
States and its territories (except North Dakota and South Dakota,
where the Company believes the demographics are unfavorable and thus
do not warrant the cost for business expansion) and the Canadian
provinces of Alberta, British Columbia and Ontario. While there can
be no assurance of success, the Company anticipates expanding into
additional provinces of Canada and certain overseas markets in the
next twelve months. Such expansion will depend on, among other
things, the availability of qualified IRSRs and the ability of the
Company to comply with applicable local licensing and business laws.
Prior to expanding into certain foreign markets, the Company intends
to translate some of its current sales and marketing materials into
languages such as Spanish and Mandarin Chinese for use in its
current markets.
26
<PAGE>
Product Sales and Development
The Company markets and sells its products through a network of
IRSRs. While IRSRs are in business for themselves, the Company
provides support for their efforts by making available certain
sales, training and motivational tools and other technical and
supervisory assistance. All IRSRs must adhere to the Company's
written policies and procedures in order to maintain their
affiliation with the Company. Compensation is paid to IRSRs in
accordance with the Plan. See "Bi-Lateral Compensation Plan."
The Company negotiates for and secures the rights (through contract,
license or other agreement) to market and sell the various products
available to the IRSRs. The Company, through oral agreements with E.
B. Harvey, Jewels by Evonne and John Kragh Jewelers, markets various
items of fine jewelry and collectibles which represent 90% of the
Company's consolidated revenue. The items of jewelry currently
available to the Company from E. B. Harvey, Jewels by Evonne and
John Kragh Jewelers include gold (14K, 18K and 24K) and precious
stone jewelry. The Company's current access to the fine collectible
products manufactured by Waterford, Lalique, Mark Hopkins, Sorrento,
Mont Blanc, Lladro, Coach Leather, Chilmark, Marlene's Collection,
Swarovski, Reed & Barton, Hummel, Precious Moments, Barbie,
Coca-Cola, Bill Blass, Enesco, Armani, Bosca, Legends, Miller
Rogaska, The Doll Maker and Paul Miller is maintained through oral
agreements with the respective manufacturers or manufacturer's
representatives and E. B. Harve y. Orders for fine collectible
products are fulfilled by E. B. Harvey.
The Company intends to introduce at its national convention on March
13-15, 1997, long distance service for both residential and business
customers from BTI, the nation's fourteenth largest long distance
company, based in Raleigh, North Carolina. The Company's management
believes that BTI service will provide a more traditional consumable
product for its IRSRs to sell which falls within the Company's
value-added added product philosophy. Since BTI provides a range of
services, including paging and wireless communication, in addition
to long distance, management believes this new product should
effectively compete with companies such as Excel Communications,
AT&T and MCI, all of whom sell communication services through direct
sales or network marketing distribution channels. The Company
intends to make a communications products a large component of its
sales mix and dedicate significant amounts of its marketing
resources into telecommunications products. If the Company is
successful, management believes th is product could generate
significant revenues.
The Company has negotiated a strategic relationship with Golf
Dimensions of Myrtle Beach, South Carolina to act as a sales agent
in the sale of golf clubs, equipment and accessories. The Company
plans to unveil its new line of products at the national convention
on March 13-15, 1997. Some of the brands of golf equipment, clubs
and accessories which are to be carried by the Company include:
Callaway, Taylor Made, King Cobra, Top Flite, Titleist and Odyssey
Golf. The Company believes that it is one of the first network
marketing or direct sales companies to sell golf clubs, equipment
and accessories. Management believes this new product line should
increase revenues as well as provide potential new IRSRs and
customers of the Company's products.
The Company displays the various products for sale in color catalogs
which are available for purchase by IRSRs. The Company charges IRSRs
for the catalogs in order to defray the costs of production. In
addition, the Company assists its IRSRs, for no additional fee, in
ordering products, tracking delivery and recording and paying
compensation associated with the sale of products. The Company is
constantly reviewing and evaluating the possibility of adding
additional product lines, additional product suppliers, as well as
arrangements directly with manufacturers of other products which fit
within the Company's "value-based" product philosophy.
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Operations
As of December 31, 1996 the Company had approximately 75,000 IRSRs
who are actively engaged in selling the Company's current product
lines. Gross revenues for the Company, since its inception, have
steadily increased with the increase in the number of active IRSRs.
Gross revenues have risen from approximately $409,000 for the month
of June 1995, to approximately $4,562,109 for the month of December
1996.
The Company has also instituted operational changes to enhance
revenues and profitability. These changes include: (1) raising the
price of the Kit from $75 to $100 (effective November 19, 1996); (2)
raising the annual technology maintenance fee from $25 to $50
(effective December 1996); (3) raising sales aid prices to reflect a
25% minimum profit on all sales; (4) adding additional shipping and
handling charges to all transactions; and (5) establishing the
commission pay-out to IRSRs at 65% (effective January 4, 1997). In
management's opinion, the Company is continuing to experience
significant sales growth and the aforementioned operational changes
will serve to enhance the revenue and profitability associated with
the overall growth in sales.
The Company uses state of the art technology and a full staff to
service its IRSRs. Service agents answer phones Monday through
Saturday. There are several bi-lingual service agents, proficient
in various languages, available to service the Company's IRSRs.
Business is processed and entered on a daily basis. IRSRs also have
technological support available 24 hours a day via the IDCC,
fax-on-demand, and the Internet to assist and provide support for
all facets of the business.
The core computer software package used by the Company has been used
within the network marketing industry for over 20 years. The
software package has been proven to support companies with annual
sales of over $500 million. The Company is constantly striving to
improve upon this successful software to make interaction with the
IRSRs more efficient and productive than it currently is.
"Bi-Lateral Compensation Plan"
IRSRs are compensated for sales of the Company's products in
accordance with the Plan. The Plan is copyrighted under federal law
and IRSRs are not permitted to modify or create any derivate forms
or versions of the Plan when presenting the Company's business.
Further, the Company has formulated various policies and procedures
to ensure that IRSRs present the Plan in a consistent manner and in
accordance with relevant government regulations. The Company
drafted its Plan to comply with applicable federal and state law
rules, rules and regulations. In order to assure that IRSRs present
the Plan properly and consistently, the Company requires IRSRs to
use only Company-prepared or Company-approved materials. When IRSRs
fail to use Company materials, they are subject to probation, fine
and/or termination. These policies and procedures are enforced by
the Company's Compliance Department. See "Network Marketing
Industry Compliance."
IRSRs earn compensation under the Plan in several ways. First,
IRSRs may purchase products at Representative Cost (the wholesale
price paid by an IRSR) from the Company and sell them at a marked-up
retail price to consumers, thereby earning a retail profit. Second,
IRSRs may undertake to build a Retail Sales Organization and earn
override commissions and bonuses on the sales made by the other
IRSRs in their Retail Sales Organization. Third, IRSRs may earn
Development Bonuses by helping or managing other IRSRs in their
Retail Sales Organization. Finally, IRSRs can save money on their
own purchases of Company products.
Override commissions are earned from sales of IHI products made
through two Retail Sales Organizations under a Retail Business
Center (a "store" or position in the Company computer system used to
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track an IRSR's Retail Business Sales Volume (defined below)). In
order to earn override commissions an IRSR must "Open" a Retail
Business Center, "Create" Retail Sales Business Volume (defined
below), "Certify" the Retail Business Center and, if the IRSR
desires to build a Retail Sales Organization, "Duplicate" by
sponsoring (defined below) two other IRSRs. Attendant with the
opportunity to earn override commissions and bonuses, the Company
places an obligation on the sponsoring IRSR to supervise, manage and
otherwise support and aid the downline IRSRs in their sales efforts.
The Plan promotes the management, support and development of
downline IRSRs.
To "Open" a Retail Business Center, a prospective IRSR must fill
out an Independent Retail Sales Representative Agreement and
Certification Letter ("Certification Letter") and send the
Certification Letter to the Company for approval and acceptance.
There is no cost or fee associated with executing the Certification
Letter and becoming an IRSR. The IRSR does not need to purchase a
product in order to be eligible to market or sell the Company's
products. The Company has absolute prohibitions against inventory
loading (purchasing inventory without retailing the same merely to
qualify for commissions). However, each IRSR is required to read
everything contained in the Kit and to certify to the Company in
writing that he/she has read and agrees to abide by the terms of the
Company's policies and procedures before selling Company products or
sponsoring other IRSRs.
The IRSR must then "Create" Retail Sales Business Volume ("RSBV")
through the sale of Company products. Every product that the
Company carries has a Representative Cost and a certain amount of
RSBV which is based on the Company's gross profit margin on a
particular product. RSBV is used to calculate commissions and
overrides on the sale of products in an IRSR's Retail Sales
Organization (i.e. profit sharing in the form of commissions and
bonuses to the selling IRSR on products sold).
The IRSR must then "Certify" the Retail Business Center by amassing
at least 200 in RSBV. Each certified Retail Business Center is
treated separately and the requirements for earning commission on
each Retail Business Center are the same. The maximum override
earnings potential for a single certified Retail Business Center is
$1,500 per week in override commissions on retail sales of Company
products and $700 per week as a Development Bonus, for a maximum
total compensation of $2,200 per week, per Retail Business Center.
Profits on retail sales are unlimited. Each Retail Business Center
must be "Re-Certified" every quarter (13 weeks) in order to permit
the IRSR to continue earning override commissions and bonuses.
Finally, the IRSR may build two Retail Sales Organizations under
their Retail Business Center if he or she "Duplicates" the process
by sponsoring two additional IRSRs who also create Retail Sales
Organizations of their own. To 'sponsor" an IRSR, a current IRSR
must recruit another individual who completes a Certification Letter
that is accepted by the Company and who subsequently accrues 200
RSBV by selling Company products themselves. Once the new IRSR has
opened a Retail Business Center, he or she has been 'sponsored" into
the business. No commissions are paid when a IRSR or prospective
IRSR is sponsored. Although no more than two sponsored IRSRs may be
sponsored directly under a Retail Business Center, there is no limit
on the number of IRSRs that are sponsored, so long as the sponsoring
IRSR properly supervises his or her Retail Sales Organization
pursuant to the Company's policies and procedures.
Override commissions and bonuses are tracked and calculated by the
Company and paid out weekly to qualifying IRSRs. To maintain their
qualification to receive override commissions and bonuses, all IRSRs
are required to meet certain retail sales quotas by selling Company
products to consumers who are not IRSRs. The Company pays
commissions on product sales only. The performance criteria used in
determining override commissions and bonuses is the same for all
IRSRs. A "pay cycle" in the Plan is comprised of Level 1 commission,
a Level 2 commission, and a Level 3 commission. An IRSR earns each
Level of compensation the same way. Each Retail Business Center has
a left and a right side, and in order to earn commissions, RSBV
realized from the sale of Company products must be accumulated on
both the left and right sides of the Retail Business Center. In
order for an IRSR to earn a Level 1 commission of $500, he or she
must accumulate 1200 in RSBV on the left side of their Retail
Business Center and 1200 in
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RSBV on the right side of their Retail Business Center. In order
for an IRSR to earn a Level 2 commission of $500, he or she must
accumulate 2400 in RSBV on the left side of their Retail Business
Center and 2400 in RSBV on the right side of their Retail Business
Center. In order for an IRSR to earn a Level 3 commission of $500,
he or she must accumulate 3600 in RSBV on the left side of their
Retail Business Center and 3600 in RSBV on the right side of their
Retail Business Center. To earn a Development Bonus, an IRSR must
reach Level 3 in the commission structure. At the same time, or
within two weeks of achieving Level 3, the IRSR must have an IRSR on
the right side and an IRSR on the left side of their Retail Business
Center earn a Level 3 commission as well. This qualifies the IRSR
for a Development Bonus. It is possible to earn a Development Bonus
on a weekly basis provided the IRSR meets the retail qualifications.
There is a maximum earnings potential of one $700 Development Bonus
per Retail Busines s Center in any single pay cycle, regardless of
how many IRSRs are qualifying by earning Level 3 commissions.
Before a Development Bonus can be earned from the same Retail
Business Center, another Level 3 commission must be earned by said
Retail Business Center. IRSRs are personally responsible for all
taxes due on their earnings. The Development Bonus is an incentive
provided by the Company to encourage IRSRs to manage, train and
motivate IRSRs in their Retail Sales Organization.
The Plan provides an opportunity for the IRSR to expand his or her
business and income by using Development Certificates. Development
Certificates are precertified Retail Business Centers. Each of the
first two times that an IRSR earns a Level 3 override commission
from a Retail Business Center, the Company provides the IRSR with a
Development Certificate which allows the IRSR to expand his or her
business. The new Retail Business Center must be placed downline
from the IRSR's original Retail Business Center. Each Retail
Business Center can earn two Development Certificates. The
Development Certificate opportunity provides for stable and
controlled growth and insures that a Retail Sales Organization has
leadership, management and training. Development Certificates help
the Company insure that its sponsoring IRSRs are managing and
overseeing their respective Retail Sales Organizations. Development
Certificate's create interaction and management in a Retail Sales
Organization between the leaders in an Re tail Sales Organization
and new IRSRs.
All IRSRs have a quarterly retailing requirement to sell twelve
Company products in order to earn override commissions and bonuses.
In addition, once an IRSR's Retail Business Center has achieved a
level of earnings, there is a quarterly (13 week) requirement of
attaining 200 in RSBV to maintain certification ("Recertify") a
Retail Business Center for override commissions and Development
Bonuses. Recertification is necessary thirteen weeks after a Retail
Business Center achieves a level of earnings and is necessary for
each Retail Business Center that has achieved a level of earnings
within a Retail Sales Organization.
Network Development and Training
In individual becomes an IRSR by being sponsored into the business
by an existing IRSR. The potential IRSR must purchase the
not-for-profit Kit which contains various materials that they are
obligated to read and study before being accepted by the Company as
an IRSR. The prospective IRSR then signs the Certification Letter
attesting to the fact that he or she has read and understands all
the materials contained in Kit and he or she agrees to abide by the
policies and procedures of the Company and applicable state and
federal regulations. Once a potential IRSR has submitted a
Certification Letter, and it is accepted by the Company, he or she
has been sponsored "into the Company." The sponsoring IRSR can then
earn override commissions and Development Bonuses on the retail
sales of the new IRSR that he or she has sponsored. This process
then repeats itself, thereby allowing an IRSR to build a Retail
Sales Organization and for the Company to build its sales force, all
of whom sell Company products.
The Company has recently implemented the System. The System is
designed to stimulate and support recruiting activity and organized
growth of an IRSR's Retail Sales Organization, enhance retention of
IRSRs, develop responsive field leadership, thereby extending the
Company's philosophy and vision throughout its network of IRSRs,
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create and promote a working partnership between the Company and its
network of IRSRs and to assure compliance with Company policies and
procedures and adherence to applicable state and federal
regulations. The System is supported by a series of events,
recognition (retail sales production and Retail Sales Organization
development) and tools.
The events include: local weekly business meetings, area, regional,
and national events and conventions, international conference calls
with the Company's President and various guest speakers, corporate
leadership courses, leadership retreats, special meetings and
contest/incentive trips. The event portion of the System provides
for local weekly meetings and training in each market area. Once a
quarter, there is a larger area event and a regional event. The
largest event is the national event which is held twice a year, with
the first to occur March 13-15, 1997. This event system gives the
IRSRs a course to follow in the development of his or her business.
When a new IRSR joins the Company, he/she begins by participating in
the local weekly meetings and training events in order to learn the
fundamentals of the business. As IRSRs gain experience and begin to
realize success in their business, they are invited to the area
events to gain added exposure and experience. If their success
continues, they ar e invited to speak and to train at the regional
events. Finally, the IRSRs will participate in and be featured at
the national events. In addition to the standard event portion of
the System, there are also monthly leadership workshops, special
training meetings, and contest/incentive trips.
The next component of the System is recognition. The Company has
implemented a unique two part Pin Recognition System that recognizes
outstanding achievement in developing a successful Retail Sales
Organization and in retailing Company products to consumers. The
Retail Sales Organization Pin Recognition System ("RSO Pin System")
recognizes IRSRs for various levels of achievement from achieving
Level 1 earnings to developing an extensive Retail Sales
Organization. Tied to the various levels of achievement (not the
same as levels of earnings) are cash bonuses and potential stock
option bonuses. The first level recognized in the RSO Pin System is
the RSO Director, which is awarded to an IRSR who has earned a
minimum of $18,000 per quarter, a cash bonus of $500 per month is
paid to the IRSR so long as the quarterly minimum earnings are
maintained. The highest level recognized in the RSO Pin System is
the Chairman's Circle, which is awarded to an IRSR who has earned a
minimum of $50,000 per quarter, a cash bo nus of $6,000 per month is
paid to the IRSR so long as the minimum quarterly earnings are
maintained. The Retail Product Sales Pin Recognition System
("Product Pin System") recognizes an IRSR for various levels of
retail sales per quarter. Tied with the various levels of
achievement are cash bonuses. The first level of recognition within
the Product Pin System is Sapphire, which is awarded to an IRSR who
has retailed $25,000 of Company products over one quarter. A
Sapphire IRSR receives a $500 cash bonus. The highest level of
recognition within the Product Pin System is Platinum Diamond, which
is awarded to an IRSR who has retailed $250,000 of Company products
over one quarter. A Platinum Diamond IRSR receives a $5,000 cash
bonus. These benefits further enhance momentum and motivation as
key elements of the Recognition System. The Pin Recognition System
rewards IRSRs who help others have success, which is consistent with
the Company's team-building philosophy. Both the RSO Pin System and
Product Pin System are designed to increase sales momentum and IRSR
motivation.
The final component of the System is comprised of tools. The tools
include the Kit, a series of audio and video tapes on the Company
("Building a Retail Sales Organization," "Quickstart Training,"
"Retailing Products," "How to Fill Out Company Forms" and "Most
Frequently Asked Questions and Answers"), slide presentations,
overhead presentations, flip chart presentations, a monthly
newsletter (The IHI Business Journal), fax on demand (which provides
an overview of the Company), monthly conference calls, an Internet
home page (www.aable.com/ihi/), various sales and marketing
publications (Gettin' the Business; A Sales Professional's Handbook
which is included in the Kit) and IDCC. IDCC currently logs over
23,000 calls per week and fax on demand logs over 35,000 calls per
week.
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Competition
The Company operates in a highly competitive business. The Company
competes with a number of established network marketing companies
including several that are better known than the Company. Among
others, the Company competes with Jewelway (a jewelry distributor),
Amway (a disposable goods distributor), Shacklee (a health products
distributor) and Mary Kay (a beauty products distributor). With its
network marketing competitors, the Company competes not only for the
sale of products but also for the services of successful IRSRs. The
Company believes its products are of a higher quality than its
network marketing competitors, and that it offers more services and
a more attractive compensation formula for IRSRs than its
competitors.
The Company believes it is extremely competitive when compared to
other companies within the network marketing industry. The Company,
with its state of the art support and services, prestigious
products, and compensation plan that allows part-time IRSRs to earn
consistent income (the Plan does not have any time limits, RSBV
accumulates until pay levels are reached), attracts very
professional individuals to the Company. By attracting talented and
credible IRSRs to the Company and offering training under the
System, the Company believes it is in a very attractive position
with regard to competition.
In addition, the Company also competes with more traditional
storefront retail sellers of fine jewelry and fine collectibles.
The Company believes its marketing approach is more efficient and
effective than these traditional storefront retailers, and that it
can provide its products at more attractive prices because of the
absence of traditional retail overhead costs. However, consumers
may be more accustomed to traditional means of purchasing jewelry
and fine collectible products, and, as a consequence, the Company
may have to work harder to penetrate a more traditional consumer
market.
The Company believes it has a significant competitive advantage over
traditional retail stores because its IRSRs take products directly
to the marketplace. The traditional retail business is dependent
on walk-in prospective customers in order to make sales. The best
way for the retail store to increase its exposure (and thus its
"walk-in" traffic) and sales is to increase its advertising budget
to increase awareness of its market presence. The Company, with
its 75,000 IRSRs across the United States and Canada, has a sales
force that is unlimited in its market. IRSRs present the Company's
products to their sphere of influence, including their friends,
family members and business associates. The Company has determined
that many people prefer to purchase fine jewelry and collectibles
from people they already know and trust, and these consumers enjoy
the convenience of having the product delivered to them by the
IRSRs, rather than making such purchases from traditional retail
outlets. Further, the Company's products are generally sold at a
retail price which is less than that offered by traditional retail
outlets for the same products and thus the Company believes that
the cost savings afforded consumers provides the Company with a
competitive advantage as well.
Network Marketing Industry Compliance
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, franchise, securities, anti-pyramid, network
distribution, and state lottery statutes, as well as U.S. Post
Office lottery and Federal Trade Commission fraud regulations, among
others. 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. Though it can give no
assurances, the Company believes it has taken significant measures
to comply with the various laws that would apply to it in the
jurisdictions in which it currently operates. The Company has
created a Compliance Department to monitor IRSR adherence to the
Company's policies and procedures. The Company has created a
training program to ensure compliance with its policies and
procedures and the Company conducts periodic reviews of its IRSRs to
ensure policy, procedure and regulatory compliance. The policies
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and procedures adopted and enforced by the Company are designed to
assure compliance with the various laws that govern its business.
The Company devotes significant efforts and resources to monitoring
its operations and sales force since any limitation on the Company's
ability to conduct its business in a particular jurisdiction could
have a material and adverse effect on the Company and its
profitability.
The Company's marketing program and Plan has been structured to fit
within the "Amway safeguards" applicable to direct selling companies
which were approved in the landmark 1979 Federal Trade Commission
Amway decision. Among the anti-pyramiding safeguards adopted by the
Company are: (1) ongoing retailing requirements (in order to
qualify for ongoing commissions, IRSRs are required to make twelve
product sales to retail customers per quarter); (2) IRSRs may not
reorder products unless and until they have sold or consumed 70% of
their previous purchase orders; (3) the industry standard 90%
buyback policy for products returned by terminating IRSRs (the
Company has actually exceeded the standard by adopting a 100%
buyback policy); (4) requiring prospective IRSRs to purchase only
the "not-for-profit" Kit for $100, before becoming an IRSR, which is
within the exemption of the business opportunity statute in each
state in which the Company conducts its business, assuring no
product purchase or investment is necess ary to become an IRSR; (5)
a prohibition from presenting hypothetical earnings projections
(only real income earned may be communicated to prospective IRSRs);
(6) an absolute prohibition on front-end or inventory loading
(purchasing inventory without retailing the same merely to qualify
for commissions); (7) IRSRs may not buy into levels or positions;
(8) IRSRs who sponsor other IRSRs must fulfill supervisory
activities, including ongoing communication and managerial
supervision with the IRSRs within their Retail Sales Organization in
order to qualify for ongoing commissions and bonuses; and (9)
commissions and bonuses are derived solely from sales as opposed to
headhunting, sponsoring or any similar activities.
The Company's program also does not involve an "investment
contract," and thus does not involve a security. The Company doubts
that its jewelry and fine collectibles are being purchased for
speculation or investment purposes. Further, the Company has
adopted strict retail requirements and policies to guard against
front-end or inventory loading. The United States Supreme Court in
SEC v. W. J. Howey Co., 328 U.S. 293 (1946), defined an "investment
contract" for the purposes of the Securities Act as follows: "a
contract, transaction or scheme whereby a person (1) invests his
money, (2) in a common enterprise and (3) is led to expect profits
(4) solely from the efforts of the promoter or a third party. . ."
At least two of the four Howey elements are absent from the
Company's marketing program. First, an IRSR does not have to make
a monetary "investment" to participate in the Company's marketing
program and compensation Plan. Rather, potential IRSRs are only
required to purchase a not-for-profit Kit for $100 before becoming
an IRSR. The Kit contains everything the IRSR needs to begin
retailing the Company's products and, if desired, building a Retail
Sales Organization. Further, the Company gives each IRSR a 60-day
100% money-back guarantee on the Kit. Since no investment is
necessary to become a Company IRSR, the Company's program is not an
investment contract under Howey. The fourth Howey element is also
absent. The fourth element requires that a person joining the
program be led to expect profits 'solely from the efforts of the
promoter or a third-party." The Company's marketing program and
compensation Plan makes clear from the start that it is the efforts
of the IRSR alone that determine how much he or she will earn.
First, no one makes any profit unless there is a retail sale of
Company products. The IRSR is free to limit his or her activities
to selling Company products and keeping the retail profit (the
difference between the Representative Cost and the retail price).
The Company's Policies and Procedure Manual makes clear that
commissions can only be earned from an IRSR's Retail Sales
Organization when the IRSR actively supervises the downline IRSRs
who make retail sales of the Company's products themselves. Any
IRSR who sponsors other IRSRs must perform bona fide supervisory,
distributing and selling functions in the sale and delivery of
products to the ultimate consumer and in the training of those
IRSRs sponsored. The efforts of the IRSRs in making direct sales
and the fact that IRSRs must exercise substantial supervision of
downline IRSRs to make any override commissions on other IRSRs'
sales ensures that each IRSR realizes that it is his or her own
efforts that determine how much the he or she will earn. Thus,
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the Company's marketing program is not an investment contract or
security according to the Supreme Court standard established in
Howey.
Properties
The Company owns no real property. The Company conducts its
operations through its headquarters in Raleigh, North Carolina. The
Company leases approximately 8,997 square feet of office space from
SPP Real Estate at a current rental of $170,000 per year plus
utilities and taxes. This lease expires on November 30, 2002.
Employees
As of December 31, 1996, the Company had 81 employees, of whom 17
performed management and supervisory functions and 61 performed
technical, administrative and support functions related to the
Company's sales and network marketing operations. As of December
31, 1996, all but 10 of the Company's employees were full-time
employees including two in Canada. The Company is not a party to
any collective bargaining agreements. The Company considers
relations with its employees to be good.
Legal Proceedings
The Company is not currently a party to any material legal proceedings.
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MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age
Position
Stanley H. Van Etten . . . . . . . . . . . . . . . . . . 35
Chairman, President & Chief Executive Officer
Barry A. Ackel. . . . . . . . . . . . . . . . . . . . . . . 54
Director
John D. Brothers . . . . . . . . . . . . . . . . . . . . . 31
Director & Interim Vice President, Compliance
Jimmie D. Knowles . . . . . . . . . . . . . . . . . . . . . 50
Director
Claude W. Savage . . . . . . . . . . . . . . . . . . . . 58
Director
Larry G. Smith . . . . . . . . . . . . . . . . . . . . . . 51
Director
Sabrina L. H. Wei . . . . . . . . . . . . . . . . . . . . 27
Director
Clark A. Jones. . . . . . . . . . . . . . . . . . . . . . . 41
Vice President, Chief Financial Officer
O. Kenneth Rudd, III. . . . . . . . . . . . . . . . . . . . 44
Vice President, Sales
Dawn E. McIntyre. . . . . . . . . . . . . . . . . . . . . . 29
Vice President, Marketing
Jeffrey A. Trendel. . . . . . . . . . . . . . . . . . . . 30
Controller
Angie C. Stewart. . . . . . . . . . . . . . . . . . . . . 32
Corporate Secretary
All directors of the Company hold office until the next
annual meeting of the shareholders and until their successors have
been elected and qualified. The officers of the Company are elected
by the Board of Directors at the first meeting after each annual
meeting of the Company's shareholders, and hold office until their
death, resignation or removal from office. The Company has no
Executive Committee. The Company presently has a Compensation
Committee. No other committees of the Board have been established
to date. Pursuant to the listing requirements for quotation on the
Nasdaq NMS, the Company is required to establish an Independent
Audit Committee. The Company has until 90 days following the date
of this Prospectus to satisfy this requirement by electing two
independent directors and establishing an Independent Audit
Committee. In connection with this undertaking, the Board of
Directors has agreed to nominate and recommend to the shareholders
the election of at least two independent members to the Board of
Directors and to create an Independent Audit Committee. The
Independent Audit Committee will be composed of a majority of the
independent directors and will be charged with reviewing the
Company's annual audit and meeting with the Company's independent
accountants to review the Company's internal controls and financial
management practices. A failure by the Company to comply with these
requirements may result in the delisting of the Common Stock from
Nasdaq NMS.
The following is a brief summary of the background of each director
and executive officer of the Company:
STANLEY H. VAN ETTEN has served as Chairman of the Board of
Directors ("Chairman"), President and Chief Executive Officer of the
Company since May 4, 1995, and he devotes substantially all of his
time to these duties. Mr. Van Etten is a Founder of the Company.
Mr. Van Etten also is the President of Mayflower, and has held this
position since 1992. Mayflower is engaged in various business
activities including corporate finance and management consulting,
and is a principal shareholder of the Company. See "Principal
Shareholders." Through Mayflower, Mr. Van Etten is a principal
shareholder and also is the Managing Director of Mayflower Capital
LLC, a National Association of Securities Dealers, Inc., ("NASD")
member investment banking firm. Mr. Van Etten is also the President
of Mayflower Venture Capital, LLC, a venture fund which focuses on
emerging and developing small to middle-market companies located in
the southeastern United States. From 1988 to 1993, Mr. Van Etten
was Regional Vice President for F. N. Wolf & Co., Inc. ("F. N.
Wolf"), a national investment banking firm. Mr. Van Etten holds a
Bachelor of Arts degree from Florida State University. Mr. Van
Etten attended Duke University, Fuqua School of Business Executive
MBA program in 1991 and 1992 but did not complete all of the course
work for graduation.
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In addition, Mr. Van Etten owns small percentages of numerous
private companies and from time to time serves as a director or a
consultant for such companies. Mr. Van Etten currently sits on the
Board of Directors of the Capital Area YMCA.
BARRY A. ACKEL has served as a Director of the Company since January
1996. He is also a principal shareholder of the Company. See
"Principal Shareholders." From September 1987 to May 1995 he was an
Independent Distributor for National Safety Associates, a network
marketing company. From 1981 to September 1987 he was the owner of
Ackel's Wholesale Jewelry in Alexandria, Louisiana. Mr. Ackel has
no formal post-secondary education.
JOHN D. BROTHERS has served as a Director of the Company since
January 1996. Since November 1995, Mr. Brothers also has served as
the Company's Director of Compliance and Shareholder Relations (now
Interim Vice President, Compliance), and from June 1995 to November
1995 he was an IRSR of the Company. From September 1994 to June
1995, he was an Account Manager with Ostrander Burch & Co., Inc. in
Raleigh, North Carolina and from February 1993 to September 1994, he
was Vice President of Mayflower. From 1989 to 1993, he held several
positions with F. N. Wolf including the position of Branch Manager.
Mr. Brothers holds a Bachelors degree from Elon College with a major
in finance. Mr. Brothers filed for Chapter 13 reorganization
bankruptcy on January 11, 1995. The plan of reorganization was
accepted on March 13, 1995, and disposition and discharge of this
matter is anticipated January 2000.
JIMMIE D. KNOWLES has served as a Director of the Company since
March 1996. He is also a principal shareholder of the Company. See
"Principal Shareholders." Since 1982 he has been the owner of
several businesses in North Carolina including at present, Body's N
Motion, Garner Glass & Mirror and Action Glass of the Triangle. In
addition, from 1983 to 1994, Mr. Knowles held insurance and
securities sales licenses.
CLAUDE W. SAVAGE has served as a Director of the Company since May
1995. He was a Founder and also is a principal shareholder of the
Company. See "Principal Shareholders." From June 1982 to October
1992 he was a National Marketing Director with National Safety
Associates, a network marketing company. Mr. Savage also was a
former teacher and football coach in various public school systems
in North Carolina. Since 1975, he has been the owner and operator
of the Fish Farm Seafood Restaurant in Matthews, North Carolina.
Mr. Savage holds a Masters degree and a Bachelor of Science degree
from Appalachian State University.
LARRY G. SMITH has served as a Director of the Company since May
1995. Mr. Smith is the Managing Director of Omega Leasing Services,
a Founder and principal shareholder of the Company. See "Principal
Shareholders." From 1987 to 1994, Mr. Smith was President and a
principal shareholder of Cross Key Enterprises, Inc., which was
engaged in various corporate activities including business
development and acquisitions. Mr. Smith's experience is in the
health care field. For eighteen years he worked for Smith Kline
Beecham and Johnson & Johnson. The highest position held was Vice
President of Sales and Marketing. He holds a Bachelor of Science
degree from Bob Jones University.
SABRINA L.H. WEI has served as a Director of the Company since
January 1996. Prior to her association with the Company, which
began in August 1991, she established Trans Global Development and
Investment Company, Ltd., a Hong Kong-based investment consulting
firm. From February 1991 to August 1991 she was Regional Vice
President of Images & Attitudes International, a personal care and
nutritional product distribution company based in Salem, Utah. Ms.
Wei was a Diamond Executive for Nu Skin International of Provo,
Utah, from January 1990 to February 1991. In addition, from 1986 to
1990 she worked for Touche Ross, Chartered Accountants (now Deloitte
& Touche). Ms. Wei holds a Bachelors degree in Business
Administration from Simon Fraser University as well as a Fellow of
Canadian Securities Institute designation from that University.
36
<PAGE>
CLARK A. JONES has served as Vice President, Chief Financial Officer
of the Company since January 1, 1997. From October 1995 Mr. Jones
served as the Company's Controller. From February 1993 to August
1995 Mr. Jones was Controller for A. R. Kamm Association, Inc. of
Cary, North Carolina. From January 1989 to February 1993 Mr. Jones
was a staff accountant with Lynch & Howard, P.A. of Raleigh, North
Carolina. From June 1982 to January 1989 Mr. Jones was a Department
Trainer and Total Quality Instructor for AVX Corp. (Formerly
Corning Glass Works) of Raleigh, North Carolina. Mr. Jones holds a
Bachelors degree in Accounting and Business from North Carolina
Wesleyan. Mr. Jones is a licensed certified public accountant and
holds memberships with the AICPA and the NCACPA.
O. KENNETH RUDD III has served as Vice President of Sales since
January 1, 1997 and since May 1996 he has served the Company by
developing and implementing the IHI Training, Leadership Development
and Support System. From June 1981 to May 1996, Mr. Rudd was
self-employed in his own real estate, marketing, consulting and
direct sales and distribution businesses. Mr. Rudd holds Bachelors
degrees in English and Psychology and Masters degrees in English and
Teaching from Duke University.
DAWN E. MCINTYRE has served as Vice President of Marketing since
January 1, 1997. Since July 1995 Ms. McIntyre has been the
Company's Director of Marketing. From June 1994 to July 1995 Ms.
McIntyre was a Sales Associate for Business Leader Magazine in
Raleigh, North Carolina. From January to June 1994 Ms. McIntyre was
Office Manager for Champions of the Dream, Inc. of Raleigh, North
Carolina. From May 1993 to January 1994 Ms. McIntyre was Office
Manager for Transtream, Inc. of Raleigh, North Carolina. From April
1992 to May 1993 Ms. McIntyre was a Stock Broker with Prudential
Securities in Raleigh, North Carolina. From July 1990 to April 1992
Ms. McIntyre was a Stock Broker with F. N. Wolf in Raleigh, North
Carolina. Ms. McIntyre holds a Bachelors degree in Mathematics from
Elon College in Burlington, North Carolina. Ms. McIntyre is a
member of the National Association of Female Executives.
JEFFREY A. TRENDEL has served as the Company's Controller since
January 1, 1997. From June 1996 Mr. Trendel served as Accounting
Manager to the Company. From February to June 1996 Mr. Trendel was
an Insurance Company Examiner for the North Carolina Department of
Insurance. From June 1989 to January 1996 Mr. Trendel was the
Financial Reporting Coordinator for Raleigh Federal Savings Bank
(which merged with First Union National Bank January 1996) in
Raleigh, North Carolina. Mr. Trendel holds a Bachelors degree from
The Citadel in Business Administration.
ANGIE C. STEWART has served as Corporate Secretary since December
16, 1996 and since March 1996 has worked in the Company's Compliance
Department. From February 1991 to March 1996 Ms. Stewart was
Corporate Secretary and Administrative Assistant to the CEO and CFO
of Raleigh Federal Savings Bank (which merged with First Union
National Bank January 1996). From November 1987 to February 1991
Ms. Stewart was a Human Resource Specialist for Raleigh Federal
Savings Bank. Ms. Stewart holds a Bachelors degree in Business
Management from North Carolina State University.
Executive Compensation
The following table sets forth information concerning the
compensation paid by the Company during the years ended December 31,
1995 and 1996 to the principal executive officers of the Company,
and each of the Company's most highly compensated managers whose
salary and bonus exceeded $100,000 with respect to the fiscal year
ended December 31, 1996 ("Named Executive Officers").
37
<PAGE>
<TABLE>
Annual Compensation
Name and Principal Positions Year Salary Bonus($)
- --------------------------------------------------------------
<S> <C> <C> <C>
Stanley H. Van Etten. . . . . . 1995 -0-(2) $-0-(2)
Chairman, President and Chief
Executive Officer 1996 $1,509,575 $23,568
Dwight Hallman. . . . . . . . . 1995 $44,159 $-0-
Director of Operations 1996 $80,000 $37,029
</TABLE>
<TABLE>
Long-Term Compensation
Securities
Restricted underlying
Other Annual Stock Options/All other
Name and Principal Positions Compensation(1) Award(s)($) SARS($) Compensation
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stanley H. Van Etten. . . . . . 1995 -0- -0- -0- $15,300
Chairman, President and Chief
Executive Officer 1996 -0- -0- 1,396,500 66,000
-0- $3,253,579
Dwight Hallman. . . . . . . . . 1995 -0- -0- -0- -0-
Director of Operations 1996 -0- $124,688 $83,125 -0-
</TABLE>
- ----------------------------------------------------------------------------
(1) Certain of the officers of the Company routinely receive other
benefits from the Company, including travel reimbursement, the
amounts of which are customary in the industry. The Company has
concluded, after reasonable inquiry, that the aggregate amounts of
such benefits during fiscal 1996, did not exceed the lesser of
$50,000 and 10% of the compensation set forth above as to any named
individual.
(2) In 1995, Mayflower earned $389,068 in consulting fees from the
Company. During 1995, Mr. Van Etten was an employee of Mayflower
and did not earn any additional compensation from the Company.
Option Grant Table
The following table sets forth certain information regarding stock
option grants made to the CEO and the other Named Executive Officers
for services performed during the fiscal years ended December 31,
1995 and December 31, 1996.
<TABLE>
Option Grants in Last Fiscal Year
Individual Grants
Number of
Securities % of Total Exercise
Underlying options of Base
Options Granted to Price
Name (#of Shares) Employees ($/SH)
---- ----------- --------- --------
<S> <C> <C> <C>
Stanley H.Van Etten 1,050,000(3) 27.6% $1.33
CEO and President 2,446,300(2)(3) 64.4 $1.33
Clark A. Jones
Vice President/CFO 52,500 1.4 $1.33
Jeffrey A. Trendel
Controller 25,000 0.7 $1.33
Angie C. Stewart
Corporate Secretary 25,000 0.7 $1.33
O.Kenneth Rudd III
Vice President, Sales 105,000 2.8 $1.33
Dawn E. McIntyre
Vice President, Marketing
92,500 2.4 $1.33
Potential Realizable Value
at Assumed Rates of Stock
Price Appreciation for
Option Term (1)
Expiration
Name 5% 10%
Stanley H.Van Etten 10/31/1999 $4,116,000 $4,378,500
CEO and President 10/31/2001 9,589,496 10,201,071
Clark A. Jones
Vice President/CFO 10/31/1999 205,800 218,925
Jeffrey A. Trendel
Controller 10/31/1999 98,000 104,250
Angie C. Stewart
Corporate Secretary 10/31/1999 98,000 104,250
O.Kenneth Rudd III
Vice President, Sales 10/31/1999 411,600 437,850
Dawn E. McIntyre
Vice President, Marketing
10/31/1999 362,600 385,725
</TABLE>
_____________________________
(1) The potential realizable portion of the foregoing table
illustrates value that might be realized upon exercise of options
immediately prior to the expiration of their term, assuming the
specified compounded rates of appreciation on the Company's Common
Stock over the term of the options. These numbers do not take into
account provisions of certain options providing for termination of
the option following termination of employment, nontransferability
or differences in vesting periods. Regardless of the theoretical
value of an option, its ultimate value will depend on the market
value of the Common Stock at a future date, and that value will
depend on a variety of factors, including the overall condition of
the stock market and the Company's results of operations and
financial condition. There can be no assurance that the values
reflected in this table will be achieved.
(2) Under an employment contract and based on the Company's
achievement of certain revenue goals, the President of the Company
was entitled to receive stock incentives in the amount of 1% of
issued and outstanding shares as of December 31, 1995, 2% of
December 31, 1996, and 3% as of each year ended December 31, 1997
through 2000. For the year ended December 31, 1995, the President
was granted options for 151,300 shares of Common Stock rather than
receiving this stock bonus. Effective October 31, 1996, the
President agreed to and has been granted stock options for 2,295,000
shares, exercisable at $1.33 per share. As a result of having been
granted these options, the President is no longer entitled to
receive the stock incentives referred to above and the options are
not contingent on the Company's achievement of the specified revenue
goals. These options remain outstanding at October 31, 1996 and
expire on October 31, 2001.
38
<PAGE>
(3) Individual grants include options granted to Mayflower Holdings,
Inc., a stockholder principally owned by Stanley H. Van Etten.
Stock Option Grants
151,300 stock options were granted to the Named Executive Officers
during the fiscal year ended December 31, 1995, and 3,645,000 stock
options were granted to the Named Executive Officers during the year
ended December 31, 1996.
Fiscal Year End Option Values
No options were exercised by the Named Executive Officers during
fiscal 1995. The following table shows the number of shares covered
by both exercisable and unexercisable employee stock options, as of
December 31, 1996.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
<TABLE>
Number of Securities
Underlying Unexercised
Options at
Name Shares December 31, 1996
Acquired on Value
Exercies (#) Realized($) Exercisable
<S> <C> <C> <C> <C>
Stanley H.Van Etten -0 - -0- 1,050,000
CEO and President 2,446,300
Clark A. Jones
Vice President/CFO -0- -0- 52,500
O.Kenneth Rudd III
Vice President, Sales -0- -0- 105,000
Dawn E. McIntyre
Vice President, Marketing-0- -0- 92,500
Jeffrey A. Trendel
Controller -0- -0- 25,000
Angie C. Stewart
Corporate Secretary -0- -0- 25,000
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In the money options at
Name December 31, 1996 December 31, 1996
Unexercisable Exercisable Unexercisable
Stanley H.Van Etten -0- $3,853,500 -0-
CEO and President 8,977,921
Clark A. Jones
Vice President/CFO -0- 192,675 -0-
O.Kenneth Rudd III
Vice President, Sales -0- 385,350 -0-
Dawn E. McIntyre
Vice President, Marketing -0- 339,475 -0-
Jeffrey A. Trendel
Controller -0- 91,750 -0-
Angie C. Stewart
Corporate Secretary -0- 91,750 -0-
</TABLE>
Long-Term Incentive Plans
The Company presently does not have any Long-Term Incentive Plans.
Company Committee Interlocks and Insider Participation
The entire Board of Directors of the Company made all compensation
decisions regarding compensation of executive officers during the
period ending December 31, 1995. During such period, Mr. Van Etten
was the only executive officer of the Company. For information
concerning transactions with the Directors of the Company and
entities affiliated with certain Directors, see "Certain
Relationships and Related Transactions."
The Board of Directors has a Compensation Committee which makes
recommendations concerning salaries, incentive compensation for
executive officers, executive directors and managers of the Company.
The 1996 Compensation Committee was composed of Larry Smith
(Chairman), Barry Ackel, Claude Savage, Sabrina Wei, Derrick Rodgers
(a former director) and Stanley H. Van Etten.
39
<PAGE>
Director Compensation
The Company's directors are compensated in the amount of $100 plus
expenses (travel, lodging and meals) for attendance at regularly
scheduled Board of Directors meetings. The Company currently does
not plan to compensate its outside directors for services rendered
in their capacity as directors.
<TABLE>
Director Compensation
Securities
Restricted Underlying
Stock Options/
Name Award(s)($) SAR($)
- -------------------------------------------------------------------------
<S> <C> <C>
Stanley H. Van Etten(1) -0- $1,396,500
3,253,579
Barry A. Ackel(2) -0- 146,300
John D. Brothers -0- 266,000
Jimmie D. Knowles -0- 133,000
Claude W. Savage -0- 778,050
Larry G. Smith(3) -0- 744,800
Sabrina L. H. Wei(4) -0- 432,250
__________________________
</TABLE>
(1) $1,497,979 of the SARS are owned in the name of Mayflower
Holdings, Inc.
(2) $46,550 of the SARS are owned in the name of Acme Holdings.
(3) $645,050 of the SARS are owned in the name of Omega Leasing
Services.
(4) $332,500 of the SARS are owned in the name of Paradise
Investments, Ltd.
Employment Contracts with Named Executive Officers
Effective June 1, 1995 the Company entered into a written employment
agreement with Stanley H. Van Etten to serve as its Chief Executive
Officer. The term of the agreement is for three years commencing
June 1, 1995 and terminating May 31, 1998. This agreement is
subject to automatic successive three-year periods of renewal unless
written notice of termination is provided by one party to the other
at least 90 days prior to the termination of the initial term of the
agreement. Mr. Van Etten will receive the greater of 3% of the net
revenues of the Company or $425,000 per year payable at least twice
monthly. Under the original terms of the agreement and based on the
Company's achievement of certain revenue goals, Mr. Van Etten was
entitled to receive stock incentives in the amount of 1% of the
issued and outstanding shares as of December 31, 1995, 2% as of
December 31, 1996, and 3% as of each year ended December 31, 1997
through 2000. For the year ended December 31, 1995, the President
was granted options for 151,300 shares of Common Stock rather than
receiving stock incentives. Effective October 31, 1996, the
President agreed to and has been granted stock options for 2,295,000
shares of Common Stock, exercisable at $1.33 per share in exchange
for the 1996 through 2000 incentive stock option referred to above.
As a result of having been granted these options, the President is
no longer entitled to receive the stock incentives referred to above
and the options are not contingent on the Company's achievement of
the specified revenue goals. These options remain outstanding at
October 31, 1996, and expire on October 31, 2001. In addition, Mr.
Van Etten is entitled to a semi-annual bonus payable no later than
July 15 and January 15 of each year equal to 3% of the operating
profits of the Company before taxes at each payment date. Other
than the exchange of options for the incentive stock referenced
above, all other provisions of Mr. Van Etten's employment contract
remain unchanged.
The Company maintains a "key man" life insurance policy in the
amount of $2.5 million on the life of Mr. Van Etten.
Compensation to the Company's President for Sales Book
Prior to the formation of the Company, the Company's President,
Stanley H. Van Etten, had authored a sales and training book which
was determined by the Company to be beneficial and instrumental for
40
<PAGE>
inclusion in the Company's Kit. In September 1995 the Company
entered into a written agreement with the Company's President and
Chief Executive Officer, Stanley H. Van Etten, and his father,
Stanley L. Van Etten, to rewrite the earlier created sales training
handbook to create a version specifically for the Company's IRSRs.
The agreement called for a lump sum payment of $10,000 to Stanley L.
Van Etten as well as a $4 per book royalty for all books sold to the
Company. The Company presently includes one copy of the book in
each Kit and sells copies of the book for $14.95 individually or in
packets of 10 for $100. $132,000 was paid to these individuals in
1996 and $30,600 was paid in 1995. No amounts were due at December
31, 1996. The Messrs. Van Etten have another edition of this book
which does not include mate rials specific to the network marketing
industry which is separately marketed through Van Etten Business
Press, LLC, a company in which the Messrs. Van Etten both maintain
a 50% interest.
41
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
the beneficial ownership of the capital stock of the Company as of
the date of this Prospectus for (i) each person who is known by the
Company to beneficially own more than 5% of the capital stock, (ii)
each of the Company's directors, (iii) each of the Named Executive
Officers and (iv) all directors and executive officers as a group.
Unless otherwise indicated, the address for directors, executive
officers and 5% stockholders is 2626 Glenwood Avenue, Suite 200,
Raleigh, North Carolina 27608.
Percentage
Directors, Executive Officers
and 5% Shareholders Number of Shares
Beneficially Before
Owned(1)(2) Offering After Offering
Acme Holdings(3) 426,875 2.8% 2.4%
1239 Heyman Lane
Alexandria, LA 71303
Barry Ackel, Director 75,000 0.5% 0.4%
1239 Heyman Lane
Alexandria, VA 71303
Omega Leasing Services(4) 1,171,250 7.8% 6.5%
2435 E. North Street
Suite 292
Greenville, SC 29615
Larry G. Smith, Director 75,000 0.5% 0.4%
2435 E. North Street
Suite 292
Greenville, SC 29615
Jimmie & Portia Knowles, Director 597,925 4.0% 3.3%
105 Beechtree Court
Apex, NC 27502
Mayflower Holdings(5) 1,527,108(6) 10.2% 8.5%
Stanley H. Van Etten 2,370,000 15.8% 13.2%
Chairman, President & Chief Executive Officer
Paradise Investments, Ltd.(7) 250,000 1.7% 1.4%
1370-885 W. Georgia
Vancouver, BC, Canada V6C 3E8
Sabrina L. H. Wei, Director 75,000 0.5% 0.4%
1370-885 W. Georgia
Vancouver, BC, Canada V6C 3E8
Claude W. Savage, Director 1,182,750 7.9% 6.6%
106 Benbow Lane
Charlotte, NC 28214
To the Top We Go, Inc.(8) 82,500 0.5% 0.5%
John D. Brothers,
Director & Interim Vice President, Compliance
200,000 1.3% 1.1%
Clark A. Jones, Vice President,
Chief Financial Officer 52,500 0.3% 0.3%
O. Kenneth Rudd III, Vice President, Sales
105,000 0.7% 0.6%
Dawn E. McIntyre, Vice President, Marketing
92,500 0.6% 0.5%
Jeffrey A. Trendel, Controller 25,000 0.2% 0.1%
Angie C. Stewart, Corporate Secretary
25,000 0.2% 0.1%
42
<PAGE>
Derrick L. Rodgers 509,250 3.4% 2.8%
409 Jackson Park Road
Kannapolis, NC 28083
All directors and 8,333,408 55.5% 46.3%
executive officers
as a group (12 persons)
(1) Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission ("Commission") and
generally includes voting or investment power with respect to
securities. Shares of Common Stock issuable upon exercise of
options, warrants currently exercisable or convertible within 60
days, are deemed outstanding for computing the percentage of
ownership of the person holding such options but are not deemed
outstanding for computing the percentage ownership of any other
person.
(2) All options except those granted to employees of the Company are
"non-ISOs" or "nonqualifying options" because they are not incentive
options as defined in Internal Revenue Code Section 422.
(3) Barry Ackel, Director of the Company, is Managing Director of
Acme Holdings. Consequently, Mr. Ackel may be deemed the beneficial
owner of all shares of Common Stock owned by Acme Holdings.
Includes 35,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days after the date of this
Prospectus.
(4) Larry G. Smith, Director of the Company, is Managing Director of
Omega Leasing Services. Consequently, Mr. Smith may be deemed the
beneficial owner of all shares of Common Stock owned by Omega
Leasing Services. Includes 485,000 shares of Common Stock issuable
upon the exercise of options exercisable within 60 days after the
date of this Prospectus.
(5) Stanley H. Van Etten, Chairman, President and Chief Executive
Officer of the Company, is President of Mayflower. Consequently,
Mr. Van Etten may be deemed the beneficial owner of all shares of
Common Stock owned by Mayflower. Includes 1,126,300 shares of
Common Stock issuable upon the exercise of options exercisable
within 60 days after the date of this Prospectus.
(6) In accordance with the provisions of his employment contract and
based on the performance of the Company in 1995, Mr. Van Etten
received a stock bonus of 1% of the issued and outstanding shares
(or 75,652 shares) of the Company's Common Stock as of December 31,
1995 on February 16, 1996. Effective October 31, 1996, Mr. Van
Etten gave the incentive stock back to the Company in exchange for
options to purchase 151,300 shares of Common Stock at an exercise
price of $1.33 per share. The balance of the stock due under this
provision of Mr. Van Etten's employment contract has been converted
to options for 2,295,000 shares of common stock at an exercise price
of $1.33. These options are outstanding as of October 31, 1996 and
expire October 31, 2001. These options are not part of the Stock
Option Plan.
(7) Sabrina L. H. Wei, Director of the Company, is a principal
shareholder of Paradise Investments, Ltd. Consequently, Ms. Wei may
be deemed the beneficial owner of all shares of Common Stock owned
by Paradise Investments, Ltd. Includes 250,000 shares of Common
Stock issuable upon the exercise of options exercisable within 60
days after the date of this Prospectus.
(8) John D. Brothers, Director of the Company, is President,
Director and principal shareholder of To The Top We Go, Inc.
Consequently, Mr. Brothers may be deemed the beneficial owner of all
shares of Common Stock owned by To The Top We Go, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
It is the Company's policy that any person that is a member of
management or an employee of either the Company or IHI Canada may
not build a Retail Sales Organization and receive override
commissions and bonuses therefrom under the Plan. Such members of
management and employees are free to purchase the Company's products
and resell them to others or to consume them personally. This
policy does not apply to the Company's directors.
All future material affiliated transactions and loans will be made
or entered into on terms that are no less favorable to the Company
than those that can be obtained from unaffiliated third parties. In
addition, all future material affiliated transactions and loans and
any forgiveness of loans, must be approved by a majority of the
independent outside members of the Company's Board of Directors who
do not have an interest in the transactions; however, at present,
there are no such independent outside members. The Company intends
to add at least two independent directors, one of whom will be
chosen by the Underwriter, who will determine the fairness of future
related-party transactions. In the interim, the Company will not
enter in any new related-party transactions.
Mayflower, a principal shareholder of the Company, of whom Stanley
H. Van Etten is President and owns approximately 85% of Mayflower's
common stock, provided substantial professional services, employees,
operating capital, corporate office space (through November 30,
1995), loans, general administrative supplies and support to the
Company during the period March through December 1995. The services
provided by Mayflower included raising capital, designing the
Company's compensation and marketing plans, conducting meetings with
43
<PAGE>
potential investors and representatives, developing a business plan,
conducting sales presentations implementing business policies,
recruiting professional advisors and administrative activities. As
a result, the Company owed Mayflower $389,068 for services rendered
and expense reimbursements, including $131,812 in notes payable with
interest at a rate of 8% per annum. These amounts were paid in full
as of February 1996. The interest paid on the note was $6,544.
Mayflower loaned the Company $200,000 in August 1996. The note
required repayment at a rate of $50,000 on the fifteenth of each
month for the months October 1996 through January 1997 with the
final payment including interest accrued at a rate of twelve percent
per annum. This loan was secured by the assets of the Company.
During 1996, the Company offset $58,172 in receivables against the
note principal. The loan was repaid and the security interest
released in November 1996.
In 1996 the Company issued Mayflower 187,500 shares of Common Stock
valued at $250,000 in exchange for consulting fees. The shares were
canceled and fair market value options were granted in replacement
thereof for 375,000 shares at an exercise price of $1.33 per share.
The options expire October 31, 1999.
In September 1995 the Company entered into a written agreement with
the Company's President and Chief Executive Officer, Stanley H. Van
Etten, and his father, Stanley L. Van Etten, to rewrite an
earlier-created sales training handbook to create a version
specifically for the Company's IRSRs. The agreement called for a
lump sum payment of $10,000 to Stanley L. Van Etten for the
preparation of the special edition of the book, which was paid on
October 2, 1995, as well as a $4 per book royalty for all books sold
to the Company. The Company presently includes one copy of the book
in each Kit and sells copies of the book for $14.95 individually or
in packets of 10 for $100.00. $132,000 was paid to these
individuals in 1996 and $30,600 was paid in 1995. No amounts were
due at December 31, 1996.
Under a 1995 employment contract and based on the Company's
achievement of certain revenue goals, the President of the Company
is entitled to receive stock incentives in the amount of 1% of
issued and outstanding shares as of December 31, 1995, 2% as of
December 31, 1996, and 3% as of each year ended December 31, 1997
through 2000. These stock incentives were granted to the President
as additional compensation and were at no cost to the President.
In 1995, the Company did not meet the revenue goals noted in the
President's contract, but in March 1995, the Board granted the
stock incentives to the President based on accrued sales and
deferred revenue combined. Effective October 31, 1996, the
President gave back the incentive stock and the Company granted
additional stock options of 151,300 shares of Common Stock at an
exercise price of $1.33 per share. Effective October 31, 1996, the
President agreed to and has been granted stock options for
2,295,000 shares of common stock, exercisable at $1.33 per share in
exchange for the 1996, 1997, 1998, 1999 and 2000 incentive stock
referred to above. As a result of having been granted these
options, the President is no longer entitled to receive the stock
incentives referred to above and the options are not contingent on
the Company's achievement of the specified revenue goals. These
options were outstanding at December 31, 1996, expire on October
31, 2001, and are not subject to the Stock Option Plan. All other
provisions of the President's employment agreement remain
unchanged.
One of the Company's jewelry suppliers, Jewels by Evonne, is
principally owned by a shareholder of the Company, Evonne Eckenroth.
The Company sold $1,160,593 (Representative Cost) worth of products
supplied by Jewels by Evonne during 1996, the majority of which were
sold during the Company's Winter Product Promotion.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company is 25,000,000 shares,
all of which are Common Stock, $0.00133 par value per share. As of
December 31, 1996, there were 7,273,246 shares of Common Stock
outstanding. Upon the completion of this Offering there will be
10,273,246 shares of Common Stock outstanding.
Common Stock
The holders of shares of Common Stock are entitled to one vote for
each share held of record on all matters to be voted on by
stockholders. There is no cumulative voting with respect to the
election of directors, with the result that the holders of more than
50% of the shares voted can elect all of the directors then being
elected. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of
funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining
available for distribution to them after payment of liabilities and
after provision has been made for each class of stock, if any,
having preference over the Common Stock. Holders of shares of
Common Stock, as such, have no redemption, preemptive or other
subscription rights, and there are no conversion provisions
applicable to the Common Stock. All of the outstanding shares of Co
mmon Stock are, and the shares of Common Stock offered hereby, when
issued and paid for as set forth in this Prospectus, will be, fully
paid and nonassessable.
Limitation on Liability and Indemnification Matters
The Amended Articles of Incorporation and Bylaws of the Company
include provisions to eliminate personal liability of its directors
for monetary damages resulting from breaches of their fiduciary duty
to the fullest extent permitted by Section 55-8-30(e) of the North
Carolina Business Corporation Act ("NCBCA") and (ii) require the
Company to indemnify its directors and officers to the fullest
extent permitted by Sections 55-8-50 through 55-8-58 of the NCBCA.
Pursuant to Section 55-8-51 and 55-8-57 of the NCBCA, a corporation
generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses incurred
by them in connection with any suit to which they are, or are
threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interest
of the Company, and with respect to criminal action, they had no
reasonable cause to believe their con duct was unlawful. These
provisions do not eliminate the directors" duty of care, and, in
appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under the
NCBCA. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the
Company, for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, for acts or
omissions that the director believes to be contrary to the best
interests of the Company or its shareholders, for any transaction
from which the director derived an improper personal benefit, for
acts or omissions involving a reckless disregard for the director's
duty to the Company or its shareholders when the director was aware
or should have been aware of a risk of serious injury to the Company
shareholders, for acts or omissions that constitute an unexcused
pattern of inattention that amounts to an abdication of the
director's duty t o the Company shareholders, for improper
transactions between the director and the Company improper
distributions to shareholders and loans to directors and officers.
Theses provisions do not affect a director's responsibilities under
any other laws, such as the federal securities laws.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Continental
Stock Transfer & Trust Company, New York, New York.
45
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
10,273,246 shares of Common Stock, not including shares of Common
Stock issuable upon exercise of outstanding options or the
Underwriter's Purchase Option and assuming no exercise of the
over-allotment option granted to the Underwriter.
* Of these outstanding shares, the 3,000,000 shares of Common
Stock sold to the public in this Offering may be freely traded
without restriction or further registration under the Securities
Act, except that any shares that may be held by an "affiliate" of
the Company (as that term is defined in the rules and regulations
under the Securities Act) may be sold only pursuant to a
registration under the Securities Act or pursuant to an exemption
from registration under the Securities Act, including the exemption
provided by Rule 144 adopted under the Securities Act.
* The 7,273,246 shares of Common Stock outstanding prior to the
consummation of this Offering are "restricted securities" as that
term is defined in Rule 144 under the Securities Act ("Restricted
Shares") and may not be sold unless such sale is registered under
the Securities Act, or is made pursuant to an exemption from
registration under the Securities Act, including the exemption
provided by Rule 144. Of such shares (i) no shares are presently
available for sale pursuant to Rule 144, (ii) 187,500 shares will be
available for sale pursuant to Rule 144 commencing April 1997 and
(iii) 5,508,375 shares will be available for sale pursuant to Rule
144 commencing June 1997.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned
any Restricted Shares for at least two years (including a
stockholder who may be deemed to be an affiliate of the Company),
will be entitled to sell, within any three-month period, that number
of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock or (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks
preceding the date on which notice of such sale is given to the
Commission, provided certain public information, manner of sale and
notice requirements are satisfied. A stockholder who is deemed to
be an affiliate of the Company, including members of the Board of
Directors and senior management of the Company, will still need to
comply with the restrictions and requirements of Rule 144, other
than the two-year holding period requirement, in order to sell
shares of Common Stock that are not Rest ricted Securities, unless
such sale is registered under the Securities Act. A stockholder (or
stockholders whose shares are aggregated) who is deemed not to have
been an affiliate of the Company at any time during the 90 days
preceding a sale by such stockholder, and who has beneficially owned
Restricted Shares for at least three years, will be entitled to sell
such shares under Rule 144 without regard to the volume limitations
described above. In addition, on July 27, 1995, the Commission
proposed to reduce the Rule 144(d) holding period for resales of
restricted securities from two years to one year and to reduce the
Rule 144(k) holding period from three years to two years. If the
Rule 144 changes are adopted as proposed, the reduced holding
periods will apply to all Restricted Shares. At present, the
Company plans to file a subsequent registration statement to
register the 7,273,246 outstanding shares of Common Stock and all of
the shares subject to options granted by the Company.
The officers, directors and principal shareholders will not sell
their shares for 12 months following the Effective Date of the
Offering without the prior written consent of the Underwriter.
No predictions can be made of the effect, if any, that future sales
of shares or the availability of shares for sale will have on the
market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock in the public market could
adversely affect the then-prevailing market price.
46
<PAGE>
UNDERWRITING
WIN Capital Corp. (the "Underwriter"), has agreed, subject to the
terms and conditions of the Letter of Intent and proposed
Underwriting Agreement, to purchase from the Company and the Company
has agreed to sell to the Underwriter the Shares offered hereby.
The obligations of the Underwriter under the Underwriting Agreement
are subject to approval of certain legal matters by counsel and
various other conditions precedent, and the Underwriter is obligated
to purchase all of the Shares offered by this Prospectus (other than
the Shares covered by the over-allotment option described below), if
any are purchased.
The Underwriter has advised the Company that it proposes to offer
the Shares to the public at the initial offering price set forth on
the cover page of this Prospectus and to certain dealers at that
price less a concession not in excess of $ per share of Common
Stock. The Underwriter may allow, and such dealers may reallow, a
concession not in excess of $ per share of Common Stock to certain
other dealers. After this Offering, the offering price and other
selling terms may be changed by the Underwriter.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the
Securities Act, and, if such indemnifications are unavailable or
insufficient, the Company and the Underwriters have agreed to damage
contribution agreements between them based upon relative benefits
received from this offering and relative fault resulting in such
damages. The Company also has agreed with the Underwriters that the
Company will file and cause to become effective a registration
statement pursuant to Section 12(g) of the Securities Exchange Act
of 1934 no later than the date of this Prospectus.
The Company has also agreed to pay to the Underwriter an expense
allowance on a non-accountable basis equal to 3% of the gross
proceeds derived from the sale of the Securities offered by this
Prospectus (including the sale of any Securities subject to the
Underwriter's over-allotment option), $70,000 of which has been paid
to date. The Company has also agreed to pay all expenses in
connection with qualifying the shares of Common Stock offered hereby
for sale under the laws of such states as the Underwriter may
designate and registering this Offering with the NASD including fees
and expenses of counsel retained for such purposes by the
Underwriter.
For the purpose of covering over-allotments, if any, which may
occur during the distribution and sale of shares, the Company will
grant the Underwriter an option to purchase all or part of an
additional number of shares of Common Stock, as will be equal to 15%
of the total number of shares initially offered to the public for a
period of 45 days from the Effective Date.
In connection with this Offering, the Company has agreed to sell to
the Underwriter for an aggregate of $100, the Underwriter's Purchase
Option, consisting of the right to purchase up to an aggregate of
300,000 shares of Common Stock excluding any shares of Common Stock
sold pursuant to the overall-allotment option provided for above.
The Underwriter 's Purchase Option is exercisable initially at a
price on 110% of the initial offering price of the Securities for a
period of four years commencing one year from the date hereof. The
Underwriter's Purchase Option may not be transferred, sold, assigned
or hypothecated during the one year period following the date of
this Prospectus except to officers of the Underwriter and the
selected dealers and their officers or partners. The Underwriter's
Purchase Option grants to the holders thereof certain "piggyback"
and demand rights.
Pursuant to the Underwriting Agreement, all of the officers,
directors and principal shareholders of the Company and any of such
person's respective affiliates as of the date of this Prospectus
have agreed not to sell any of their shares of Common Stock (who
hold in the aggregate 7,273,246 outstanding shares of Common Stock)
until 12 months from the date of this Prospectus without Underwriter
approval. In addition, the Underwriting Agreement provides that,
for a period of two years from the date of this Prospectus, the
Company will recommend and use its best efforts to elect a designee
of the Underwriter as a member of the Board of Directors.
Alternatively, the Underwriter will have the right to send a
representative to observe each meeting of the Board of Directors.
47
<PAGE>
The Underwriter has selected John W. Hemmer as such designee or
representative. Mr. Hemmer has been placed on the proxy for the
1997 Board of Directors and has received the recommendation of the
Company's management. During the two year period following the
date of this Prospectus, the Underwriter shall have the right to
purchase for the Underwriter's account or to sell for the account of
the officers and directors of the Company (and any family member or
affiliate of any of the foregoing persons), any securities sold by
any of such persons in the open market.
Lack of Experience of Underwriter
The Underwriter commenced operations in 1994, and has been a
broker-dealer since 1995, and has not served as a managing
underwriter of public offering of securities. In addition, the
Underwriter is a relatively small firm and no assurance can be given
that it will be able to participate as a market maker in the Common
Stock, and no assurance can be given that any broker-dealer will
make a market in the Common Stock. However, the principals of the
Underwriters have a combined ___ years experience and have completed
over ___ public stock transactions.
Discussion of Determination of Offering Price
Prior to this Offering, there has been no public market for any of
the Company's securities. Accordingly, the Offering Price of the
Shares has been determined by negotiation between the Company and
the Underwriter and does not necessarily bear any relation to
established valuation criteria. Factors considered in determining
such prices and terms, in addition to prevailing market conditions,
included an assessment of the prospect for the industry in which the
Company will compete, the Company's management and the Company's
capital structure.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Effective October 31, 1996, the Board of Directors awarded fair
market value options under the Stock Option Plan to various
professionals. Names experts and counsel have interests in the
Company as follows: (1) Georgina Marie Mollick, Esq. options for
117,500 shares of Common Stock; (2) Wood & Francis, PLLC, options
for 37,500 shares of Common Stock; (3) Richard S. Heller, Esq.
options for 18,750 shares of Common Stock; and (4) Wyrick, Robbins,
Yates & Ponton, LLP, options for 37,500 shares of Common Stock.
LEGAL MATTERS
Certain legal matters in connection with the Shares offered hereby
are being passed upon for the Company by Wood & Francis, PLLC,
Raleigh, North Carolina. Olshan Grundman Frome & Rosenzweig LLP,
New York, New York, has served as counsel to the Underwriter in
connection with this offering.
EXPERTS
The financial statements of the Company as of December 31, 1996 and
December 31, 1995, have been included herein in reliance on the
reports of Eilers, Jones, Brown & McLeod, CPAs, PA, independent
certified public accountants, appearing elsewhere in this
Prospectus, and upon the authority of said firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement
under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto;
certain portions have been omitted from this Prospectus in
accordance with the rules and regulations of the Commission. For
further information with respect to the Company, the securities
offered by this Prospectus and such omitted information, reference
is made to the Registration Statement, including any and all
exhibits and amendments thereto. Statements contained in this
Prospectus concerning the provisions of any document filed as an
exhibit are of necessity brief descriptions thereof and are not
necessarily complete, and in each instance reference is made to the
copy of the document filed as an exhibit to the Registration
Statement, each such statement being qualified in its entirety by
this reference.
48
<PAGE>
Following the effectiveness of the Registration Statement, the
Company will be subject to the informational requirements of the
Exchange Act and in accordance therewith the Company files reports,
proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected and
copied at public reference facilities of the Commission at 450 Fifth
Street, NW, Washington, D.C. 20549; the Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7
World Trade Center, New York, New York 10048. Copies of such
material, including the Registration Statement, can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission
also maintains a site on the World Wide Web that contains reports,
proxy and information statements and other information regarding
Registrants that file electronically. The address of such site is
http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing financial statements which will be audited and reported
on by its independent public accounting firm, and such other
periodic reports as the Company may determine to be appropriate or
as may be required by law.
49
<PAGE>
INTERNATIONAL HERITAGE, INC.
Raleigh, North Carolina
Consolidated Financial Statements
and Supplemental Information
Year Ended December 31, 1996 and
Period Ended December 31, 1995
<PAGE>
INTERNATIONAL HERITAGE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
Year Ended December 31, 1996 and Period Ended December 31, 1995
- --------------------------------------------------------------------------
PAGE(S)
---------
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets F-3 to F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8 to F-19
SUPPLEMENTAL INFORMATION:
Schedules of Consolidated Selling and Administrative Expenses F-20
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
EILERS, JONES, BROWN, & McLEOD, CPAs, PA
2626 Glenwood Avenue, Suite 300
Raleigh, North Carolina 27608
To the Shareholders of
International Heritage, Inc.
Raleigh, North Carolina
We have audited the accompanying consolidated balance sheets of
International Heritage, Inc. as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1996 and the
period April 28, 1995 (date of inception) to December 31, 1995.
These consolidated financial statements are the responsibility of
the management of International Heritage, Inc. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of International Heritage, Inc. as of December 31, 1996 and
1995, and the results of its operations and its cash flows for the
year and period then ended in conformity with generally accepted
accounting principles.
Our audits were conducted for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. The
supplemental information on page F-20 is presented for purposes of
additional analysis and is not a required part of the basic
consolidated financial statements. Such information has been
subjected to the same auditing procedures applied in the audit of
the basic consolidated financial statements and, in our opinion, is
fairly stated in all material respects, in relation to the basic
consolidated financial statements taken as a whole.
/s/ Eilers, Jones,Brown & McLeod CPAs, PA
February 14, 1997
F-2
<PAGE>
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
- ------------------------------------------------------------------------
<TABLE>
ASSETS
------
1996 1995
------- -------
<S> <C> <C>
CURRENT ASSETS
Cash $ 38,004 $ 306,099
Certificates of deposit 91,734 10,000
Inventory 664,632 283,371
Employee and stockholder advances 11,734 39,556
Due from representatives, less allowance for
doubtful accounts of $455,000 in 1996 1,933,086 142,028
Sales tax refunds due 36,796 -
Other receivables 22,603 22,998
Deposit on promotional inventory 146,316 -
Other deposits 54,721 79,419
Prepaid commissions 411,136 -
Other prepaid expenses 26,021 1,438
---------- --------
Total Current Assets 3,436,783 884,909
---------- --------
PROPERTY AND EQUIPMENT - AT COST
Computer software 251,035 124,933
Computer hardware 462,383 101,114
Office furniture and equipment 180,517 88,136
Leasehold improvements 117,004 -
---------- --------
1,010,939 314,183
Less accumulated depreciation and amortization
125,841 21,832
---------- --------
Net Property and Equipment 885,098 292,351
---------- --------
OTHER ASSETS
Deferred registration costs 568,850 116,543
Organization costs, net 184,230 260,232
Start-up costs, net 12,461 15,062
Acquisition costs, net 319,578 160,349
----------- ---------
Total Other Assets 1,085,119 552,186
----------- ---------
$ 5,407,000 $ 1,729,446
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
- ------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
1996 1995
------------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable $ 1,580,725 $ 594,851
Product ordered payable to IRSRs 440,994 253,913
Other payables to IRSRs 155,485 103,331
Cash overdrafts 95,708 94,034
Deferred revenue 1,682,827 408,375
Income taxes payable 7,000 -
Sales tax payable 157,396 135,913
Accrued payroll and payroll taxes 387,085 13,215
Accrued commissions 593,953 915,421
Accrued interest payable - 2,675
Notes payable - stockholders - 165,545
Potential investor deposits - 115,650
-------- -----------
Total Liabilities 5,101,173 2,802,923
--------- -----------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value: authorized - 25,000,000 shares;
issued and outstanding - 7,273,246 shares 9,693 9,693
Additional paid-in capital 910,903 846,497
Equity adjustment for foreign currency translation 2,803 156
Accumulated deficit (617,572) (1,929,823)
----------- -----------
Total Stockholders' Equity 305,827 (1,073,477)
----------- -----------
$ 5,407,000 $ 1,729,446
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 1996 and Period Ended December 31, 1995
- ------------------------------------------------------------------------
<TABLE>
1996 1995
--------- -------
<S> <C> <C>
REVENUE
Sales - product $ 41,261,709 $ 4,254,278
Sales - business kits 3,316,576 312,110
Sales - administrative fees 3,126,917 285,854
---------- ---------
Total Revenue 47,705,202 4,852,242
---------- ---------
COST OF SALES
Commissions 19,631,091 2,580,177
Product 13,534,224 1,912,157
Business kits 3,223,348 358,549
Other 1,451,126 67,454
---------- ---------
Total Cost of Sales 37,839,789 4,918,337
---------- ---------
GROSS INCOME (LOSS) 9,865,413 (66,095)
SELLING AND ADMINISTRATIVE EXPENSES 8,553,162 1,863,728
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 1,319,251 (1,929,823)
PROVISION FOR INCOME TAXES - -
NET INCOME (LOSS) $ 1,312,251 $ (1,929,823)
============= ==============
Earnings per common share
and common equivalent share $ 0.11 $ (0.14)
============= ==============
Earnings per common share -
assuming full dilution $ 0.11 $ (0.14)
============= ==============
Weighted average number of common and common
equivalent shares outstanding 13,569,147 12,737,149
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Year Ended December 31, 1996 and Period Ended December 31, 1995
- -----------------------------------------------------------------------
<TABLE>
Common Stock; $.001 par value,
25,000,000 shares authorized
Additional
Shares Amount Paid-in Capital
-------- ---------- ---------------
<S> <C> <C> <C>
Issuance of common
stock for cash
consideration 6,605,348 $ 8,802 $ 382,364
Conversion of notes
payble to common
stock 575,250 767 340,727
Issuance of common
stock for services
rendered 92,648 124 123,406
Adjustment for foreign
currency translation - - -
Net loss - - -
--------- ---- -------
Balance -
December 31, 1995 7,273,246 9,693 846,497
Value attributed to
options granted for
services - - 64,406
Adjustment for
foreign currency
translation - - -
Net income - - -
--------- ----- -------
B
alance -
December 31, 1996 7,273,246 $ 9,693 $ 910,903
======== ========= ===========
Adjustment
for Foreign Total
Currency Accumulated Stockholders'
Translation Deficit Equity
----------- ----------- ------------
<S> <C> <C> <C>
Issuance of common
stock for cash
consideration $ - $ - $ 391,166
Conversion of notes
payble to common
stock - - 341,494
Issuance of common
stock for services
rendered - - 123,530
Adjustment for foreign
currency translation 156 - 156
Net loss - (1,929,823) (1,929,823)
-------- ----------- -----------
Balance -
December 31, 1995 156 (1,929,823) (1,073,477)
Value attributed to
options granted for
services - - 64,406
Adjustment for
foreign currency
translation 2,647 - 2,647
Net income - 1,312,251 1,312,251
-------- ----------- -----------
Balance -
December 31, 1996 $2,803 $ (617,572) $ 305,827
======== ====== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1996 and Period Ended December 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,312,251 $ (1,929,823)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 109,039 21,832
Amortization 112,513 47,511
Common stock options granted for services 64,406 -
Other 52,789 -
Changes in Assets and Liabilities:
Inventory (381,261) (283,371)
Receivables, net (1,799,637) (204,582)
Deposits and prepaid expenses (557,337) (80,857)
Payables 1,225,109 952,095
Deferred revenue 1,274,452 408,375
Accrued expenses and taxes payable 78,210 1,067,224
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,490,534 (1,596)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 795 -
Purchases of property and equipment (731,061) (314,183)
Purchases of certificates of deposit (81,734) (10,000)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (812,000) (324,183)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of stock - 391,166
Payments for deferred registration costs (452,307) (116,543)
Proceeds from notes payable 222,775 511,539
Payments on notes payable (388,320) (4,500)
Deposits from potential investors - 120,650
Refunds to investors (115,650) (5,000)
Payments for organization and start-up costs (1,627) (184,136)
Payments for acquisition costs (215,821) (175,488)
Cash overdraft 1,674 94,034
---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (949,276) 631,722
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 2,647 156
---------- ----------
NET INCREASE (DECREASE) IN CASH AT END OF PERIOD (268,095) 306,099
Cash at beginning of period 306,099 -
---------- ----------
CASH AT END OF PERIOD $ 38,004 $ 306,099
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- ----------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY - International Heritage, Inc. (the 'Company') was incorporated in
North Carolina on April 28, 1995. It is principally engaged in the direct
sale of fine jewelry and collectibles in forty-eight states. The Company
recruits Independent Retail Sales Representatives ('IRSRs') who build retail
sales organizations. IRSRs purchase products from the Company and retails
them to the public.
The Company has a wholly owned subsidiary, International Heritage of Canada,
Inc., that was incorporated in Canada on July 26, 1995, and is engaged in the
same direct sales business in Canada as the parent Company. The accounts of
the Canadian Company have been consolidated with the Company and all
significant intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES - The preparation of consolidated 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.
RECLASSIFICATIONS - In October 1996, the Company canceled 300,000 shares of
stock originally valued at $400,000 and issued in 1995 in exchange for
services provided to the Company in the organization of the Canadian
subsidiary, and has retroactively treated this cancellation as of December 31,
1995. This retroactive cancellation has reduced both organization costs and
paid in capital balances by $400,000 as of December 31, 1995. Certain other
1995 amounts have been reclassified to conform to current year presentation.
None of these reclassifications affected the statements of operations. During
1996, it was discovered that the number of shares of common stock was
understated by 3,375 shares. The number of shares of common stock has been
restated in the attached consolidated financial statements effective December
31, 1995. This restatement has no effect on the consolidated financial
consolidated statement balances.
CASH - For purposes of reporting cash flows, cash includes cash on hand and
amounts due from banks. As of December 31, 1996, the Company had U.S. bank
balances of $416,454 of which $239,537 was in excess of the insured limits
prescribed by the Federal Deposit Insurance Corporation.
CERTIFICATES OF DEPOSIT - The Company was required to deposit $90,000 in 1996
and $10,000 in 1995 into certificates of deposit in order to obtain a merchant
credit card account with a financial institution. The certificates of deposit
are required to be maintained with this financial institution until they
mature on various dates in 1997.
INVENTORY - Inventory, consisting primarily of retail business center kits
containing sales and other business materials, is stated at the lower of cost
or market, with cost determined
F-8
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- ----------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
under the first-in first-out (FIFO) method. Inventory also includes
approximately $57,000 of jewelry used for display purposes and $70,000 in
promotional items.
PROPERTY AND EQUIPMENT - Depreciation expense is calculated on the
straight-line method over useful lives as follows:
Estimated Useful Life
--------------------
Computer software 5 years
Computer hardware 5 years
Office furniture and equipment 7 years
Leasehold improvements 7 years
Expenditures for repairs and maintenance are charged to expense as incurred.
The cost of major renewals and betterments are capitalized and depreciated
over their estimated useful lives. Upon disposition of equipment, the
respective assets and accumulated depreciation accounts are relieved and any
related gain or loss is reflected in operations.
ORGANIZATION AND START-UP COSTS - Organization costs consist primarily of
legal, consulting and accounting fees associated with the organization of the
Company and are being amortized on a straight-line basis over 5 years
(accumulated amortization was $76,977 as of December 31, 1996 and $31,761 as
of December 31, 1995). During 1996, the Company wrote off $24,309 (net book
value) in organization costs for the development of a training video which has
been updated and replaced to reflect the fact that the underlying asset no
longer had value. Start-up costs consist of legal and consulting fees
associated with the start-up of the Canadian operations and are being
amortized on a straight-line basis over 5 years (accumulated amortization was
$3,213 as of December 31, 1996 and $612 as of December 31, 1995).
ACQUISITION COSTS - In order to facilitate a larger retail sales organization
in a short time period, the Company acquired sales organizations from third
parties and paid for these acquisitions through direct product cost to the new
representatives. More than 90% of these representatives acquired have
remained active with the Company through December 31, 1996. Accordingly, the
direct costs associated with these acquisitions have been capitalized (does
not include any management or overhead cost) and are being amortized on a
straight- line basis over 5 years (accumulated amortization was $71,730 as of
December 31, 1996 and $15,138 as of December 31, 1995).
REVENUE RECOGNITION AND DEFERRED REVENUE - IRSRs may join the Company and
retail product at no cost other than to purchase a $100 professional retail
business career kit. When the IRSRs sell a product the sale is recognized
when the product is shipped.
The Company allows IRSRs to stop selling the Company"s products without
penalty or obligation within 60 days and receive a complete refund. The
Company records revenues
F-9
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- -----------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for down payments made on product sales and provides allowances for sales
returns and allowances based on past experience. After a 60 day period has
elapsed, all such revenue is recognized. Effective July 1996, IRSRs who enter
with more than one business center or have earned a commission check are not
eligible for a refund.
In addition, the Company provides a 100% satisfaction guarantee on all product
and sales aids purchased by IRSRs or customers. Commissions are earned by the
IRSRs based on sales volume levels. The Company periodically conducts sales
contests and various incentive plans to enhance revenue growth. The Company
recognized revenue on an annual $25 optional administration fee when an IRSRs
or customer first joins the Company and every year thereafter and an annual
$50 technology maintenance fee earned throughout the year and billed at the
end of each year.
INVESTOR DEPOSITS - Subsequent to the initial issuance of common stock for
$111,491 in cash and services, the Company received $809,105 of funds and
services from potential investors. The Company sold these securities under an
exemption from registration; however, it was later determined that the
exemption may have been technically deficient in some states. Thus, the
Company voluntarily (under no regulatory directive) offered to rescind such
prior sales to all investors who deposited monies during the period from May
to December 1995 by refunding the price paid for the securities plus interest
(the "Rescission Offer"). The Company has recorded deposits made by investors
who rejected the Rescission Offer as equity. Four investors, for a total of
$20,000, accepted the Rescission Offer and received a refund. In addition,
the Company refunded $100,650 plus interest to potential investors from the
state of Washington, since the Company withdrew its offering in that state.
All other investors rejected the Rescission Offer. Any investor who rejected
the Rescission Offer received shares of the Company"s stock at the rate of 7.5
shares for each $10 investment.
ADVERTISING COSTS - Advertising costs are expensed the first time the
advertising takes place.
PER SHARE AMOUNTS - Earnings per common and common equivalent share were
computed by dividing adjusted net income (loss) by the weighted average number
of shares of common stock and common stock equivalents outstanding during the
period. Common stock options have been considered to be the equivalent of
common stock from the time of their issuance, and have been treated as
outstanding for all reported periods. The number of common shares was
increased by the number of shares issuable on the exercise of stock options
when the estimated initial public offering price of the common stock ($5.00
per share) exceeds the exercise price of the options. This increase in the
number of common shares was reduced by the number of common shares that are
assumed to have been purchased with the proceeds from the exercise of the
options. Those purchases were assumed to have been made at the estimated
initial public offering price of the common stock and have been
F-10
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- --------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
limited so as not to exceed twenty percent of the outstanding common stock as
of December 31, 1996. Net income (loss) has been adjusted to reflect
investment interest, net of tax, assuming the balance of the funds assumed to
have been obtained from the exercise of options in excess of the twenty
percent limitation referred to above were invested in U. S. government
securities. Earnings per common share assuming full dilution were computed
under the same assumptions as earnings per common and common equivalent share.
See Note 5 for additional information.
STOCK OPTIONS - The Company recognizes compensation cost for nonvariable
employee stock options at the differences between what the stock has last sold
for to outside investors ($1.33 per share) less the amount, if any, the
employee is required to pay. The method used is the intrinsic value based
method and is expensed over the estimated period of service. As of December
31, 1995 and 1996, there are no outstanding employee stock options requiring
the recognition of compensation expense.
The Company recognizes compensation cost for all non-employee stock options at
the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable. There were 286,250
non-employee stock options outstanding at December 31, 1996 and no such
options outstanding at December 31, 1995. The Company has recorded $64,406 in
related compensation expense in 1996.
INCOME TAXES - Temporary differences in the basis of assets and liabilities
for financial statement and income tax reporting arise from using different
methods and periods to calculate depreciation, allowances for bad debt and
various accrued liabilities. Provision has been made for income taxes due on
taxable income and for the deferred taxes on the temporary differences.
International Heritage of Canada, Inc. files their tax returns separately from
the Company.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS
The Company was formed April 28, 1995 and from that date until June 21, 1995,
the Company"s operations consisted primarily of raising capital, developing
and implementing business policies and administrative activities. During this
development stage, the Company incurred approximately $225,000 of losses.
NOTE 3 - NOTES PAYABLE AND LETTERS OF CREDIT
The Company has no outstanding loans to stockholders as of December 31, 1996,
and had loans of $33,733 to several stockholders as of December 31, 1995.
These notes have interest rates of 12% and mature in one year. Interest
expense was $1,467 in 1996 and $2,554 in 1995. All loans were repaid as of
December 6, 1996.
F-11
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- ----------------------------------------------------------------------------
NOTE 3 - NOTES PAYABLE AND LETTERS OF CREDIT (CONTINUED)
In August 1996, Mayflower Holdings, Inc., a stockholder which is principally
owned by the President of the Company, loaned the company $200,000 with
interest at 12%. The note is payable in monthly installments of $50,000
beginning in October 1996 with a final payment including interest due in
January 1997. The note is secured by the assets of the Company. During 1996,
the Company offset $58,172 in receivables from Mayflower Holdings, Inc.
against the note principal. The note was repaid on November 1, 1996.
Interest expense was $4,100 in 1996.
The Company owed $131,812 to Mayflower Holdings, Inc. as of December 31, 1995.
This note bears interest at 8% per annum and was payable on demand. The note
was secured by all assets of the Company. The note was repaid in February
1996. Interest expense was $7,581 in 1996 and $5,508 in 1995.
In January 1996, the Company borrowed $22,775 under a note payable to a
finance company, bearing interest at 12.5%. The note was secured by a vehicle
and was scheduled to mature January 4, 1999. In October 1996, the Company
repaid the note balance. Interest expense was $1,168 in 1996.
The Company has a $10,000 letter of credit with a bank for the benefit of a
telephone company. The related note bears interest at a variable rate (8.25%
as of July 3, 1996) and matures on July 3, 1997. The note is secured by
certain cash balances maintained with the bank. The Company has a $7,300
letter of credit with a bank for the benefit of the Canadian Ministry of
Housing, Recreations and Consumer Services. The related note bears interest
at one percent above the prime rate (prime rate was 8.25% as of December 31,
1996) and matures on March 17, 1997. The note is secured by a certificate of
deposit with the bank. No amounts are outstanding under either letter as of
December 31, 1996.
NOTE 4 - PROVISION FOR INCOME TAXES
The provision for income taxes consisted of:
1996
----------
Current taxes payable
Federal $ 594,000
State 147,000
-------
741,000
-------
Deferred taxes
Federal (181,500)
State (27,500)
--------
(209,000)
--------
Less NOL Carryforward (532,000)
--------
$ -
========
F-12
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 4 - PROVISION FOR INCOME TAXES (CONTINUED)
No income tax provision was calculated for 1995 since the Company had a net
loss.
Deferred taxes result from timing differences in the recognition of revenue
and expense for tax and financial reporting purposes. The source of these
differences and the tax effect of each is as follows:
1996
----------
Excess of tax over book
depreciation and amortization $ 49,000
Nondeductible bad debt expense (177,000)
Nondeductible expenses related to
certain book liabilities (81,000)
-----------
$ (209,000)
===========
The Company's total deferred tax assets, deferred tax liabilities, and
deferred tax asset valuation allowances at December 31, 1996 are as follows:
1996
---------
Total deferred tax assets $ 258,000
Less valuation allowance -
---------
258,000
Total deferred tax liabilities (49,000)
---------
Net deferred tax asset $ 209,000
=========
The following table reconciles the tax provision with the expected provision
obtained by applying statutory rates to pretax income:
1996
--------
Expected tax provision $ 446,000
State income taxes, net of federal
income tax benefit 67,000
Canadian income tax effect (5,000)
Non-deductible expenses 24,000
---------
$ 532,000
=========
For financial statement purposes, the Company has approximately $620,000 of
net operating loss carryforwards as of December 31, 1996, which expire on
2010.
NOTE 5 - COMMON STOCK AND STOCK OPTIONS
On July 1, 1996, the shareholders approved an increase in authorized shares of
common stock to 25,000,000 shares and a ten for one common stock split.
Concurrent with this
F-13
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- -----------------------------------------------------------------------------
NOTE 5 - COMMON STOCK AND STOCK OPTIONS (CONTINUED)
amendment, the par value of common stock changed from $0.01 to $0.001 per
share. Effective October 31, 1996, the Board of Directors approved a three
for four reverse common stock split. Concurrent with this amendment, the par
value of common stock changed from $0.001 to $0.00133 per share (rounded to
$0.001 for financial statement reporting purposes).
During 1995, the Company granted the initial Board of Directors and founders
options for 15% of the issued and outstanding shares at $.02 per share.
Effective October 31, 1996, the Board of Directors approved and the original
founders accepted the cancellation of these options and the grant of new
options for 1,350,000 shares in exchange for the canceled options. These new
options are exercisable at $1.33 per share and expire October 31, 1999. These
options remain outstanding at December 31, 1996 and are not subject to the
option plan noted below.
In 1996, the Company issued Mayflower Holdings, Inc. 187,500 shares of common
stock (valued at $250,000) in exchange for consulting fees. The shares were
then canceled and options were granted for 375,000 shares effective October
31, 1996, at an exercise price of $1.33 per share. The options expire on
October 31, 1999, and are outstanding as of December 31, 1996. These options
are not subject to the option plan noted below.
Under a 1995 employment contract and based on the Company"s achievement of
certain revenue goals, the President of the Company is entitled to receive
stock incentives in the amount of 1% of issued and outstanding shares as of
December 31, 1995, 2% as of December 31, 1996, and 3% as of each year ended
December 31, 1997 through 2000. These stock incentives were granted to the
President as additional compensation and were at no cost to the President. In
1995, the Company did not meet the sales level noted in the President"s
contract, but in March 1996, the Board granted the incentive stock to the
President based on accrued sales and deferred revenue combined. Effective
October 31, 1996, the President gave back the incentive stock and the Company
granted additional stock options of 151,300 shares of common stock at an
exercise price of $1.33 per share. Effective October 31, 1996, the President
agreed to and has been granted stock options for 2,295,000 shares, exercisable
at $1.33 per share in exchange for the 1996, 1997, 1998, 1999 and 2000
incentive stock referred to above. As a result of having been granted these
options, the President is no longer entitled to receive the stock incentives
referred to above and the options are not contingent on the Company"s
achievement of the specified revenue goals. These options are outstanding at
December 31, 1996, expire on October 31, 2001, and are not subject to the
option plan noted below. No compensation expense has been recorded since the
options granted have exercise prices that approximate fair market value.
In 1996, the Company formalized and consolidated all previously existing
options into a single option plan effective October 31, 1996, and reissued
options for 3,579,250 shares (previously 3,175,000 shares) to its Board of
Directors, management, advisory board members, consultants, named experts and
council, IRSRs and others. These options are exercisable
F-14
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- -----------------------------------------------------------------------------
NOTE 5 - COMMON STOCK AND STOCK OPTIONS (CONTINUED)
at $1.33 per share and expire on October 31, 1999. All are outstanding as of
December 31, 1996.
The weighted average exercise price for all outstanding options is $1.33 per
share. If all of the above options were exercised as of December 31, 1996,
this would result in 7,750,550 shares of additional outstanding common stock.
The following table summarizes information about fixed stock options both
outstanding and exercisable at December 31, 1996:
Number Weighted-average
Range of outstanding remaining Weighted average
exercise prices at 12/31/96 contractual life exercise price
--------------- ----------- ---------------- ----------------
$1.33 5,304,250 3.0 years $1.33
1.33 2,446,300 5.0 1.33
---------
1.33 7,750,550 3.6 1.33
=========
A summary of the status of the Company's stock options as of December 31, 1996
and 1995, and changes during the periods ended are as follows:
<TABLE>
1996 1995
------------------------- ----------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C>
Outstanding -
beginning of
period 1,501,300 $1.33 - -
Granted 6,249,250 $1.33 1,501,300 $1.33
--------- ---------
Outstanding -
end of period 7,750,550 1,501,300
========= =========
Options exercisable
at end of period 7,750,550 -
========= =========
Weighted average
fair value of
options granted
during the period $ 0.28 $ 0.25
========= =========
</TABLE>
The Company has recognized no compensation cost for its stock options issued
to employees under the intrinsic-value based method. If the Company had
applied the
F-15
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- ----------------------------------------------------------------------------
NOTE 5 - COMMON STOCK AND STOCK OPTIONS (CONTINUED)
provisions of Statement of Financial Accounting Standards No. 123 requiring
the fair-value based method for these employee stock options, the Company
would have reported a net loss of $2,279,871 in 1995 and a net loss of
$123,619 in 1996, and earnings per share would have been $(0.17) in 1995 and
$0.00 in 1996.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1995 and 1996: dividend yield of zero percent;
expected volatility of 30%; risk-free interest rates of 6.38% for options
granted to the President under his employment contract and 6.25% for all other
options granted; and expected lives of 2.5 years for options granted to the
President under his employment contract and 1.5 years for all other options
granted.
NOTE 6 - LEASE COMMITMENTS
On November 11, 1995, the Company entered into a lease for its U.S. office
space under an operating lease agreement expiring on November 30, 2002. The
rental rate will escalate each November based on changes in the consumer price
index, not to exceed a five percent annual increase. On September 1, 1995,
the Company entered into a lease for its Canadian operations under an
operating lease which automatically renews for six month terms. Certain
office equipment is being leased under operating leases expiring in 1999.
Certain other office equipment is being leased on a month-to-month basis.
The combined future minimum lease payments are as follows:
Year Ending December 31, Amount
----------------------- ------
1997 $ 204,727
1998 198,727
1999 193,321
2000 189,734
2001 171,639
Thereafter 155,828
-----------
$ 1,113,976
============
Rent expense was $192,477 in 1996 and $94,197 in 1995.
NOTE 7 - ECONOMIC DEPENDENCY
A material amount of the Company's jewelry and collectibles products are
acquired from three suppliers, the loss of which may have an adverse effect on
the Company in the near term. These suppliers accounted for approximately 88%
of the jewelry products purchased as of December 31, 1996. The Company has
made arrangements with other suppliers in order to mitigate this dependency.
Based on these arrangements and due to the nature of the
F-16
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- -----------------------------------------------------------------------------
NOTE 7 - ECONOMIC DEPENDENCY (CONTINUED)
Company's products, management does not believe that the loss of these
suppliers would adversely affect the Company in the long term.
A material amount of the Company"s retail business career kits are acquired
from three principal suppliers, the loss of which may have an adverse effect
on the Company. These suppliers accounted for approximately 90% of the
inventory on hand at December 31, 1996.
NOTE 8 - CONTINGENCIES
As a result of the transactions leading to the Recission Offer referred to in
Note 1 under investor deposits, the Company may be liable for administrative
penalties and sanctions. The Company knows of no administrative proceedings
or regulatory investigations related to the Recission Offer that are currently
pending or proposed. The amount of any such penalties and sanctions cannot be
estimated.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company incurred costs totaling approximately $60,667 in 1996 and $389,068
in 1995 from Mayflower Holdings, Inc., a stockholder which is principally
owned by the President of the Company, related to the organization, start-up
and other operating expenses of the Company. Of these costs, $48,138 was
capitalized as deferred registration costs in 1996 and $130,815 was
capitalized as organizational costs in 1995. The remaining amounts were
expensed as incurred. As of December 31, 1996, the amount due from Mayflower
Holdings, Inc. was $2,163.
The Company subleases office space to Mayflower Holdings, Inc. on a
month-to-month basis. Rental income was $6,000 in 1996.
In 1996, the Company issued Mayflower Holdings, Inc. 187,500 shares of common
stock (valued at $250,000) in exchange for consulting fees. The shares were
then canceled and options were granted for 375,000 shares effective October
31, 1996, at an exercise price of $1.33 per share. The options expire on
October 31, 1999, and are outstanding as of December 31, 1996. These options
are not subject to the option plan noted in Note 5 above.
Under a 1995 employment contract and based on the Company"s achievement of
certain revenue goals, the President of the Company is entitled to receive
stock incentives which have since been replaced with stock options. See Note
5 for additional information.
The Company entered into an agreement with the President and a relative to
create a sales training handbook for its sales representatives. The agreement
calls for a lump sum payment of $10,000 to the authors as well as a $4 per
book royalty for all books sold to the Company. $132,000 was paid to these
individuals in 1996 and $30,600 was paid in 1995. No amounts
F-17
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- -----------------------------------------------------------------------------
NOTE 9 - RELATED PARTY TRANSACTIONS (CONTINUED)
were due at December 31, 1996.
The Company acquires its jewelry and collectibles from three suppliers, one of
whom is a stockholder of the Company. 15% of the Company"s products were
acquired from this stockholder in 1996 and 0% in 1995.
The Company entered into an agreement with a member of the Board of Directors
to create a business presentation video. The agreement calls for a $0.50 per
video royalty for each video sold. $1,942 was paid to this individual in
1996.
The Company entered into an agreement with a stockholder to create a retail
sales video. The agreement calls for a $0.50 per video royalty for each
video sold. $982 was paid to this individual in 1996.
The Company has an agreement with a stockholder to provide the Company with a
promotional line of merchandise. $13,926 was paid to this individual in 1996.
During 1996, two stockholders received employee advances for a combined total
of $60,876 at their highest. These balances have been repaid prior to
December 31, 1996.
The Company owed $131,812 outstanding to Mayflower Holdings, Inc. as of
December 31, 1995. This note bears interest at 8% per annum. The note was
paid off in February 1996.
During 1996, the Company awarded a stockholder the use of a company-owned
vehicle for the calendar year 1996 in recognition of his achievements as the
top sales representative. In October 1996, the Company gave title to the
vehicle to the stockholder and recognized $27,859 as additional commission
expense.
In August 1996, Mayflower Holdings, Inc. loaned the Company $200,000, with
interest at 12%. The note was repaid on November 1, 1996. See Note 3 for
additional information.
In 1996, the Company began renting use of an airplane on a per-use basis from
Mayflower Aviation, LLC, which is owned by the President of the Company and
his wife. $34,416 was paid to this company in 1996.
NOTE 10 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments during the periods were as follows:
<TABLE>
1996 1995
-------- --------
<S> <C> <C>
Interest $ 26,661 $ 2,833
Income taxes - -
</TABLE>
F-18
<PAGE>
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
- ----------------------------------------------------------------------------
NOTE 10 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (CONTINUED)
Non-cash investing and financing activities during the periods were as
follows:
<TABLE>
1996 1995
-------- --------
<S> <C> <C>
Conversion of notes payable to stock $ - $341,494
Stock issued for services provided in
the organization of the Company - 123,530
Common stock options granted 64,406 -
</TABLE>
As indicated in Note 1, the Company has valued services provided in exchange
for stock at the fair market value of the stock issued. The fair market value
was determined as the price the stock last sold to outside investors at the
time the services were performed.
F-19
<PAGE>
INTERNATIONAL HERITAGE, INC.
SCHEDULES OF CONSOLIDATED SELLING AND ADMINISTRATIVE EXPENSES
Year Ended December 31, 1996 and Period Ended December 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
1996 1995
---------------- ---------------
<S> <C> <C>
Salaries and employee benefits $ 3,226,129 $ 526,613
Rent 192,477 94,197
Seminars and meeting room 106,431 3,893
Telephone 288,276 94,919
Utilities 19,499 601
Insurance 71,073 12,280
Office supplies and expenses 149,316 24,035
Postage and shipping 380,369 107,367
Repair and maintenance 3,777 3,705
Dues and subscriptions 3,674 1,041
Fulfillment fees 178,650 53,297
Taxes and licenses 12,971 1,343
Advertising 42,062 17,444
Annual sales meeting 956,113 -
Sales presentations and promotions 130,553 248,815
Printing and binders 127,715 120,700
Royalties 134,924 17,500
Meals and entertainment 92,989 2,968
Travel 462,325 113,046
Professional and consulting fees 503,057 150,440
Directors fees 6,100 -
Computer services 110,494 20,661
Temporary and contract help 43,666 18,716
Depreciation 109,039 21,832
Amortization 112,513 47,511
Product development 20,000 -
Conference calls 87,051 -
Bank fees and charges 220,929 25,656
Recruiting and training 34,727 4,950
Business development 147,919 96,182
Bad debt 455,083 -
Fax and mobile communications 68,707 23,929
Interest 25,453 8,062
Charitable contributions 27,550 -
Exchange loss 5,905 737
Other (4,354) 1,288
------------- -----------
$ 8,553,162 $ 1,863,728
============= ===========
</TABLE>
F-20
<PAGE>
[INSIDE COVER OF PROSPECTUS]
[PICTURES OF THE COMPANY'S PRODUCTS ARE TO BE INSERTED HERE]
No dealer, salesperson or any other person has been authorized to
give any information or to make any representations in connection
with this Offering other than those contained in this Prospectus,
and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or by the
Underwriter. This Prospectus does not constitute an offer to sell
or solicitation of an offer to buy any security other than the
securities offered by this Prospectus, or an offer to sell or a
solicitation of an offer to buy any securities by any person in any
jurisdiction in which such offer or solicitation is not authorized
or is unlawful. The delivery of this Prospectus shall not, under
any circumstances, create any implication that the information
herein is correct as of any time subsequent to the date of this
Prospectus.
TABLE OF CONTENTS
Page
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . 7
Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 16
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . 18
Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Selected Financial Data. . . . . . . . . . . . . . . . . . . . .. .19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Principal Shareholders. . . . . . . . . . . . . . . . . . . . . . . 42
Certain Relationships & Related Transactions. . . . . . . . . . 43
Description of Capital Stock. . . . . . . . . . . . . . . . . . . . 45
Shares Eligible For Future Sale . . . . . . . . . . . . . . . . . . 46
Underwriting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Interests of Named Experts & Counsel. . . . . . . . . . . . . . . . 48
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Available Information. . . . . . . . . . . . . . . . . . . . . . . .48
Index to Financial Statements. . . . . . . . . . . . . . . . . . . .F-1
Until March 28, 1997 (25 days after the date of this Prospectus),
all dealers effecting transactions in the Common Stock and Options,
whether or not participating in the distribution, may be required to
deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
INTERNATIONAL
HERITAGE, INC.
3,000,000
Shares of Common Stock
PROSPECTUS
WIN Capital Corp.
March 3, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in
connection with the sale of Common Stock being registered. All
amounts are estimates except the SEC registration fee, NASD fees and
expenses and the Nasdaq National Market application fee.
SEC registration fee $5,728
NASD fees and expenses 6,000
Nasdaq National Market application fee 5,000
Printing and engraving 50,000*
Legal Fees and expenses 408,000*
Accounting fees and expenses 137,000*
Blue Sky fees and expenses 13,677*
Transfer Agent and Registrar fees 5,000*
Miscellaneous 198,000*
Total $828,405*
- ---------------
*Estimated cost
Item 14. Indemnification of Directors and Officers
The Amended Articles of Incorporation and Bylaws of International
Heritage, Inc. (the "Registrant") include provisions to eliminate
personal liability of its directors for monetary damages resulting
from breaches of their fiduciary duty to the fullest extent
permitted by Section 55-8-30(e) of the North Carolina Business
Corporation Act ("NCBCA") and (ii) require the Registrant to
indemnify its directors and officers to the fullest extent permitted
by Sections 55-8-50 through 55-8-58 of the NCBCA. Pursuant to
Section 55-8-51 and 55-8-57 of the NCBCA, a corporation generally
has the power to indemnify its present and former directors,
officers, employees and agents against expenses incurred by them in
connection with any suit to which they are, or are threatened to be
made, a party by reason of their serving in such positions so long
as they acted in good faith and in a manner they reasonably believed
to be in, or not opposed to, the best interest of the Registrant,
and with respect to criminal action, they ha d no reasonable cause
to believe their conduct was unlawful. These provisions do not
eliminate the directors" duty of care, and, in appropriate
circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under the NCBCA. In
addition, each director will continue to be subject to liability for
breach of the director's duty of loyalty to the Registrant, for acts
or omissions not in good faith or involving intentional misconduct
or knowing violations of law, for acts or omissions that the
director believes to be contrary to the best interests of the
Registrant or its shareholders, for any transaction from which the
director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the
Registrant or its shareholders when the director was aware or should
have been aware of a risk of serious injury to the Registrant or its
shareholders, for acts or omissions that constitute an unexcused
pattern of inatte ntion that amounts to an abdication of the
director's duty to the Registrant or its shareholders, for improper
transactions between the director and the Registrant and for
improper distributions to shareholders and loans to directors and
officers. Theses provisions do not affect a director's
responsibilities under any other laws, such as the federal
securities laws.
The Registrant's Amended Articles of Incorporation require the
Registrant to indemnify its directors and officers against expenses,
II-1
<PAGE>
judgements, fines, settlements and other amounts actually and
reasonably incurred in connection with the defense of, or for advice
concerning, any claim asserted or proceeding brought against him by
reason of his or her being or having been a director or officer of
the Registrant, provided that such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to
the best interest of the Registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the
Registrant and its directors and officers, and by the Registrant of
the Underwriters, for certain liability arising under the Securities
Act, or otherwise.
Item 15. Recent Sales of Unregistered Securities
Since April 28, 1995 (inception) the Company has sold and issued the
following securities in reliance upon Section 4(2) of the Securities
Act:
Fred B. Smith & Associates purchased on April 31, 1995, 187,500
shares of common stock and a convertible note in the amount of
$12,600. The note was converted on August 15, 1995, to 18,900
shares of additional common stock.
Eagle Harbor Holdings purchased on May 4, 1995, 656,250 shares of
common stock and a convertible note in the amount of $20,000. The
note was converted on August 15, 1995, to 30,000 shares of
additional common stock. Eagle Harbor Holdings assigned all right,
title and interest in these shares to Omega Leasing Services on
April 4,1996.
Mayflower Holdings, Inc. ("Mayflower") purchased on May 4, 1995,
656,250 shares of common stock and a convertible note in the amount
of $20,000. The note was converted August 15, 1995, to 30,000
shares of additional common stock. Mayflower purchased on August
20, 1995 an additional 5,558 shares of common stock for $7,400. For
service on the initial Board of Directors and being one of the
Founders, Mr. Van Etten received options to purchase 450,000 shares
of common stock. These options were assigned to Mayflower. In 1995
the Company did not meet the sales level noted in Mr. Van Etten's
employment agreement, but in March 1996, the Board of Directors
granted Mr. Van Etten 75,653 shares of incentive stock based on
accrued sales and deferred revenue combined. Effective October 31,
1996, the President gave back the stock and the Company granted
additional stock options of 151,300 shares of common stock at an
exercise price of $1.33 per share. These options are outside of the
Stock Option Plan. In 1996, the Company issued Mayflower 187,500
shares of common stock (valued at $250,000) in exchange for
consulting fees. The shares were then canceled and exchanged for
options to purchase 375,000 shares of common stock at an exercise
price of $1.33. The options expire on October 31, 1999. In March
1996, Mayflower gifted 291,000 shares to various individuals who had
participated in business transactions or investments with Mayflower
in the past. Mayflower does not maintain any voting control over
the shares gifted to others. In October 1996, Mayflower transferred
112,500 shares to an escrow agent for SPS Investments, a North
Carolina general partnership, as collateral for a $300,000 loan. On
November 28, 1996, Mayflower gifted 12,500 shares to Lynn and Eunice
Simonson. On January 2, 1997, the collateral held by the escrow
agent for SPS Investments was accepted in lieu of payment as full
satisfaction on the note. Mayflower as of January 1997 owns a total
of 275,808 shares of common stock.
Claude W. Savage, Director, Founder and principal shareholder,
purchased on May 4, 1995, 656,250 shares of common stock and a
convertible note in the amount of $20,000, of which $10,000 was
converted on August 15, 1995, to 15,000 shares of additional common
stock and the remaining $10,000 was repaid June 4, 1995. Mr. Savage
gifted 73,500 shares to his children, Robin K. McDaniel and Tracy E.
Sabates. For service on the initial Board of Directors and being
one of the Founders, Mr. Savage received options to purchase 450,000
shares of common stock. For service on the 1996 Board of Directors
and in consideration of top sales for 1995, Mr. Savage received
options to purchase 135,000 shares of common stock.
II-2
<PAGE>
Wendell and Jodie C. Elliott purchased on May 9, 1995, 75,000 shares
of common stock and a convertible note in the amount of $10,000.
The note was converted on August 15, 1995, to 15,000 shares of
additional common stock. The Elliotts received on March 18, 1996 an
additional 4,875 shares of common stock from Mayflower and 7,500
shares of common stock from To The Top We Go, Inc.
Dean Elliott purchased on May 10, 1995, 18,750 shares of common
stock and a convertible note in the amount of $2,500. The note was
converted on August 15, 1995, to 3,750 shares of additional common
stock. Mr. Elliott purchased an additional 3,000 shares on August
18, 1995 for $4,000. Mr. Elliott received on March 18, 1996 an
additional 2,625 shares of common stock from To The Top We Go, Inc.
Larry Ellis purchased on May 10, 1995, 75,000 shares of common stock
and a convertible note in the amount of $12,500. The note was
converted on August 15, 1995, to 18,750 shares of additional common
stock. Mr. Ellis purchased on June 8, 1995, an additional 37,500
shares for $5,000 and purchased on July 21, 1995 an additional
56,250 shares for $7,500.
Calvin Michael Ward purchased on May 22, 1995, 93,750 shares of
common stock and a convertible note in the amount of $12,500. The
note was converted on August 15, 1995, to 7,500 shares of additional
common stock.
Eugenia M. and Michael D. Batchelor purchased on May 22, 1995,
37,500 shares of common stock and a convertible note in the amount
of $5,000. The note was converted on August 15, 1995, to 7,500
shares of additional common stock.
John Buhrman purchased on May 23, 1995, 37,500 shares of common
stock and a convertible note in the amount of $5,000. The note was
converted on August 15, 1995, to 7,500 shares of additional common
stock.
Jimmie D. Knowles, Director, and Portia Knowles, his wife, purchased
on May 24, 1995, 145,875 shares of common stock and a convertible
note in the amount of $19,450. The note was converted on August 15,
1995, to 52,050 shares of additional common stock. Mr. and Mrs.
Knowles purchased an additional 300,000 shares of common stock and a
convertible note in the amount of $50,000 on July 19, 1995. The
note was repaid October 6, 1995.
To The Top We Go, Inc., principally owned by John D. Brothers,
Director, received on May 24, 1995, 96,375 shares in exchange for
services rendered to the Company consisting of consulting on network
marketing, recruiting and developing and other retail organizations,
general corporate management and working full-time for the Company.
To The Top We Go, Inc. on March 18, 1996 gifted 750 shares to Jeff
Ayersman, 1,500 shares to Cornelleus Sexton, 750 shares to Greg
Strauss, 750 shares to Craig Taylor, 2,625 shares to Dean Elliott
and 7,500 shares to Wendell and Jodie C. Elliott.
Jeffrey L. Hooks received on May 24, 1995, 93,750 shares in exchange
for services rendered to the Company consisting of consulting on
network marketing, recruiting and acquisition of other retail
organizations, assisting in establishing the Company's phone system,
general corporate management and working part-time for the Company.
Mr. Hooks joined Company's management as Director of Training &
Leadership Development and received options to purchase 42,500
shares of common stock on June 30, 1996.
Dr. Martin R. and Nina R. Runion purchased on May 24, 1995, 168,750
shares of common stock and a convertible note in the amount of
$20,000. The note was converted on August 15, 1995, to 30,000
shares of additional common stock. Dr. Runion served on the
Company's U.S. Advisory Board and in exchange for his services, he
received options to purchase 37,500 shares of common stock at an
exercise price of $1.33 on October 31, 1996.
II-3
<PAGE>
Harold W. and Linda W. Queen purchased on May 26, 1995, 37,500
shares of common stock and a convertible note in the amount of
$5,000. The note was converted on August 15, 1995, to 7,500 shares
of additional common stock.
Steven E. and Nanette N. Taitt purchased on May 28, 1995, 18,750
shares of common stock and a convertible note in the amount of
$2,500. The note was converted on August 15, 1995, to 3,750 shares
of additional common stock.
George B. Bain purchased on May 30, 1995, 37,500 shares of common
stock and a convertible note in the amount of $5,000. The note was
converted on August 15, 1995, to 7,500 shares of additional common
stock.
Bobby W. and Shirley E. Bristow purchased on May 30, 1995, 37,500
shares of common stock and a convertible note in the amount of
$5,000. The note was converted on August 15, 1995, to 7,500 shares
of additional common stock.
Joseph F. Spoon purchased on May 30, 1995, 18,750 shares of common
stock and a convertible note in the amount of $2,500. The note was
converted on August 15, 1995, to 3,750 shares of additional common
stock.
Ronald W. Cassese purchased on May 31, 1995, 93,750 shares of common
stock and a convertible note in the amount of $5,000. The note was
converted on August 15, 1995, to 7,500 shares of additional common
stock. Mr. Cassese received options to purchase 5,000 shares of
common stock at an exercise price of $1.33 on October 31, 1996.
Nick Collias purchased on May 31, 1995, 112,500 shares of common
stock and a convertible note in the amount of $15,000. The note was
converted on August 15, 1995, to 22,500 shares of additional common
stock.
Barry Ackel, Director and principal shareholder, purchased on June
1, 1995, 375,000 shares of common stock and a convertible note in
the amount of $12,500. The note was converted on August 15, 1995,
to 16,875 shares of additional common stock. Mr. Ackel assigned all
right, title and interest in these shares to Acme Holdings in April,
1996. On November 28, 1996, Acme Holdings gifted 12,500 shares to
Daniel and Judy Simonson. For service on the 1996 Board of
Directors, Mr. Ackel received options to purchase 75,000 shares of
common stock at an exercise price of $1.33.
Jack F. Weatherly purchased on June 2, 1995, 37,500 shares of common
stock and a convertible note in the amount of $5,000. The note was
converted on August 15, 1995, to 7,500 shares of additional common
stock.
Leisure Time Rentals & Management purchased on June 3, 1995, 37,500
shares of common stock and a convertible note in the amount of
$5,000. The note was converted on August 15, 1995, to 7,500 shares
of additional common stock.
Dennis E. And Linda C. Brackett purchased on June 5, 1995, 37,500
shares of common stock and a convertible note in the amount of
$5,000. The note was converted to on August 15, 1995, to 7,500
shares of additional common stock.
Braxton Merritt purchased on June 5, 1995, 150,000 shares of common
stock and a convertible note in the amount of $20,000. The note was
converted on August 15, 1995, to 30,000 shares of additional common
stock.
II-4
<PAGE>
Dwight and Jennifer Hallman received on June 6, 1995, 93,750 shares
of common stock in exchange for Mr. Hallman's services to the
Company in configuring its computer system for the tracking of sales
and computation of compensation to IRSRs and for other services
provided to the Company.
William A. Blackman purchased on June 7, 1995, 18,750 shares of
common stock and a convertible note in the amount of $2,500. On
July 20, 1995, Mr. Blackman purchased an additional 18,750 shares of
common stock and a convertible note in the amount of $3,750. Both
notes were converted on August 15, 1995 to 9,375 shares of
additional common stock.
Diane B. James purchased on June 7, 1995, 37,500 shares of common
stock and a convertible note in the amount of $5,000. The note was
repaid November 1, 1996.
Harold Scott Jr. purchased on June 7, 1995, 37,500 shares of common
stock and a convertible note in the amount of $5,000. Mr. Scott
accepted the Company's offer of rescission and was repaid the amount
of his investment plus interest at the legal rate prescribed by the
North Carolina Securities Act on September 29, 1995.
Paul Hoyle purchased on June 8, 1995, 37,500 shares of common stock
and a convertible note in the amount of $5,000. The note was
converted on August 15, 1995, to 7,500 shares of additional common
stock.
Jimmy Aymond purchased on June 8, 1995, 187,500 shares of common
stock and a convertible note in the amount of $12,600. The note was
converted on August 15, 1995, to 18,900 shares of additional common
stock.
Faiger M. Blackwell purchased on June 9, 1995, 18,750 shares of
common stock and a convertible note in the amount of $2,500. The
note was converted on August 15, 1995, to 3,750 shares of additional
common stock.
Clotilda Rodgers purchased on June 9, 1995, 37,500 shares of common
stock and a convertible note in the amount of $5,000. The note was
converted on August 15, 1995, to 7,500 shares of additional common
stock.
Michael Francis Canning, Jr. purchased on June 12, 1995, 18,750
shares of common stock and a convertible note in the amount of
$2,500. The note was converted on August 15, 1995, to 3,750 shares
of additional common stock. Mr. Canning purchased on August 10,
1995, an additional 6,000 shares for $8,000.
Neva Marie Canning purchased on June 12, 1995, 37,500 shares common
stock and a convertible note in the amount of $5,000. The note was
converted on August 15, 1995, to 7,500 shares of additional common
stock.
Kenneth W. and Helen W. Wilkinson purchased on June 12, 1995, 37,500
shares of common stock and a convertible note in the amount of
$5,000. The note was converted on August 15, 1995, to 7,500 shares
of additional common stock.
Kay Wood Disman purchased on June 13, 1995, 75,000 shares of common
stock and a convertible note in the amount of $10,000. The note was
converted on August 15, 1995, to 15,000 shares of additional common
stock.
Rodger Dale Gadd received on June 13, 1995, 37,500 shares of common
stock in exchange for acquisition of other retail organizations.
Mr. Gadd served on the Company's U.S. Advisory Board and in exchange
for his services, he received options to purchase 37,500 shares of
common stock at an exercise price of $1.33 per share on October 31,
1996.
II-5
<PAGE>
John F. and Margaret H. Hudson purchased on June 13, 1995, 18,750
shares of common stock and a convertible note in the amount of
$2,500. The note was converted on August 15, 1995, to 3,750 shares
of additional common stock.
Edgar Collins purchased on June 14, 1995, 56,250 shares of common
stock and a convertible note in the amount of $7,500. The note was
converted on August 15, 1995, to 11,250 shares of additional common
stock. Mr. Collins on March 15, 1996, gifted 22,500 shares to
Michael LaRocco.
Clinton S. (Jr.) and Lavada P. Forbis received on June 14, 1995,
18,750 shares of common stock in exchange for acquisition of other
retail organizations.
Conda McCall purchased on June 14, 1995, 37,500 shares of common
stock and a convertible note in the amount of $5,000. The note was
converted on August 15, 1995, to 7,500 shares of additional common
stock.
Derrick L. Rodgers purchased on June 14, 1995, 375,000 shares of
common stock and a convertible note in the amount of $47,500. The
note was converted on August 15, 1995, to 57,750 shares of
additional common stock. Mr. Rogers gifted a total of 13,500 shares
to Joyce M. Hatley, William A. Meyers III and Ann M. Smoak. For
service on the 1996 Board of Directors, Mr. Rodgers received options
to purchase 75,000 shares of common stock at an exercise price of
$1.33 per share. For top sales in 1995, Mr. Rodgers received
options to purchase 15,000 shares of common stock at an exercise
price of $1.33 per share.
James Ronnie and Sylvia M. Sherrill purchased on June 14, 1995,
18,750 shares of common stock and a convertible note in the amount
of $2,500. The note was converted on August 15, 1995, to 3,750
shares of additional common stock.
Christopher S. Brackett purchased on June 15, 1995, 37,500 shares of
common stock and a convertible note in the amount of $5,000. The
note was converted on August 15, 1995, to 7,500 shares of additional
common stock.
Stephen E. Brackett purchased on June 15, 1995, 37,500 shares of
common stock and a convertible note in the amount of $5,000. The
note was converted on August 15, 1995, to 7,500 shares of additional
common stock.
James Pinkney and Nina Lou Blackwelder purchased on June 15, 1995,
18,750 shares of common stock and a convertible note in the amount
of $2,500. The note was converted on August 15, 1995, to 3,750
shares of additional common stock. On November 17, 1995, the
Blackwelders purchased an additional 23,625 shares of common stock
for $15,000.
Gold Raven, Inc. received on June 16, 1995, 37,500 shares of common
stock in exchange for recruiting and acquisition of other retail
organizations.
The Eddie L. Mattox Irrevocable Trust purchased on June 16, 1995,
37,500 shares of common stock and a convertible note in the amount
of $5,000. The note was converted on August 15, 1995, to 7,500
shares of additional common stock.
Sunrise Pro Glass purchased on June 16, 1995, 18,750 shares of
common stock and a convertible note in the amount of $2,500. The
note was converted on August 15, 1995, to 3,750 shares of additional
common stock. The shares were transferred to the individual
shareholders who invested through Sunrise Pro Glass to include:
David Andrew and Kathy June Holt, Gary Lee and Valerie Bisbey, Darin
and Jennifer Brewer, Donald and Patricia Snyder, and Brian D. and
Debra Jean Waite, who own 4,500 shares, respectively.
II-6
<PAGE>
Robert L. Chalmers purchased on June 20, 1995, 37,500 shares of
common stock and a convertible note in the amount of $5,000. The
note was converted on August 15, 1995, to 7,500 shares of additional
common stock. Mr. Chalmers served on the Canadian Advisory Board
and in exchange for his services, he received options to purchase
37,500 shares of common stock at an exercise price of $1.33 on
October 31, 1996.
Kathleen Illian received on June 20, 1995, 37,500 shares of common
stock in exchange for services related to establishing a group
health insurance program for the Company's IRSRs.
Samuel W. (III) and Carolyn Johnston purchased on June 21, 1995,
37,500 shares of common stock and a convertible note in the amount
of $5,000. The note was converted on August 15, 1995, to 7,500
shares of additional common stock.
Egbert Louis Ming purchased on June 22, 1995, 37,500 shares of
common stock and a convertible note in the amount of $5,000. The
note was converted on August 15, 1995, to 7,500 shares of additional
common stock. Mr. Ming purchased on August 22, 1995 an additional
7,500 shares for $10,000. Mr. Ming purchased on October 5, 1995, an
additional 11,250 shares for $15,000.
Joanne and Ray Norville purchased on June 22, 1995, 18,750 shares of
common stock and a convertible note in the amount of $2,500. The
note was converted on August 15, 1995 to 3,750 shares of additional
common stock.
Larry J. Rikard purchased on June 22, 1995, 18,750 shares of common
stock and a convertible note in the amount of $2,500. The note was
converted on August 15, 1995, to 3,750 shares of additional common
stock.
Evonne B. Eckenroth purchased on July 3, 1995, 187,500 shares of
common stock and a convertible note in the amount of $12,600. The
note was paid July 23, 1996. On August 18, 1995, Ms. Eckenroth
purchased an additional 37,500 shares for $1,300. Ms. Eckenroth
gifted 30,000 shares to James R. Reynolds on August 18, 1995. Ms.
Eckenroth received options to purchase 47,500 shares of common stock
on October 31, 1996, for her services to the Company related to
retail sales training.
Richard C. Hungate purchased on August 10, 1995, 150,000 shares of
common stock and a convertible note in an amount of $12,600. The
note was repaid March 27, 1996. Mr. Hungate gifted 9,375 shares to
Kathryn C. Crist on August 10, 1995.
Kathryn C. Crist received on August 10, 1995, 9,375 shares of common
stock as a gift from Richard C. Hungate.
John Bell Neil purchased on August 10, 1995, 2,250 shares of common
stock for $3,000.
Richard Blaine Smith purchased on August 11, 1995, 1,500 shares of
common stock for $2,000.
David Lane Tillman purchased on August 11, 1995, 750 shares of
common stock for $1,000.
Terry D. Phillips purchased on August 14, 1995, 49,000 shares of
common stock and a convertible note in the amount of $5,000. The
note was converted on April 30, 1996, to 7,500 shares of additional
common stock.
Kathi Jean Jones purchased on August 15, 1995, 525 shares of common
stock for $700.
Bobby Wren Bristow purchased on August 18, 1995, 1,500 shares of
common stock for $2,000.
II-7
<PAGE>
James R. Reynolds received on August 18, 1995, 30,000 shares of
common stock as a gift from Evonne Eckenroth, his upline sponsor.
Thomas Suber (Jr.) and Betty Jean Cromer purchased on August 21,
1995, 1,500 shares of common stock for $2,000.
Claude W. Savage, Jr. purchased on August 22, 1995, 37,500 shares of
common stock for $5,000.
Frank S. Hart purchased on August 24, 1995, 1,500 shares of common
stock for $2,000. Mr. Hart purchased on November 9, 1995, 2,250
shares of common stock for $3,000.
Frank Wesley Alexander purchased on August 28, 1995, 750 shares of
common stock for $1,000.
John H. Giles purchased on August 28, 1995, 750 shares of common
stock for $1,000.
Edmund Eugene and Rosemarie Jaqueline Dreyer purchased on August 31,
1995, 3,750 shares of common stock for $5,000.
Russell Hugh Caston purchased on September 5, 1995, 750 shares of
common stock for $1,000.
Charles Campbell Edmondson, Jr. purchased on September 7, 1995,
7,500 shares of common stock for $10,000.
Paul Bourque purchased on September 20, 1995, 4,500 shares of common
stock for $6,000.
Rhyon Caldwell received on September 20, 1995, 37,500 shares of
common stock in exchange for working with International Heritage of
Canada, Inc. to establish a Canadian office for the Company and to
assist in developing IRSRs in the various provinces of Canada in
which the Company conducts business. These shares were canceled and
exchanged on October 31, 1996, for options to purchase 50,000 shares
of common stock. Mr. Caldwell served on the Company's Canadian
Advisory Board and in exchange for his services, he received
additional options to purchase 50,000 shares of common stock on
October 31, 1996.
James Law received on September 20, 1995, 37,500 shares of common
stock in exchange for working with International Heritage of Canada,
Inc. to establish a Canadian office for the Company and to assist in
developing IRSRs in the various provinces of Canada in which the
Company conducts business. These shares were canceled and exchanged
on October 31, 1996, for options to purchase 50,000 shares of common
stock.
Felix Li received on September 20, 1995, 37,500 shares of common
stock in exchange for working with International Heritage of Canada,
Inc. to establish a Canadian office for the Company and to assist in
developing IRSRs in the various provinces of Canada in which the
Company conducts business. These shares were canceled and exchanged
on October 31, 1996, for options to purchase 50,000 shares of common
stock.
Paradise Investments, Ltd. received on September 20, 1995, 187,500
shares of common stock in exchange for working with International
Heritage of Canada, Inc. to establish a Canadian office for the
Company and to assist in developing IRSRs in the various provinces
of Canada in which the Company conducts business. These shares were
canceled and exchanged on October 31, 1996, for options to purchase
250,000 shares of common stock.
Lawrence A. Canning purchased on September 20, 1995, 750 shares of
common stock for $1,000.
Neva Marie Canning and Freeland R. Goldammer purchased on September
20, 1995, 3,750 shares of common stock for $5,000.
II-8
<PAGE>
Kathleen Canning Leone purchased on September 20, 1995, 750 shares
of common stock for $1,000. Frederick Michael Kennel purchased on
September 22, 1995, 2,250 shares of common stock for $3,000. Mr.
Kennel received on March 18, 1996, an additional 3,000 shares of
common stock as a gift from Mayflower.
Hans Fiedrich Kennel purchased on September 22, 1995, 2,250 shares
of common stock for $3,000. Mr. Kennel received on March 18, 1996,
an additional 3,000 shares of common stock as a gift from Mayflower.
Aubry L. and Brenda Sue Vincent purchased on September 25, 1995,
3,750 shares of common stock for $5,000.
Ray Paul Boudreaux purchased on September 27, 1995, 375 shares of
common stock for $500.
The Dujay Living Trust of 1994 purchased on September 28, 1995,
3,750 shares of common stock for $5,000.
McCleldon Van and Judith Ann Evans purchased on September 28, 1995,
2,250 shares of common stock for $3,000.
Charles C. Geoffroy purchased on September 28, 1995, 1,875 shares of
common stock for $2,500. Mr. Geoffroy received on March 18,
1996,1,500 shares of common stock as a gift from Mayflower.
Eric J. Geoffroy purchased on September 28, 1995, 1,875 shares of
common stock for $2,500. Mr. Geoffroy received on March 18, 1996,
1,500 shares of common stock as a gift from Mayflower.
Lloyd Geoffroy, Jr. purchased on September 28, 1995, 2,250 shares of
common stock for $3,000. Mr. Geoffroy received on March 18, 1996,
2,250 shares of common stock as a gift from Mayflower.
Robin K. Savage McDaniel purchased on September 28, 1995, 750 shares
of common stock for $1,000. Ms. McDaniel received 36,750 shares of
common stock as a gift from her father, Claude W. Savage.
Tracy E. Sabates purchased on September 28, 1995, 750 shares of
common stock for $1,000. Ms. Sabates received 36,750 shares of
common stock as a gift from her father, Claude W. Savage.
Charles Edward and Patricia Joanne White purchased on September 28,
1995, 3,750 shares of common stock for $5,000.
Kathleen Helen Caldwell purchased on September 29, 1995, 1,500
shares of common stock for $2,000.
Melissa Aine Caldwell purchased on September 29, 1995, 750 shares of
common stock for $1,000.
Muriel Kathleen Caldwell purchased on September 29, 1995, 750 shares
of common stock for $1,000.
Charles Barron Elrod purchased on September 29, 1995, 750 shares of
common stock for $1,000.
Bruce W. Jones purchased on September 29, 1995, 3,750 shares of
common stock for $5,000.
Melvola J. Mitchell purchased on September 29, 1995, 750 shares of
common stock for $1,000. Ms. Mitchell received 1,500 shares as a
gift from Mayflower on March 18, 1996.
II-9
<PAGE>
David Matthew Canning purchased on October 2, 1995, 3,750 shares of
common stock for $5,000.
Douglas L. Sims purchased on October 2, 1995, 1,500 shares of common
stock for $2,000. Mr. Simms received 1,500 shares of common stock
from Mayflower on March 18, 1996. Mr. Sims received an option to
purchase 5,000 shares of common stock at an exercise price of $1.33
per share on October 31, 1996.
Rhett M. Starnes purchased on October 2, 1995, 1,125 shares of
common stock for $1,500.
Darrell Murray Olinger purchased on October 3, 1995, 7,500, shares
of common stock for $10,000.
Norbert Louis Ming purchased on October 5, 1995, 3,750 shares of
common stock for $5,000. Mr. Ming received an additional 15,000
shares of common stock from Mayflower on March 18, 1996.
Douglas Rene Schexnayder purchased on October 5, 1995, 2,400 shares
of common stock for $3,200.
Harold Walter Queen purchased on October 6, 1995, 825 shares of
common stock for $1,100.
Rebecca G. Rushing purchased on October 6, 1995, 375 shares of
common stock for $500.
Patricia S. Schnell purchased on October 9, 1995, 3,750 shares of
common stock for $5,000.
Joyce M. Hatley received on October 10, 1995, 3,000 shares of common
stock as a gift from Derrick L. Rodgers, her upline sponsor.
William A. Myers, III received on October 10, 1995, 7,500 shares of
common stock as a gift from Derrick L. Rodgers, his upline sponsor.
Ann M. Smoak received on October 10, 1995, 3,000 shares of common
stock as a gift from Derrick L. Rodgers, her upline sponsor.
Betty Jean H. Taylor purchased on October 10, 1995, 1,500 shares of
common stock for $2,000.
Elizabeth M. Oakley purchased on October 11, 1995, 1,500 shares of
common stock for $2,000.
Enrico Victor Cannella purchased on October 16, 1995, 7,500 shares
of common stock for $10,000.
Dorothy Grant Eaddy purchased on October 16, 1995, 2,250 shares
of common stock for $3,000.
Patricia A. Gore purchased on October 18, 1995, 225 shares of common
stock for $300.
Marc Homer Mitchell purchased on October 18, 1995, 2,025 shares of
common stock for $2,700.
Luke J. Carline purchased on October 19, 1995, 450 shares of common
stock for $600.
David R. Fanning purchased on October 23, 1995, 1,500 shares of
common stock for $2,000. Mr. Fanning received an additional 2,250
shares of common stock from Mayflower on March 18, 1996.
Carl Richard Fears purchased on October 23, 1995, 3,750 shares of
common stock for $5,000. Mr. Fears received an additional 1,500
shares of common stock from Mayflower on March 18, 1996.
John Vales purchased on October 23, 1995, 150 shares of common stock
for $200.
II-10
<PAGE>
The Vales Revocable Living Trust purchased on October 23, 1995,
18,750 shares of common stock for $25,000.
Bobbie Lee Baer purchased on October 24, 1995, 1,500 shares of
common stock for $2,000.
Rachel H. Clark purchased on October 24, 1995, 1,500 shares of
common stock for $2,000. Ms. Clark accepted the Company's offer of
rescission dated December 15, 1995, and was repaid the amount of her
investment plus interest at the legal rate prescribed by the Code of
Alabama on January 30, 1996.
Carroll Joseph Boutte, III purchased on October 25, 1995, 750 shares
of common stock for $1,000.
Joe Oscar Matthews purchased on October 25, 1995, 750 shares of
common stock for $1,000.
Byron Keith and Elizabeth McKellips purchased on October 25, 1995,
2,250 shares of common stock for $3,000. Mr. and Mrs. McKellips
accepted the Company's offer of rescission dated December 15, 1995,
and were repaid the amount of their investment plus interest at the
legal rate as prescribed by Oklahoma Securities Act on January 30,
1996.
Barbara M. Romero purchased on October 25, 1995, 750 shares of
common stock for $1,000.
Helen G. Rourk purchased on October 25, 1995, 3,000 shares of common
stock for $4,000.
Philip Andre Martin purchased on October 26, 1995, 3,750 shares of
common stock for $5,000. Mr. Martin received an additional 3,750
shares of common stock from Mayflower on March 18, 1996.
Terry Lane Neustrom purchased on October 26, 1995, 7,500 shares of
common stock for $10,000. Mr. Neustrom accepted the Company's offer
of rescission dated December 15, 1995, and was repaid the amount of
his investment plus interest at the legal rate as prescribed by the
Kansas Securities Act on January 30, 1996.
Sherry T. Macklin purchased on October 27, 1995, 863 shares of
common stock for $1,150.
Lawrence L. and Dorothy Smith purchased on October 27, 1995, 3,750
shares of common stock for $5,000.
William Larry Duncan purchased on October 30, 1995, 375 shares of
common stock for $500.
Fannie Lenora Ross purchased on October 30, 1995, 6,000 shares of
common stock for $8,000.
Karen Elaine Sardinas purchased on October 30, 1995, 1,500 shares of
common stock for $2,000.
Henry C. and Winifred E. Turner purchased on October 30, 1995, 3,000
shares of common stock for $4,000.
Mollie M. Stewart purchased on November 2, 1995, 1,500 shares of
common stock for $2,000.
Mollie M. Stewart and Pharoh H. Smith purchased on November 2, 1995,
750 shares of common stock for $1,000.
Bradley Reed Thomas, Jr. received on November 8, 1995, 750 shares of
common stock in exchange for pulling cable and wire network for
computer in the Company's headquarters.
II-11
<PAGE>
Joel Daniel Thomas received on November 8, 1995, 750 shares of
common stock in exchange for pulling cable and wire network for
computer system in the Company's headquarters.
Scot Rolland Thomas received on November 8, 1995, 750 shares of
common stock in exchange for pulling cable and wire network for
computer system in the Company's headquarters.
Ronald Franklin Hopson purchased on November 10, 1995, 750 shares of
common stock for $1,000. Mr. Hopson received on March 18, 1996, 750
shares of common stock as a gift from Mayflower.
David P. Accurso purchased on November 13, 1995, 1,875 shares of
common stock for $2,500. Mr. Accurso received on March 18, 1996 an
additional 5,625 shares of common stock as a gift from Mayflower.
Jerome Victor and Sandra Yvonne Leventhal purchased on November 13,
1995, 3,750 shares of common stock for $5,000.
James LeRoyal Lucas purchased on November 13, 1995, 750 shares of
common stock for $1,000. Mr. Lucas received on March 18, 1996, an
additional 375 shares of common stock as a gift from Mayflower
McDaniel Air Conditioning and Heating, Inc. purchased on November
13, 1995, 18,750 shares of common stock for $25,000.
David and Leslie Newman Family Trust purchased on November 13, 1995,
3,750 shares of common stock for $5,000.
Kenneth R. Hines purchased on November 14, 1995, 1,500 shares of
common stock for $2,000.
Houston Allen Little purchased on November 17, 1995, 750 shares of
common stock for $1,000.
Charles T. and Rachel E. Moore purchased on November 17, 1995, 750
shares of common stock for $1,000.
Charles Otto and Deborah Ann Reynolds purchased on November 17,
1995, 375 shares of common stock for $500.
Eric O. and Trina C. Skidmore purchased on November 17, 1995, 3,000
shares of common stock for $4,000.
Jerry Dean and Dorthea P. Staley purchased on November 17, 1995,
3,750 shares of common stock for $5,000.
Homer R. and Ruth J. Fears purchased on November 23, 1995, 1,500
shares of common stock for $2,000.
Bobby Dean Sidden purchased on November 27, 1995, 7,500 shares of
common stock for $10,000.
Helen W. Kennedy purchased on December 1, 1995, 750 shares of common
stock for $1,000.
Johnny R. Kennedy, Sr. purchased on December 1, 1995, 1,500 shares
of common stock for $2,000.
Reine R. and David Hemelright purchased on December 6, 1995, 1,500
shares of common stock for $2,000.
Anthony Landry purchased on December 13, 1995, 2,250 shares of
common stock for $3,000.
II-12
<PAGE>
Michael LaRocco received on March 15, 1996, 22,500 shares of common
stock as a gift from Edgar Collins.
Lorraine Lee Allen received on March 18, 1996, 3,750 shares of
common stock as a gift from Mayflower.
Rodney Dean Alvord received on March 18, 1996, 7,500 shares of
common stock as a gift from Mayflower.
Richard Anderson received on March 18, 1996, 375 shares of common
stock as a gift from Mayflower.
Jeff Ayersman received on March 18, 1996, 750 shares of common stock
as a gift from To The Top We Go, Inc.
Paige Bankston received on March 18, 1996, 1,500 shares of common
stock as a gift from Mayflower.
William Brewer received on March 18, 1996, 3,750 shares of common
stock as a gift from Mayflower.
Charles H. Brock received on March 18, 1996, 750 shares of common
stock as a gift from Mayflower.
Deborah A. Broughton received on March 18, 1996, 15,000 shares of
common stock as a gift from Mayflower.
Central Welding & Industrial Supply received on March 18, 1996,
1,875 shares of common stock as a gift from Mayflower.
Karen Cranford received on March 18, 1996, 1,875 shares of common
stock as a gift from Mayflower.
Harvell Clay Duncan received on March 18, 1996, 1,500 shares of
common stock as a gift from Mayflower.
Burl and Becky Dunlap received on March 18, 1996, 1,500 shares of
common stock as a gift from Mayflower.
DeAnne Elrod received on March 18, 1996, 750 shares of common stock
as a gift from Mayflower.
David English, M.D. received on March 18, 1996, 37,500 shares of
common stock as a gift from Mayflower.
Roger Flowers received on March 18, 1996, 3,750 shares of common
stock as a gift from Mayflower.
Peter Gee received on March 18, 1996, 750 shares of common stock as
a gift from Mayflower.
Edward and Bernadett Grant received on March 18, 1996, 7,500 shares
of common stock as a gift from Mayflower.
Jane Guerard received on March 18, 1996, 3,750 shares of common
stock as a gift from Mayflower.
Norma Hamilton received on March 18, 1996, 750 shares of common
stock as a gift from Mayflower.
Bernard A. Harrell received on March 18, 1996, 1,875 shares of
common stock as a gift from Mayflower.
II-13
<PAGE>
Kenneth A. Hawkins received on March 18, 1996, 1,875 shares of
common stock as a gift from Mayflower.
Randy Herrin received on March 18, 1996, 1,875 shares of common
stock as a gift from Mayflower.
Freddie Walton Huffman received on March 18, 1996, 1,875 shares of
common stock as a gift from Mayflower.
Joe Ingram received on March 18, 1996, 1,875 shares of common stock
as a gift from Mayflower.
Francis Kathy Isbell received on March 18, 1996, 7,500 shares of
common stock as a gift from Mayflower.
Wesley Hunt Johnson received on March 18, 1996, 7,500 shares of
common stock as a gift from Mayflower.
James and Catherine Jones received on March 18, 1996, 2,250 shares
of common stock as a gift from Mayflower.
Michael J. Kennedy received on March 18, 1996, 1,875 shares of
common stock as a gift from Mayflower.
Sean Kilmartin received on March 18, 1996, 3,750 shares of common
stock as a gift from Mayflower.
Ricky Lagle received on March 18, 1996, 22,500 shares of common
stock as a gift from Mayflower.
Benjamin F. Lewis received on March 18, 1996, 7,500 shares of common
stock as a gift from Mayflower.
David J. and Patsy B. Lewis received on March 18, 1996, 375 shares
of common stock as a gift from Mayflower.
Marian Lewis received on March 18, 1996, 750 shares of common stock
as a gift from Mayflower.
Art Lovelace received on March 18, 1996, 3,750 shares of common
stock as a gift from Mayflower.
Robert W. Matera received on March 18, 1996, 1,500 shares of common
stock as a gift from Mayflower.
Anita McCollum-Shelton received on March 18, 1996, 1,500 shares of
common stock as a gift from Mayflower.
Benny G. and Martha N. Morgan received on March 18, 1996, 750 shares
of common stock as a gift from Mayflower.
Ostrander Burch & Company, Inc. received on March 18, 1996, 7,500
shares of common stock as a gift from Mayflower.
Mario Pastore received on March 18, 1996, 22,500 shares of common
stock as a gift from Mayflower.
Robert A. Reckenbeil received on March 18, 1996, 3,750 shares of
common stock as a gift from Mayflower.
II-14
<PAGE>
Samuel Barron Saxon received on March 18, 1996, 1,125 shares of
common stock as a gift from Mayflower.
Cornelleus Sexton received on March 18, 1996, 1,500 shares of common
stock as a gift from To The Top We Go, Inc.
Jeffrey Sheehan received on March 18, 1996, 15,000 shares of common
stock as a gift from Mayflower.
Walter Siemian received on March 18, 1996, 7,500 shares of common
stock as a gift from Mayflower.
Joseph Smith received on March 18, 1996, 750 shares of common stock
as a gift from Mayflower.
Gregg Strauss received on March 18, 1996, 750 shares of common stock
as a gift from To The Top We Go, Inc.
Craig Taylor received on March 18, 1996, 750 shares of common stock
as a gift from To The Top We Go, Inc.
Dorothy Teal received on March 18, 1996, 1,125 shares of common
stock as a gift from Mayflower.
Mary H. Thomas received on March 18, 1996, 750 shares of common
stock as a gift from Mayflower.
David J. Thurlow received on March 18, 1996, 9,375 shares of common
stock as a gift from Mayflower.
M & C Thyfault Trust received on March 18, 1996, 1,500 shares of
common stock as a gift from Mayflower.
Eric and Alfie Turner received on March 18, 1996, 375 shares of
common stock as a gift from Mayflower.
Glenn R. Turner received on March 18, 1996, 750 shares of common
stock as a gift from Mayflower.
Martin Williams received on March 18, 1996, 3,750 shares of common
stock as a gift from Mayflower.
Steven Windscheffell received on March 18, 1996, 1,875 shares of
common stock as a gift from Mayflower.
Acme Holdings on October 31, 1996, received an option to purchase
30,000 shares of common stock at an exercise price of $1.33 per
share as an award for being the Number Two Money Earner in the
Company, and an additional option to purchase 5,000 shares of common
stock at an exercise price of $1.33 per share in recognition of the
President's Award For Excellence.
DeAnne Ackel on October 31, 1996, received an option to purchase
5,000 shares of common stock at an exercise price of $1.33 per share
in recognition of being a Top Ten Money Earner.
Timothy L. Allen on October 31, 1996, received an option to purchase
1,000 shares of common stock at an exercise price of $1.33 per share
in recognition of his service as an employee during 1996.
Kimberly Barnes on October 31, 1996, received an option to purchase
18,750 shares of common stock at an exercise price of $1.33 per
share for services rendered.
II-15
<PAGE>
Dee A. Baucum on October 31, 1996, received an option to purchase
5,000 shares of common stock at an exercise price of $1.33 per share
in recognition of being a Top Ten Money Earner.
Gary Bisbey on October 31, 1996, received an option to purchase
47,500 shares of common stock at an exercise price of $1.33 per
share in recognition of his service on the U. S. Advisory Board.
Kenneth Bowen on October 31, 1996, received an option to purchase
5,000 shares of common stock at an exercise price of $1.33 per share
in recognition of his sales during 1995.
Mary Elizabeth Breen on October 31, 1996, received an option to
purchase 37,500 shares of common stock at an exercise price of $1.33
per share in recognition of her service as an employee and manager
of the Company during 1996, and an option to purchase 5,000 shares
at an exercise price of $1.33 in recognition of the President's
Award For Excellence, and an option to purchase 10,000 shares of
common stock at an exercise price of $1.33 per share in recognition
of her service as an employee during 1995.
Gregg Bright on October 31, 1996, received an option to purchase
37,500 shares of common stock at an exercise price of $1.33 per
share in recognition of his service on the Canadian Advisory Board.
Al Brothers on October 31, 1996, received an option to purchase
5,000 shares of common stock at an exercise price of $1.33 per share
for recruiting and acquisition of other retail organizations.
John D. Brothers on October 31, 1996, received options to purchase
75,000 shares of common stock at an exercise price of $1.33 per
share for his service on the 1996 Board of Directors, and an option
to purchase 45,000 shares of common stock at an exercise price of
$1.33 per share for his service as an employee and manager of the
Company during 1995, an option to purchase 75,000 shares of common
stock at an exercise price of $1.33 per share in recognition of his
services as an employee and manager of the Company during 1996, and
an option to purchase 5,000 shares of common stock at an exercise
price of $1.33 per share in recognition of the President's Award For
Excellence.
Jeffrey H. Byrd on October 31, 1996, received an option to purchase
2,000 shares of common stock at an exercise price of $1.33 per share
in exchange for services to the Company, in moving and loaning
furniture and equipment.
Zachary S. Byrd on October 31, 1996, received an option to purchase
2,000 shares of common stock at an exercise price of $1.33 per share
in exchange for services to the Company, moving and loaning
furniture and equipment.
Jawan Cherry on October 31, 1996, received an option to purchase
2,000 shares of the Company's common stock at an exercise price of
$1.33 per share for recruiting and acquisition of other retail
organizations.
Katherine Crews on October 31, 1996, received an option to purchase
7,500 shares of common stock at an exercise price of $1.33 per share
in recognition of her service as an employee 1996.
Johnny Daniell on October 31, 1996, received options to purchase
37,500 shares of common stock at an exercise price of $1.33 per
share for his service on the U.S. Advisory Board, and received an
option to purchase 5,000 shares of common stock at an exercise price
of $1.33 per share in recognition of his performance as a Top Ten
Money Earner and options to purchase 160,000 shares of common stock
at an exercise price of $1.33 per share for acquisition of other
retail organizations.
Ron DePeitro on October 31, 1996, received an option to purchase
5,000 shares of common stock at an exercise price of $1.33 per share
for recruiting and acquisition of other retail organizations.
II-16
<PAGE>
Jennifer R. Doherty on October 31, 1996, received an option to
purchase 10,000 shares of common stock at an exercise price of $1.33
per share in recognition of her service as an employee during 1996.
Jack and Maxine Duffie on October 31, 1996, received an option to
purchase 5,000 shares of common stock at an exercise price of $1.33
per share in recognition of their performance as Top Trainers in the
Company.
DeAnne Elrod on October 31, 1996, received an option to purchase
37,500 shares of common stock at an exercise price of $1.33 per
share for her service on the U.S. Advisory Board, and an option to
purchase 10,000 shares of common stock at an exercise price of $1.33
per share in recognition of being a Top Ten Money Earner and a Top
Trainer in the Company.
Matthew J. Englert on October 31, 1996, received an option to
purchase 9,000 shares of common stock at an exercise price of $1.33
per share in recognition of his service as an employee during 1996.
Bonnie Finch on October 31, 1996, received an option to purchase
5,000 shares of common stock at an exercise price of $1.33 per share
for recruiting and acquisition of other retail organizations.
Kathy R. Foreman on October 31, 1996, received an option to purchase
10,000 shares of common stock at an exercise price of $1.33 per
share in recognition of her service as an employee during 1996.
Teresa Geotz on October 31, 1996, received an option to purchase
5,000 shares of common stock at an exercise price of $1.33 per share
in recognition of being a Top Ten Money Earner.
Dwight Hallman on October 31, 1996, received an option to purchase
75,000 shares of common stock at an exercise price of $1.33 per
share for his service as an employee and manager of the Company
during 1996, and an option to purchase 5,000 shares of common stock
at an exercise price of $1.33 per share in recognition of the
President's Award for Excellence, and an option to purchase 25,000
shares of common stock at an exercise price of $1.33 per share in
recognition of his service as an employee during 1995.
Stephanie L. Harris on October 31, 1996, received an option to
purchase 37,500 shares of common stock at an exercise price of $1.33
per share for her service as an employee and manager of the Company
during 1996, and an option to purchase 10,000 shares of common stock
at an exercise price of $1.33 per share in recognition of her
service as an employee during 1995.
Richard S. Heller on October 31, 1996, received options to purchase
18,750 shares of common stock at an exercise price of $1.33 per
share for his legal services to the Company.
Andrea Jacobs on October 31, 1996, received an option to purchase
1,000 shares of common stock in recognition of her service as an
employee during 1996.
Clark A. Jones on October 31, 1996, received an option to purchase
37,500 shares of common stock at an exercise at price of $1.33 per
share in recognition of his service as an employee and manager of
the Company during 1996, and received an option to purchase 15,000
shares of common stock at an exercise price of $1.33 per share in
recognition of his service as an employee during 1995.
Gina E. Josephson on October 31, 1996, received an option to
purchase 10,000 shares of common stock at an exercise price of $1.33
per share in recognition of her service as an employee during 1996.
Donald M. Knight on October 31, 1996, received an option to purchase
5,000 shares of common stock at an exercise price of $1.33 per share
in recognition of his Top Sales during 1995.
II-14
<PAGE>
Jimmie D. Knowles on October 31, 1996, received an option to
purchase 75,000 shares of common stock at an exercise price of $1.33
per share for his service on the 1996 Board of Directors, and an
option to purchase 20,000 shares of common stock at an exercise
price of $1.33 per share for his Top Sales Performance in 1995, and
an option to purchase 5,000 shares of common stock at an exercise
price of $1.33 per share in recognition of the President's Award For
Excellence.
Patrick Kolenik on October 31, 1996, received an option to purchase
300,000 shares of common stock at an exercise price of $1.33 per
share in recognition of his service as an employee during 1996.
Ashley K. Markham on October 31, 1996, received an option to
purchase 1,000 shares of common stock at an exercise price of $1.33
per share in recognition of her service as an employee during 1996.
David Martin on October 31, 1996, received an option to purchase
37,500 shares of common stock at an exercise price of $1.33 per
share for his service on the Canadian Advisory Board.
Tricia Martin on October 31, 1996, received an option to purchase
37,500 shares of common stock at an exercise price of $1.33 per
share for her service on the Canadian Advisory Board.
Shelia M. McCarthy on October 31, 1996, received an option to
purchase 1,000 shares of common stock at an exercise price of $1.33
per share in recognition of her service as an employee during 1996.
Dawn E. McIntyre on October 31, 1996, received an option to purchase
75,000 shares of common stock at an exercise price of $1.33 per
share in recognition of her service as an employee and manager
during 1996, and an option to purchase 5,000 shares of common stock
at an exercise price of $1.33 per share in recognition of the
President's Award For Excellence, and an option to purchase 2,500
shares of common stock at an exercise price of $1.33 per share for
special planning of the Bahamas convention, and an option to
purchase 10,000 shares of common stock at an exercise price of $1.33
per share in recognition of her service as an employee during 1995.
Georgina Marie Mollick on October 31, 1996, received an option to
purchase 112,500 shares of common stock at an exercise price of
$1.33 per share for legal services to the Company, and an option to
purchase 5,000 shares of common stock at an exercise price of $1.33
per share in recognition of the President's Award For Excellence.
John Moore on October 31, 1996, received an option to purchase
25,000 shares of common stock at an exercise price of $1.33 per
share for recruiting and acquisition of other retail organizations.
Justo Nunez on October 31, 1996, received an option to purchase
75,000 shares of common stock at an exercise price of $1.33 per
share in exchange for professional services rendered to the Company.
Omega Leasing Services on October 31, 1996, received an option to
purchase 15,000 shares of common stock at an exercise price of $1.33
per share in exchange for Top Sales performance during 1995, and an
option to purchase 15,000 shares of common stock at an exercise
price of $1.33 per share in recognition of being a Top Three Money
Earner in the Company, and an option to purchase 5,000 shares of
common stock at an exercise price of $1.33 per share in recognition
of the President's Award For Excellence. Omega Leasing Services on
October 31, 1996, also received an option to purchase 450,000 shares
of common stock at an exercise price of $1.33 per share, outside of
the Stock Option Plan, for service on the initial Board of
Directors.
Kecia L. Peterson on October 31, 1996, received an option to
purchase 1,000 shares of common stock at an exercise price of $1.33
per share in recognition of her service as an employee during 1996.
O. Kenneth Rudd III on October 31, 1996, received an option to
purchase 100,000 shares of common stock at an exercise price of
$1.33 per share pursuant to his Independent Contractor Agreement
with the Company and an option to purchase 5,000 shares of common
stock at an exercise price of $1.33 per share in recognition of the
Chairman's Leadership Award.
II-18
<PAGE>
Michael Russo on October 31, 1996, received an option to purchase
2,500 shares of the Company's common stock at an exercise price of
$1.33 per share for his service in planning the Bahamas convention.
Sue Salim on October 31, 1996, received an option to purchase 1,000
shares of common stock at an exercise price of $1.33 per share in
recognition of her service as an employee during 1995.
Peter D. Scanlon on October 31, 1996, received an option to purchase
1,000 shares of common stock at an exercise price of $1.33 per share
in recognition of his service as an employee during 1996.
Richard Sheridan on October 31, 1996, received an option to purchase
10,000 shares of common stock at an exercise price of $1.33 per
share for acquisition of other retail organizations.
Larry G. Smith on October 31, 1996, received an option to purchase
75,000 shares of common stock at an exercise price of $1.33 per
share for his service on the 1996 Board of Directors.
Fred B. Smith III on October 31, 1996, received an option to
purchase 37,500 shares of common stock at an exercise price of $1.33
per share for his service on the U.S. Advisory Board.
SPS Investments on October 31, 1996, received an option to purchase
50,000 shares of common stock at an exercise price of $1.33 per
share for prior support and assistance.
Angie C. Stewart on October 31, 1996, received an option to purchase
25,000 shares of common stock at an exercise price of $1.33 per
share in recognition of her service as an employee during 1996.
Jeffrey A. Trendel on October 31, 1996, received an option to
purchase 25,000 shares of common stock at an exercise price of $1.33
per share in recognition of his service as an employee during 1996.
Richard M. Truluck on October 31, 1996, received an option to
purchase 5,000 shares of common stock at an exercise price of $1.33
per share for his Top Sales Performance in 1995.
John M. Truluck III on October 31, 1996, received an option to
purchase 5,000 shares of common stock for his Top Sales Performance
in 1995.
Maureen Uphill on October 31, 1996, received an option to purchase
to 37,500 shares of common stock at an exercise price of $1.33 per
share for her service on the Canadian Advisory Board.
Stanley Howland Van Etten on October 31, 1996, received an option to
purchase 75,000 shares of common stock at an exercise price of $1.33
per share for his service on the 1996 Board of Directors, and an
option to purchase 2,295,000 shares of common stock at an exercise
price of $1.33 per share in exchange for the 1996, 1997, 1998, 1999
and 2000 incentive stock under the terms of his employment contract
with the Company, which options are outside of the Stock Option
Plan.
Stanley Leroy Van Etten on October 31, 1996, received an option to
purchase 37,500 shares of common stock at an exercise price of $1.33
per share for his work on the sales book "Gettin" The Business: A
Sales Professional's Handbook."
Calvin Michael Ward on October 31, 1996, received an option to
purchase 20,000 shares of common stock at an exercise price of $1.33
per share for his performance for the Company in 1995.
II-19
<PAGE>
Anna M. Washburn on October 31, 1996, received an option to purchase
1,000 shares of common stock at an exercise price of $1.33 per share
in recognition of her service as an employee during 1995, and an
option to purchase 2,500 shares of common stock at an exercise price
of $1.33 per share for her participation in the Bahamas convention
planning, and an option to purchase 18,750 shares of common stock at
an exercise price of $1.33 per share in recognition of her service
as an employee during 1996.
Sabrina L. H. Wei on October 31, 1996, received an option to
purchase 75,000 shares of common stock at an exercise price of $1.33
per share for her service on the 1996 Board of Directors.
Gary Williams on October 31, 1996, received an option to purchase
7,500 shares of common stock at an exercise price of $1.33 per share
in recognition of his service as an employee during 1996.
Wood & Francis, PLLC on October 31, 1996, received an option to
purchase 37,500 shares of common stock at an exercise price of $1.33
per share for legal services.
Wyrick, Robins, Yates & Ponton, PLLC on October 31, 1996, received
an option to purchase 37,500 shares of common stock at an exercise
price of $1.33 per share for legal services.
Daniel and Judy Simonson received on November 28, 1996, 12,500
shares of common stock from Acme Holdings.
Lynn and Eunice Simonson received on November 28, 1996, 12,500
shares of common stock from Mayflower.
Washington State
Similar to the shares issued above, securities were sold to several
investors in Washington State. Upon filing of the proposed offer of
rescission by the Company, the securities administrator indicated
that in order to make an offer of rescission the Company would have
to register the shares, therefore the Company opted to return to
each of the investors in Washington the amount of their investment
along with interest at the legal rate rather than pursue
registration (for the rescission offer) with the Securities Division
of the Department of Financial Institutions of Washington. The
transactions were as follows:
David Andrew and Kathy June Holt purchased on August 8, 1995, 3,750
shares of common stock for $5,000. Mr. and Mrs. Holt were repaid
the amount of their investment plus interest at the legal rate on
March 8, 1996.
Glen M. Christopherson purchased on August 9, 1995, 3,750 shares of
common stock for $5,000. Mr. Chistopherson was repaid the amount of
his investment plus interest at the legal rate on March 8, 1996.
Geraldine June Coons purchased on August 11, 1995, 375 shares of
common stock for $500. Ms. Coons was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Christine L. Del Nagro purchased on August 11, 1995, 750 shares of
common stock for $1,000. Ms. Del Nagro was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Walter E. Dewater purchased on August 11, 1995, 1,125 shares of
common stock for $1,500. Mr. Dewater was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
Rodney Dean Alvord purchased on August 11, 1995, 3,750 shares of
common stock for $5,000. Mr. Alvord was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
II-20
<PAGE>
Mildred Gerard purchased on August 11, 1995, 375 shares of common
stock for $500. Ms. Gerard was repaid the amount of her investment
plus interest at the legal rate on March 8, 1996.
Karon Lee Hill purchased on August 11, 1995, 750 shares of common
stock for $1,000. Ms. Hill was repaid the amount of her investment
plus interest at the legal rate on March 8, 1996.
Kenneth Lee Huff purchased on August 11, 1995, 750 shares of common
stock for $1,000. Mr. Huff was repaid the amount of his investment
plus interest at the legal rate on March 8, 1996.
Vickie Lea Parks purchased on August 11, 1995, 2,250 shares of
common stock for $3,000. Ms. Parks was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
James Paul Ramos purchased on August 11, 1995, 1,125 shares of
common stock for $1,500. Mr. Ramos was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
Timothy Thorpe purchased on August 11, 1995, 750 shares of common
stock for $1,000. Mr. Thorpe was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
Steven Keith Hagen purchased on August 14, 1995, 2,625 shares of
common stock for $3,500. Mr. Hagen was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
Darik Brewer purchased on August 14, 1995, 375 shares of common
stock for $500. Mr. Brewer was repaid the amount of his investment
plus interest at the legal rate on March 8, 1996.
Darin Brewer purchased on August 14, 1995, 3,750 shares of common
stock for $5,000. Mr. Brewer was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
Darin and Jennifer Brewer purchased on August 14, 1995, 375 shares
of common stock for $500. Mr. and Mrs. Brewer were repaid the
amount of their investment plus interest at the legal rate on March
8, 1996.
Shirley Mae Carter purchased on August 14, 1995, 2,250 shares of
common stock for $3,000. Ms. Carter was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Randall C. And Wanda K. Knight purchased on August 14, 1995, 938
shares of common stock for $1,250. Mr. and Mrs. Knight were repaid
the amount of their investment plus interest at the legal rate on
March 8, 1996.
Ruben Marshall Lalish purchased on August 14, 1995, August 18, 1995
and August 24, 1995, 450, 975, and 1,875 shares of common stock for
($600, $1,300 and $2,500), respectively. Mr. Lalish was repaid the
amount of his investment plus interest at the legal rate on March 8,
1996.
Debra Jean Waite purchased on August 14, 1995, 750 shares of common
stock for $1,000. Ms. Waite was repaid the amount of her investment
plus interest at the legal rate on March 8, 1996.
Brian D. And Debra Jean Waite purchased on August 14, 1995, 375
shares of common stock for $500. Mr. and Mrs. Waite were repaid the
amount of their investment plus interest at the legal rate on March
8, 1996.
Patricia A. Wells purchased on August 14, 1995, 1,500 shares of
common stock for $2,000. Ms. Wells was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Heather Michelle Zeilestra purchased on August 14, 1995, 1,500
shares of common stock for $2,000. Ms. Zeilestra was repaid the
amount of her investment plus interest at the legal rate on March 8,
1996.
II-21
<PAGE>
Barbara J. Dickson purchased on August 15, 1995, 375 shares of
common stock for $500. Ms. Dickson was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Gary Lee Bisbey purchased on August 16, 1995, 3,750 shares of common
stock for $5,000. Mr. Bisby was repaid the amount of his investment
plus interest at the legal rate on March 8, 1996.
Gary Lee and Valerie Bisbey purchased on August 16, 1995, 375 shares
of common stock for $500. Mr. and Mrs. Bisby were repaid the amount
of their investment plus interest at the legal rate on March 8,
1996.
John Hilde purchased on August 16, 1995, 1,125 shares of common
stock for $1,500. Mr. Hilde was repaid the amount of his investment
plus interest at the legal rate on March 8, 1996.
Donna A. Leslie purchased on August 18, 1995, 3,750 shares of common
stock for $5,000. Ms. Leslie was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Ronald Raymond Cartwright purchased on August 21, 1995, 3,750 shares
of common stock for $5,000. Mr. Cartwright was repaid the amount of
his investment plus interest at the legal rate on March 8, 1996.
Sharon M. Klykken purchased on August 21, 1995, 1,500 shares of
common stock for $2,000. Ms. Klykken was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Sidney Wen Monwai purchased on August 22, 1995, 3,750 shares of
common stock for $5,000. Mr. Monwai was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
Sandra Leigh Orestad purchased on August 28, 1995, 375 shares of
common stock for $500. Ms. Orestad was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Lori Halverson purchased on August 30, 1995, 750 shares of common
stock for $1,000. Ms. Halverson was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
John Ernest White purchased on September 5, 1995, 1,500 shares of
common stock for $2,000. Mr. White was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
Michael Anthony and Cheri Diane Rovick purchased on September 12,
1995, 3,750 shares of common stock for $5,000. Mr. and Mrs. Rovick
were repaid the amount of their investment plus interest at the
legal rate on March 8, 1996.
Joanne Shirley Boyer purchased on September 25, 1995, 375 shares of
common stock for $500. Ms. Boyer was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Ena T. Shepard purchased on October 2, 1995, 3,750 shares of common
stock for $5,000. Ms. Shepard was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Moreen Margot Allen purchased on October 2, 1995, 375 shares of
common stock for $500. Ms. Allen was repaid the amount of her
investment plus interest at the legal rate on March 8, 1996.
Robert J. Sumner purchased on October 5, 1995, 3,750 shares of
common stock for $5,000. Mr. Sumner was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
Dean R. Dietrich purchased on October 9, 1995, 3,750 shares of
common stock for $5,000. Mr. Dietrich was repaid the amount of his
investment plus interest at the legal rate on March 8, 1996.
II-22
<PAGE>
Robert L. Undsderfer purchased on October 24, 1995, 1,500 shares of
common stock for $2,000. Mr. Undsderfer was repaid the amount of
his investment plus interest at the legal rate on March 8, 1996.
Marilyn L. VanDelinder purchased on December 1, 1995, 750 shares of
common stock for $1,000. Ms. VanDelinder was repaid the amount of
her investment plus interest at the legal rate on March 8, 1996.
William R. Baker purchased on December 1, 1995, 375 shares of common
stock for $500. Mr. Baker was repaid the amount of his investment
plus interest at the legal rate on March 8, 1996.
The Company on September 5, 1995, entered into a Consent Agreement
with the State of Washington Department of Financial Institutions,
Securities Division, agreeing to comply with all registration
requirements under the Washington Securities Act covering the offer,
sale, purchase, and gift of Securities in Washington.
The sale and issuance of the securities in the transactions
described above were believed by the Company to be exempt from
registration under the Securities Act, by virtue of Section 4(2)
thereof as transactions not involving any public offering. The
recipients represented their intention to acquire the securities for
investment only and not with a view to distribution thereof.
Appropriate legends were affixed to the stock certificates issued in
such transactions. All recipients had adequate access to
information about the Registrant.
II-23
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Number Description of Exhibit
1.2 Form of Underwriting Agreement.(3)
3.1 Amended Articles of Incorporation of the Company.(1)(2)
3.2 Bylaws of the Company, as amended.
4.1 Form of Common Stock Certificate.(1)(2)
5.1 Opinion and Consent of Wood & Francis, PLLC dated February 28, 1997.
10.1 Employment Agreement dated June 1, 1996, by and between the
Company and Stanley H. Van Etten.(1)(2)
10.2 Confidentiality/Non-Competition Agreement dated March 25,
1996, by and between the Company and John D. Brothers.(1)(2)
10.3 Confidentiality/Non-Competition Agreement dated March 25,
1996, by and between the Company and Mary E. Breen.(1)(2)
10.4 Confidentiality/Non-Competition Agreement dated March 25,
1996 by and between the Company and Dwight Hallman.(1)(2)
10.5 Confidentiality/Non-Competition Agreement dated March 25,
1996, by and between the Company and Clark A. Jones.(1)(2)
10.6 Confidentiality/Non-Competition Agreement dated March 25,
1996, by and between the Company and Dawn E. McIntyre.(1)(2)
10.7 Confidentiality/Non-Competition Agreement dated April 29,
1996, by and between the Company and Stephanie Harris.(1)
10.8 License Agreement by and between the Company and Premium
Concepts, Inc. dated June 30, 1995, and Addendum to License
Agreement dated September 28, 1995.
10.9 Inventory Management and Fulfillment Services Agreement by
and between the Company and Specialty Atlanta, Inc. dated
November 1, 1996.
10.10 Agreement dated September 27, 1995, by and between the
Company and Stanley H. Van Etten and Stanley L. Van Etten.
10.11 International Heritage, Inc. 1996 Stock Option Plan.
11.1 Statement Regarding Computation of Earnings (Loss) Per
Share.
21.1 Subsidiaries of the Company.(1)(2)
23.1 Consent of Independent Auditors dated February 28, 1997.
23.2 Consent of Wood & Francis, PLLC, included in Exhibit 5.
25.1 Powers of Attorney (included in Part II, page II-25).(1)(2)
________________________________
(1) Previously filed with the SEC July 15, 1996.
(2) Previously filed with the SEC September 5, 1996.
(3)To be filed by amendment.
II-24
<PAGE>
Item 17. Undertaking
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 Act 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
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) 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;
(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.
(2) That, for the purpose 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 remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
The undersigned registrant hereby undertakes to provide the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each
purchaser.
II-25
<PAGE>
October 28, 1996
International Heritage, Inc.
2626 Glenwood Avenue
Suite 200
Raleigh, NC 27608
Ladies and Gentlemen:
We are pleased to submit this Letter of Intent with respect to
a proposed "firm commitment" public offering by International
Heritage, Inc. (the "Company") of 2,500,000 shares (the "Shares") of
the Company's common stock, par value $.001 per share (or such other
par value as the Company shall determine) (the "Common Stock") (the
"Offering"). The offering price shall be $7.00 per Share, or such
other price as shall be mutually determined by Win Capital Corp.
("Win") and the Company immediately prior to the effective date (the
"Effective Date") of the Registration Statement, based on certain
factors, including but not limited to Win's due diligence review of
the Company's business, operations, industry and prospects. For the
purpose of covering over-allotments, if any, which may occur during
the distribution and sale of the Shares, the Company will grant Win
an option to purchase all or part of an additional number of shares
of Common Stock, as will be equal to 15% of the total number of
Shares initially offered to the public for a period of 45 days from
the Effective Date.
Prior to the completion of the Offering, the Company will have
a capital structure satisfactory to Win, consisting of an aggregate
of up to 12,500,000 shares of Common Stock issued and outstanding,
including shares of Common Stock reserved for issuance upon the
exercise or conversion of all outstanding options, warrants and
convertible securities.
As part of its due diligence investigation, Win will review all
existing and proposed relationships between the Company and its
officers, directors and/or principal shareholders ("Related Party
Transactions"), including any license or employment agreements,
loans and services. The Company and Win will mutually agree upon
the structure of all of such Related Party Transactions from the
date of this Letter of Intent through the Closing Date.
It is our intent, immediately prior tot he Effective Date, to
enter into an Underwriting Agreement with the Company which shall
contain such terms and conditions as are customarily contained in
agreements of such character. The October 28, 19956 Page -3-
Underwriting Agreement will set forth the terms and conditions of
the Offering, which shall include the following:
(a) There will be an underwriting discount of ten percent.
(b) In order to reimburse Win for those costs, fees and
expenses customarily incurred by an underwriter during the
registration process, the Company shall pay to Win a non-
accountable expense allowance in the amount of 3% of the gross
proceeds of the Offering (including the over-allotment option), of
which $35,000 will be paid upon the execution of this Letter of
Intent. Expenses in the amount of $35,000 have previously been paid
by the Company to Win for non- accountable expenses. These
previously paid amounts shall be credited against the
non-accountable expense total.
(c) The Company will sell to Win and/or its designees, at the
time of the closing of the Offering ("the "Closing Date"), for an
aggregate of $100, an option (the "Purchase Option") to purchase
that aggregate number of shares of Common Stock as would be equal to
ten percent of the total number of shares sold in the Offering,
excluding any shares of Common Stock sold pursuant to the
over-allotment option provided for above. The Purchase Option will
be exercisable at any time, in whole or in part, between the first
and fifth anniversary dates of the Effective Date at a price per
share equal to 110% of the per Share public offering price. Win
shall be afforded demand and "piggyback" registration rights with
respect to the shares of Common Stock underlying the Purchase
Option.
(d) The Company will bear all fees, disbursements and expenses
of the Company in connection with the Offering, including, without
limitation, the Company's legal and accounting fees and
disbursements, the costs of preparing, printing, mailing and
delivering the Registration Statement, Prospectus and amendments,
post-effective amendments and supplements thereto, the Underwriting
Agreement and related documents and "Blue Sky" memoranda (all in
such quantities as Win may reasonably require), preparing and
printing stock certificates, the reasonable costs of holding "due
diligence" meetings, filing fees, costs and expenses (including fees
and disbursements of Win's counsel) incurred in registering the
Offering with the National Association of Securities Dealers, Inc.
(the "NASD"), preparation of five sets of transaction "bibles,"
preparation of "mementos" in such quantities as Win may reasonably
request, listing the Shares on the Nasdaq National Market, filing
fees, costs and expenses (including fees and disbursements of Win's
counsel, as limited by paragraph (e) below) incurred in qualifying
the Offering under the "Blue Sky" laws of the states reasonably
specified by Win, transfer taxes, transfer and warrant agent and
registrar fees, and the costs of placing a "tombstone" advertisement
(1/8 page) in The Wall Street Journal and The New York Times and a
third publication to be selected by Win.
October 28, 1996
Page -3-
(e) The Company shall "Blue Sky" the Offering in such states as
Win shall reasonably request. All blue sky work shall be undertaken
by Win's newly appointed counsel, Olshan Grundman Frome & Rosenzweig
LLP. The Company shall pay for all blue sky filing fees and the
costs and expenses of blue sky registration or qualification and
registration of the Offering with the NASD, including the fees and
disbursements of Win's counsel. Upon the commencement of blue sky
filings (which shall be when the Company first files the next
amendment to the Registration Statement No. 333-5268 with the
Commission), the Company shall pay $12,500 to such counsel on
account for professional services to be rendered, with the balance
owed for professional services (no more than an additional $12,500,
based upon actual time) to be due on the Closing Date.
(f) The Company shall have the Shares approved for quotation on
the Nasdaq National Market, effective on the Effective Date. By the
Effective Date, the Company shall have registered its Common Stock
with the Commission under the provisions of Section 12 (g) of the
Securities Exchange Act of 1934, as amended, and will use its best
efforts to maintain such registration in effect for a period of at
least five years from the Effective Date. The Company agrees that
it will, prior to the Effective Date, register with, and, for a
period of five years from the Effective Date (or until the Common
Stock is quoted on the Nasdaq National Market), remain covered by
the Corporation Records Service published by Standard & Poor's
Corporation.
(g) The Company agrees not to permit or cause a private or
public sale or private or public offering any of its securities (in
any manner, including pursuant to Rule 144 under the Securities Act
of 1933, as amended (the "Act") owned or to be owned of record, or
beneficially by any of the Company's officers, directors or more
than 5% shareholders, or by any family member or affiliate of any of
the foregoing persons, (collectively, "Insiders") for a period of
twelve (12) months following the Effective Date without obtaining
the prior written approval of Win (and, if required by applicable
state blue sky laws, the securities commissions in any such states);
provided, however, that the foregoing agreement shall be limited to
six (6) months from the Effective Date with regard to shares
issuable upon exercise of options held by any Insider. The Company
shall cause each of the Insiders to execute an agreement with Win
regarding such restrictions.
For a period of two years after the closing of the Offering,
the Company shall notify Win in writing within ten (10) days of
negotiating a letter of intent for a proposed U.s. public offering
of any debt or equity securities (other than bank debt or similar
financing) by the Company or by any of its majority owned or
controlled subsidiaries (collectively referred to herein as the
Company) or any of its shareholders owning at least five percent of
the Company's Common Stock so that Win or, at its
October 28, 1996
Page -4-
(h) option, a group of associated investment bankers, shall
have the right of refusal to effect such offering in terms as
favorable as theretofore offered in writing by a reputable
investment banker.
(i) During the two-year period following the Effective Date,
Win shall have the right to purchase Win's account or to sell for
the account of the Insiders any securities sold by the Insiders on
the open market. Each of the Insiders will agree to consult with
Win with regard to any such sales and will offer Win the exclusive
opportunity to purchase or sell such securities on terms at least
favorable to the Insiders as they can secure elsewhere. If Win
fails to accept any such proposal within (one) business day after
receipt of a notice containing such proposal, then Win shall have no
claim or right with respect to any such sales contained in any such
notice. If, thereafter, such proposal is modified in any material
respect, the Insiders shall adopt the same procedure as with respect
to the original proposal.
(j) For a period of two years from the Effective Date, the
Company will recommend and use its best efforts to elect a designee
and representative of Win as a member of its Board of Directors.
Alternatively, Win shall have the right to send a representative
(who need not be the same individual from meeting to meeting) to
observe each meeting of the Board of Directors. Such designee or
representative, as the case may be, shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such
meetings, including, but not limited to, food, lodging and
transportation. The Company agrees to give Win written notice of
each such meeting and to provide Win with an agenda and minutes of
the meeting no later than it gives such notice and provides such
items to the other directors.
(k) The Company shall purchase key-man life insurance naming
the Company as a beneficiary on the lives of such executive
officers, and in such reasonable amounts, as the Company and Win
shall mutually determine. Currently, the Company's only executive
officer, Stanley H. Van Etten, has a $1,500,000 key-man life
insurance policy.
(l) As of the Effective Date, the Company will have employment
agreements with the Company's executive officers and managers, the
terms and conditions of which shall be reasonably satisfactory to
Win and the Company. For a period of two years from the Effective
Date, all the compensation and other arrangements between the
Company and its officers, directors and arrangements between the
Company and its officers, directors and affiliates shall be approved
by the Board of Directors. The Company shall appoint two
independent directors by the Closing.
October 28, 1996
Page -5-
(m) The Company shall retain Win pursuant to a Consulting
Agreement for a period of 24 months from the Closing at $5,000 per
month to continue the development of interest and sponsorship in the
Common Stock of the Company with such amount being paid in advance
at Closing.
(n) The Company has retained and will continue to retain a
transfer agent acceptable to Win, Continental Stock Transfer & Trust
Company, for the Common Stock and the Warrants for a period of no
less than two years following the Effective Date. Upon Win's
request, the Company shall provide Win with a copy of the Company's
daily stock transfer sheets from such transfer agent and from the
Depository Trust Company, at the Company's sole cost and expense.
Win shall keep the information disclosed in such daily transfer
sheets confidential.
(o) Prior to the filing of the Registration Statement, the
Company will provide Win with the results of such UCC, lien and
title searches to be effected in such jurisdictions, as Win or its
counsel may reasonably request.
(p) Commencing on the date hereof and continuing until 25 days
after the Effective Date, the Company will not issue a press release
or engage in any other publicity without Win's prior written consent
which shall not be unreasonably withheld.
The Company represents and warrants to Win that (i) it is not
obligated to pay a finder's or consulting fee to anyone in
connection with the introduction of the Company to Win; (ii) during
the prior twelve months, it has not paid any monies or other
compensation or issued any securities to any member of the NASD, or
to any affiliate or associate of such a member, or to any other
person in consideration for such person raising funds for the
Company or providing consulting services to the Company, except for
payments to Win hereunder and except as set forth on Schedule A
hereto; and (iii) Schedule B hereto describes all the registration
rights held by the holders of the Company's securities. No holder
of the Company's securities has (A) any right (which will not be
waived) to "piggyback" its securities on the Registration Statement
or (B) any right to demand registration of its securities (which
will not be modified so that it cannot be exercised until at least
18 months after the Effective Date), except as set forth in
paragraph (g) hereinabove.
Win must enter into the Underwriting Agreement and provide
verification of meeting the net capital requirements within five (5)
business days of the Effective Date and in the event Win does not
enter into such Underwriting Agreement, the Company is free to
pursue another underwriter for the Offering without any further
obligation to Win; however, Win reserves the right not to proceed
with the Offering if, prior to the
October 28, 1996
Page -6-
execution of the Underwriting Agreement, (i) in its sole judgment,
market conditions are unsuitable for such Offering at the price per
Share set forth on page one hereof and the Company and Win cannot
agree on another price or structure; (ii) material adverse
information comes to Win's attention relating to the Company, its
management or its position in the industry which would preclude a
successful public offering; (iii) a material adverse change has
occurred in the financial condition, business or prospects of the
Company; (iv) as a result of the review of the Company's financial
statements by the Company's independent accountants, it is
determined that the Company's historical financial statements must
be restated and that, as restated, the Company's earnings, revenues,
assets and/or net worth is materially less than as previously
presented; or (v) the Company has breached any of its material
representations, warranties or obligations hereunder, or failed to
expeditiously proceed, in a reasonable manner, with the Offering or
to cooperate with Win in requesting effectiveness of the
Registration Statement at such time as Win may deem appropriate.
If, prior to the execution of the Underwriting Agreement, Win elects
not to proceed with the Offering as a result of the condition
enumerated in clause (I) above, the Company shall reimburse Win in
full for its out-of-pocket expenses (including, without limitation,
its reasonable legal fees and disbursements), up to the amounts
previously paid pursuant to paragraph (b), above. If, prior to the
execution of the Underwriting Agreement, Win elects not to proceed
with the Offering as a result of any of the conditions enumerated in
any of clauses (ii) - (v) above, or the Company elects not to
proceed with the Offering for any reason (either of such events
being referred to herein as an "Offering Termination"), the Company
shall reimburse Win in full for its out-of-pocket expenses
(including, without limitation, its reasonable legal fees and
disbursements), up to an aggregate of $100,000, less amounts
previously paid pursuant to paragraph (b) above. In addition, if
the Company elects not to proceed with the Offering for any reason
(other than as a result of Win's breach of this Letter of Intent or
its failure to enter into the Underwriting Agreement within five (5)
business days of the Effective Date) and subsequently engages in any
public offering, private placement, merger, acquisition of
securities, joint venture or other similar transaction ("Subsequent
Transaction") within (12) months following the Company's election
not to proceed, then Win shall be paid an investment banking fee in
connection therewith equal to two percent (2%) of the consideration
received by the Company in an Subsequent Transaction ("Break-up
Fee"); provided, however, that no Break-up Fee shall be payable if
the Subsequent Transaction is the sale of securities exclusively to
persons who are officers, directors, or shareholders of the Company
(of their affiliates) on the date of this letter.
Except as otherwise set forth herein, neither the Company nor
Win will be under any obligation to the other, until both the
Company and Win have executed and delivered the Underwriting
Agreement. It is understood that, except as otherwise indicated,
this letter is merely a statement of intent and any legal
obligations between
October 28, 1996
Page -7-
the parties shall be only as set forth in a duly negotiated and
executed Underwriting Agreement. This letter shall, nevertheless,
constitute a binding agreement relative to the reimbursement of
Win's expenses, the payment of the Break-up Fee and the Company's
obligations and agreements in the next two paragraphs.
The Company agrees that it will not negotiate with or engage
any investment banking firm or underwriter other than Win with
respect to any private or public financing for the Company for the
period up to and including five (5) business days from the Effective
Date; however, in the event Win does not then enter into an
Underwriting Agreement, the Company is free to pursue another
investment banking firm or underwriter without further obligation to
Win. Notwithstanding anything else contained herein, the Company
agrees that its obligations contained in this paragraph shall be
binding on the Company and shall constitute its legal obligations,
enforceable against it by Win.
This letter shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws
of the State of New York. Any dispute relating to this Letter of
Intent shall be resolved by binding arbitration in Washington D.C.
before one arbitrator appointed by the American Association ("AAA"),
which arbitration shall be conducted in accordance with the rules of
the AAA. The decision of such arbitrator shall be binding upon all
parties.
If the foregoing correctly sets forth our understanding with
respect to the proposed offerings on behalf of the Company, please
so confirm by signing and returning one copy of this letter,
together with a check payable to Win Capital Corp. in the amount of
$35,000, whereupon we will instruct our counsel to cooperate with
counsel for the Company in a preparation of the appropriate
"investment summary," Registration Statement under the Act, and the
Underwriting Agreement and other related documents so as to expedite
the successful consummation of the Offering.
Very truly yours,
WIN CAPITAL CORP.
/s/ Barry Hawk
Name: Barry Hawk
Title: President
Accepted and confirmed:
INTERNATIONAL HERITAGE, INC.
By:______________________________
Name:
Title:
October 28, 1996
Page -9-
SCHEDULE A
Payments and Issuance to NASD Members and Others Within
Twelve Months
Description Date of
NASD Member Others of Payment Payment
Amount
A. Cash
B. Securities
SCHEDULE B
Registration Rights
A. Demands
B. "Piggyback"
<PAGE>
STATE OF
NORTH Department Of The
CAROLINA Secretary of State
To all whom these presents shall come, Greetings:
I, Rufus L. Edmisten, Secretary of State of the State of
North Carolina, do hereby certify the following and hereto
attached to be a true copy of
ARTICLES OF INCORPORATION
OF
INTERNATIONAL HERITAGE, INC.
the oringinal of which was filed in this office on the 28th day of
April, 1995
IN WITNESS WHEREOF, I have herunto set my
hand and affixed my official seal at the City of
Raleigh, this 28th day of April, 1995.
/s/ Rufus L. Edmisten
Secretary of State
Exhibit 3.1
C. 0367869
<PAGE>
(STAMP)
F I L E D
9:00 AM
April 28, 1995
EFFECTIVE
RUFUS EDMINSTEN
ARTICLES OF INCORPORATION
OF
INTERNATIONAL HERITAGE, INC
Pursuant to North Carolina General Statute 55-2-02, the
undersigned does hereby submit these Articles of Incorporation
for the purpose of forming a business corporation.
ARTICLE 1: NAME
The name of the Corporation is INTERNATIONAL HERITAGE, INC.
ARTICLE 11: DURATION
The Corporation shall have perpetual existence.
ARTICLE 111: PURPOSE AND POWERS
To Conduct Business To own, operate, manage and/or administer
any legal corporate entity, more specifically, but not limited
too, a multi-level marketing company. Initially, the company
shall own, operate and manage a multi-level marketing company.
To Act As Agent To manage or administer as agent the
business of, property of any corporation, firm, or person
carrying on any authorized business and to sell or dispose of,
receive and make disbursements for, or arrange for the
management or administration of the whole or any part of the
business or property of any corporation, firm, or person, and to
act as agent, broker, consignee, or factor of others in buying
and selling all manner and kind of goods, and to make contracts
with others in reference to the handling and disposing of the
same, and to deliver goods on bills of lading in the name of
this Corporation, to draw drafts against such bills of lading,
and to carry insurance in the name of this Corporation on goods
consigned for sale, and to develop and extend the business
interests of any corporation, firm, or person.
To Borrow Money To borrow or raise money without limit as to
amount; to sell, create security interests in, pledge, and
otherwise dispose of and realize upon book accounts and other
chases in action; to make, draw, accept, endorse, execute, and
<PAGE>
issue bonds, debentures, notes, or other obligations of any
nature or in any manner for money borrowed or in payment for
property purchased or for any other of the objects or purposes
of this Corporation, and to secure the principal thereof and the
interest thereon by mortgage upon, or creation of security
interests in, all or any part of the Corporation's property.
To Make Contracts To enter into, make, perform, and carry
out contracts of every sort and kind which may be necessary
or convenient for the business of the Corporation, or
business of a similar nature, with any person, corporation,
private, public or municipal body politic under the
government of the United States, or any state, territory, or
possession thereof, or any foreign government so far as and
to the extent that the same may be done and performed by
corporations organized under the Business Corporation laws
of any state, territory, dependency, or possession of the
United States, and in any foreign country.
To Enter into Partnership Arrangements To enter into any
partnership, limited or general, as limited or general
partner, or both, and to enter into any other arrangement
for sharing profits, union of interest, unitization or
farmout agreement, reciprocal concession, or cooperation,
with any corporation, association, partnership, syndicate,
entity, person, or governmental, municipal, or public
authority, domestic or foreign, in the carrying on of any
business which this Corporation is authorized to carry on,
or any business or transaction deemed necessary, convenient,
or incidental to carrying out any of the purposes of this
Corporation.
To Deal in Property in General To acquire, own, hold, improve,
develop, operate, exploit, sell, convey, assign, lease,
exchange, transfer, dispose of, pledge, mortgage, create
security interests in, deal in, and loan or borrow money
upon, alone or in conjunction with others, real and personal
property, tangible and intangible, of every kind, character,
and description, or any interest therein, and all kinds and
forms of securities, shares of capital stock, scrip, bonds,
debentures, coupons, mortgages, notes, bills of exchange,
acceptances, assignments, accounts, fees, evidences of
indebted ness, obligations, trust certificated, interim
receipts, warrants, and certificates issued or created by or
being claims against any corporation, association,
partnership, syndicate, entity, or person, or governmental,
municipal, or public subdivision, district or authority.
To Acquire Real Property To acquire by purchase, lease, gift,
devise, or otherwise, and to own, use, hold, sell, convey,
exchange, lease, mortgage, work, improve, develop, divide,
and otherwise handle, deal in, and dispose of real estate,
real property, and any interest or right therein, whether as
principal, agent, broker, or otherwise, and to manage,
operate, service, equip, furnish, alter, and keep in repair
real and personal property of every kind, nature and
description, whether as principal, agent, broker or
otherwise, and generally to do anything and everything
necessary and proper, and to the extent permitted by law, in
connection with the owning, managing,
2
<PAGE>
leasing and operating real and personal property of any and all kinds.
To Deal in All Classes of Property To acquire by purchase,
exchange, lease, or otherwise, and to own, hold, use,
develop, operate, sell, assign, lease, transfer, convey,
exchange, mortgage, create security interests in, pledge, or
otherwise dispose of, deal in and with, real and personal
property of every class or description and rights and
privileges therein wheresoever situate.
To Mortgage Assets To borrow money and contract debts; to make,
issue, and dispose of bonds, debentures, notes, and other
obligations, secured or unsecured; and to make any lawful
contract of guaranty, suretyship, or of any kind whatsoever
in connection with, or in aid of , any corporation or other
organizations any of whose securities this Corporation has an
interest; to secure contracts, obilgations, and liabilites or
any thereof, in whole or in part, by mortgage, deed of trust,
creation of security intersts in, pledge, or other lien, upon
any or all the propoerty of this Corporation wheresoever
situated, acquired, or to be acquired.
To Deal in its Own Share To purchase, hold, cancel reissue, sell,
exchange, transfer, or otherwise deal any of its outstanding
shares from time to time to such an extent and in such manner
and upon such terms as the Board of Directors of the
Corporation shall determine; provided that this Corporation
shall not use its funds or property for the purchase of its
own shares when such use would cause any impairment of its
capital, except to the extent permitted by law; and provided
further that shares of the Corporation belonging to it shall
not be voted upon directly or indirectly.
To Invest Corporate Funds To invest and deal with the funds of this
Corporation in any manner, and to acquire by purchase or
otherwise the stocks, bonds, notes, debentures and other
securities and obligations of any government, state,
municipality, corporation, association or partnership,
domestic or foreign and, while owner of any such securities
or obligations, to exercise all the rights, powers, and
privileges of ownership, including among other things the
right to vote thereon for any and all purposes. ~
To Invest in the Shares of Other CorDorations Subject to the
restrictions or limitations imposed by law, to purchase or
otherwise acquire, hold, sell, assign, transfer, create
security interests in, pledge, exchange, or otherwise dispose
of the shares, bonds, obligations, or other securities and
evidences of indebtedness of other corporations, domestic and
foreign, and the goodwill, rights, assets and property of any
and every kind or any part thereof, of any person, firm, or
corporation, domestic or foreign, and if desirable to issue
in exchange therefor the shares, bonds, or other obligations
of this Corporation, and while the owner of such shares to
exercise all rights, powers, and privileges of ownership,
including the power to vote thereon; and in furtherance of
the corporate purposes, in the course of the transaction of the
3
<PAGE>
business and affairs of this Corporation, to acquire real
and personal property, rights and interests of every nature,
and to execute and issue bonds, debentures, and other
negotiable or transferable instruments, and to mortgage and
create a security interest in, or pledge, any or all of the
property of the Corporation; to secure such bonds,
debentures, or other instruments, upon such terms and
conditions as may be set forth in the instrument or
instruments, mortgaging, creating a security interest in, or
pledging the same, or in any deed, contract or other
instrument relating thereto.
To Acquire Other Businesses To acquire, by purchase, exchange, or
otherwise, all or any part of, or any interest in, the
property, assets, business, and goodwill of any one or more
persons, firms, associations, or corporations heretofore or
hereinafter engaged in any business for which a corporation
may now or hereafter be organized under the laws of this or
any other state or country; to pay for the same in cash,
property, its own or other securities; to hold, operate,
reorganize, liquidate, sell, or in any manner dispose of the
whole or any part thereof; and in connection therewith, to
assume or guarantee performance of any liabilities,
obligations, or contracts of such persons, firms,
associations, or corporations, and to conduct the whole or
part of any business thus acquired.
To Assist Other Corporations To aid in any manner any corporation,
association, or trust estate, domestic or foreign, or any
firm or individual, any shares of stock in which or any
bonds, debentures, notes, securities, evidences of
indebtedness, contracts, or obligations of which are hold by
or for this Corporation, directly or indirectly, or in
which, or in the welfare of which, this Corporation shall
have any interest and to do any acts designed to protect,
preserve, improve, or enhance the value of any property at
any time held or controlled by it or in which it may be at
any time interested, directly or indirectly or through other
corporations or otherwise; and to organize or promote or
facilitate the organization of any corporation, association,
partnership, syndicate, or entity, domestic or foreign.
To Oroganize Other Corporations To organize or cause to be
organized under the laws of any state of the United States,
or of the District of Columbia, or of any territory,
dependency, or possession of the United States, or of any
foreign country, a corporation or corporations for the
purpose of transacting, promoting, or carrying on any or all
of the objects or purposes for which this Corporation is
organized, and to dissolve, wind up, liquidate, merge, or
consolidate any such corporation or corporations or to cause
the same to be dissolved, wound up, liquidated, merged or
consolidated.
4
<PAGE>
To Vote Shares in Other Corporations Shares in other corporations
held by this Corporation shall be voted by such Officer or
Officers of this Corporation as the Board of Directors, by a
majority vote, shall designate for that purpose, or by a
proxy thereunto duly authorized by like vote of such Board,
except as otherwise ordered by vote of the holders of a
majority of the shares outstanding and entitled to vote.
To Act as a Holding Company To purchase, own and hold the stock of
other corporations, and to do every act and thing covered
generally by the denomination "holding corporation," and
especially to direct the operations of other corporations
through the ownership of stock therein; to purchase,
subscribe for, acquire, own, hold, sell, exchange, assign,
transfer, create security interests in, pledge, or otherwise
dispose of shares or voting trust certificates for shares of
the capital stock, or any bonds, notes, securities, or
evidences of indebtedness created by any other corporation
or corporations organized under the laws of this state or
any other state or district or country, nation, or
government, and also bonds or evidences of indebtedness of
the United States or of any state, district, territory,
dependency or country or subdivision or municipality
thereof; to issue in exchange thereof shares of the capital
stock, bonds, notes or other obligations of the Corporation
and while the owner thereof, to exercise all the rights,
powers, and privileges of ownership including the right to
vote on any shares of stock or voting trust certificates so
owned; to promote, lend money to, and guarantee the
dividends, stocks, bonds, notes, evidences of indebtedness,
contracts or other obligations, of and otherwise aid in any
manner which shall be lawful, any corporation or association
of which any bonds, stocks, voting trust certificates, or
other securities or evidences of indebtedness shall be held
by or for this Corporation, or in which, or in the welfare
of which, this Corporation shall have any interest, and to
do any acts and things permitted by law and designated to
protect, preserve, improve, or enhance the value of any such
bonds, stocks, or other securities or evidences of
indebtedness of the property of this Corporation.
To Act Outside the State To carry on its operations and conduct
business in any state, district, territory, dependency, or
possession of the United States, and in any foreign country.
To Engage in Any Lawful Act To engage in any lawful act or activity
for which corporation may be organized under the North
Carolina Business Corporation Act.
Construction of Power Clauses The foregoing clauses shall be
construed as and shall be powers as well as purposes, and
the matters expressed in each clause shall, unless otherwise
herein expressly provided, be in no wise limited by
reference to or reference from the terms of any other clause
but shall be regarded as independent bowers and purposes and
the enumeration of specific powers and purposes shall not e
construed to limit or restrict in any manner the meaning of
general terms or other general powers of this Corporation,
nor shall the expression of one thing be deemed exclude
another not expressed, although it be of like nature. This
5
<PAGE>
Corporation shall be authorized by the North Carolina
Business Corporation Act, and all the powers conferred by
all acts heretofore or hereafter amendatory of or
supplemental to that statute, and the enumeration of certain
powers as herein specified is not intended as exclusive of
or, as a waiver of any of the powers, rights, or privileges
granted or conferred by that statute now or hereafter in
force; provided, however, that nothing herein contained
shall be deemed to authorize or permit this Corporation to
carry on any business, to exercise any power, or to do any
act which a corporation formed under that statute may not at
the time lawfully carry on or do.
ARTICLE IV: CAPITAL STOCK
Authorized Shares The maximum number of shares of stock
of the Corporation that may be issued is one-thousand ( 1
,000) shares, consisting of one-thousand (1,000) shares of
Class A Common, voting shares with $0.01 par value. The
stated capital of the Corporation shall be at least equal to
the sum of the aggregate amount of consideration received by
the Corporation for the issuance of shares plus such amounts
as, from time to time, by resolution of the Board of
Directors may be transferred thereto.
Authority to Issue Warrants The Corporation is hereby
expressly authorized and empowered, from time to time, by
resolution of its Board of Directors, to create and issue,
whether or not in connection with the issue and sale of any
shares or other securities of the Corporation, rights or
options entitling the holders or owners thereof to purchase
or acquire from Corporation any shares of any class or
series or other securities, whether now or hereafter
authorized, such rights or options to be evidenced by or in
such warrants
6
<PAGE>
or other instruments as shall be approved by
the Board of Directors. The terms upon which, the time or
times, which may be limited or unlimited in duration, at or
within which, and the price or prices at which any such
shares or other securities may be purchased or acquired from
the Corporation upon the exercise of any such rights or
options shall be such as shall be fixed in a resolution or
resolutions adopted by the Board of Directors providing for
the creation and issue of such rights or option, and set
forth or incorporated by reference in the warrants or other
instruments evidencing such rights or options, and as shall
be permitted by law. The Board of Directors is hereby
authorized and empowered to authorize the creation and issue
of any such rights or options and any such warrant or other
instruments from time to time, for such consideration as the
Board of Directors may determine. Any and all shares which
may be purchased or acquired or issued upon the exercise of
any such right or option shall be deemed fully paid shares
and not liable to any further call or assessment, as the
terms of the warrants or other instruments evidencing such
rights or options shall provide. Except as otherwise
provided by law, the Board of Directors shall have full
power and discretion to prescribe and regulate from time to
time the procedure to be following in, and other matters
concerning, the creation, issue, and exercise of any such
rights and options and such warrants or other instruments,
and the setting aside of shares of other securities for the
purpose thereof, and the issuance of such shares or other
securities upon the exercise thereof. Unissued Shares The
Corporation may, at any time and from time to time, issue
and dispose of any of the authorized and unissued shares of
the stated capital of the Corporation for such consideration
as may be fixed by the Board of Directors, subject to any
provisions of law then applicable, and subject to the
provisions of any resolutions of the shareholders of the
Corporation relating thereto.
CLASS A COMMON STOCK
Voting Rights Each holder of shares of Class A Common Stock
shall be entitled to one vote for each share held, and as
such shall be entitled to notice of all shareholder meetings
of Corporation as set forth more specifically in the Bylaws
of Corporation.
Dividends The Board of Directors, in its discretion, may
declare and pay dividends on the common stock concurrently
with dividends on the preferred stock for any dividend
period of any fiscal year when such dividends are applicable
to the common stock; provided, that all accumulated
dividends on the preferred stock of the previous dividend
periods for the current fiscal year have been paid in full.
ARTICLE V: PREEMPTIVE RIGHTS
Every shareholder, upon the sale for cash of any additional
stock of the Corporation of the same kind, class, or series
as that which he already holds, shall have the right to
purchase his pro rata share thereof (or as nearly as may be
done without issuance of fractional shares) at the price at
which such stock is offered to others.
ARTICLE VI: INITIAL REGISTERED OFFICE AND AGENT
The street address and county of the original registered
office of the Corporation is: 2626 Glenwood Avenue, Suite
300, Raleigh, Wake County, North Carolina 27608, and the
name of the initial registered agent of this Corporation at
that address is Stanley H. Van Ettten.
ARTICLE VII: INITIAL BOARD OF DIRECTORS
The Corporation shall have three (3) directors initially.
The number of directors may be either increased or decreased
from time to time in accordance with
7
<PAGE>
the Bylaws, but shall
never be fewer than one (1). The names of the initial
directors of the Corporation are: Stanley H. Van Etten,
Claude Savage, and Larry Smith. All corporate powers shall
be exercised by or under the authority of, and the business
and affairs of the Corporation managed under the direction
of the Board of Directors, except as may be otherwise
limited by these Articles of Incorporation or Bylaws of
Corporation.
ARTICLE Vll: OFFICERS
The Officers of the Corporation shall be elected by the
Board of Directors of the Corporation at a meeting to be
held immediately following each annual meeting of the
shareholders. New offices may be created, and appointment
may be made therefor, and any office that may become vacant
may be filled by the Board of Directors of the Corporation
at any regular meeting or at any special meeting called for
that purpose. The duties of the Officers of the Corporation
shall be prescribed by the Bylaws.
ARTICLE VIII: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each Director and Officer in consideration for his services,
shall be indemnified, whether then in office or not, for the
reasonable costs and expenses incurred by him in connection
with the defense of, or for advice concerning, any claim
asserted or proceeding brought against him by reason of his
being or having been a Director or Officer of the
Corporation, whether or not wholly owned or by reason of any
act or omission to act as such Director or Officer, provided
that he shall not have been derelict in the performance of
his duty as to the matter or matters in respect of which
claim is asserted or proceeding brought. The foregoing
right of indemnification shall not be exclusive, but shall
expressly be in addition to, any other rights which any
Director or Officer may be entitled to as a matter of law.
ARTICLE IX: INTERESTED PARTY TRANSACTIONS
No contract or other transaction between the Corporation
and any other firm or corporation shall be affected or
invalidated by reason of the fact that any one or more of
the Directors or Officers of this Corporation is, or are
interested in, or is a member, shareholder, Director, or
Officer, or are members, shareholders, Directors or Officers
of such other firm, partnership, association or corporation;
and any Director or Officer or Officers, individually or
jointly, may be a party or parties to, or may be interested
in, any contract or transaction of this Corporation, shall
be affected or invalidated by reason of the fact that any
Director or Directors or Officer or Officers of this
Corporation is a party to parties to, or are interested in
such contract, act or
8
<PAGE>
association or corporation, and each
and every person who may become a Director or Officer of
this Corporation is hereby relieved from any liability that
might otherwise exist from thus contracting with this
Corporation for the benefit of himself or any firm,
partnership, association or corporation in which he may be
in anywise interested.
ARTICLE X: INCORPORATOR
The name of the person signing these Articles is:
Stanley H. Van Etten
Mayflower Holdings, Inc
2626 Glenwood Avenue
Suite 300
Raleigh, North Carolina 27608
ARTICLE Xl: BYLAWS
The power the adopt, alter, amend or repeal Bylaws
not inconsistent with these Articles of Incorporation is
vested in the Board of Directors of the Corporation.
ARTICLE Xll: AMENDMENT
The Corporation reserves the right to amend, alter, change
or repeal any provisions contained in these articles of
Incorporation in the manner now or hereafter prescribed by
law, and all rights and powers conferred herein on
shareholders, Directors, or Officers are subject to this
reserved power.
IN WITNESS WHEREOF, I have hereunto set my hand, and
acknowledge the filing of the foregoing Articles of
Incorporation under the laws of the State of North Carolina.
This the 28th day of April, 1995.
/s/ Stanley Van Etten
Stanley Van Etten, Incorporator
<PAGE>
STATE OF
NORTH Department Of The
CAROLINA Secretary of State
To all whom these presents shall come, Greetings:
I, JANICE H. FAULKNER, Secretary of State of the State of
North Carolina, do hereby certify the following and hereto
attached to be a true copy of
ARTICLES OF AMENDMENT
OF
INTERNATIONAL HERITAGE, INC.
the oringinal of which was filed in this office on the 2nd day of
July, 1996
IN WITNESS WHEREOF, I have herunto set my
hand and affixed my official seal at the City of
Raleigh, this 2nd day of July, 1996.
/s/ Janice H. Faulkner
<STATE SEAL> Secretary of State
<PAGE>
(STAMP)
C-0367869
State of North Carolina
Department of the secretary of State
ARTICLES OF AMENDMENT
Pursuant to 55-10-06 of the General Statutes of North Carolina,
the undersigned corporation hereby submits the following
Articles of Amendment for the purpose of amending its
articles of Incorporation.
1. The name of the corporation is: International Heritage
2. The text of each amendment adopted is as follows:
Article IV; Capital Stock, the paragraph entitled
Authorized Shares shall be deleted in its entirety and
in lieu thereof shall be added a new paragraph which
shall read as follows:
Authorized Shares - The maximum number of shares of
stock of the Corporation that may be issued is
Twenty-Five Million (25,000,000) shares, consisting of
common, voting shares with $.01 par value. Stated
capital of the Corporation shall be at least equal to
the sum of the aggregate amount of consideration and
received by the Corporation for the issuance of shares
plus such amounts as, from time to time, by resolution
of the Board of Directors, may be transferred thereto.
3. If an amendment provides for an exchange,
reclassification, or cancellation of issued shares,
provisions for implementing the amendment, if not
contained in the amendment itself, are as follows:
There is no provision for an exchange,
reclassification, or cancellation of issued shares.
4. The date adoption of each amendment was as follows:
July 1, 1996.
5. (Check either a, b, c, or d, whichever is applicable)
a. The amendment(s) was (were) duly adopted by the
incorporator[ors] prior to the issuance of
shares.
b. The amendment(s) was (were) duly
adopted by the board of directors prior to the
issuance of shares.
c. The amendments(s) was (were) duly adopted by the board
of directors without shareholder approval as a
shareholder approval was not required because
(set forth a brief explanation of why
shareholder action was not required)
<PAGE>
ARTICLES OF AMENDMENT
Page 2
d. X The amendment(s) was (were) approved by
shareholder action, and such shareholder
approval was obtained as required by Chapter
55 of the North Carolina General Statutes.
6. These articles will be effective upon
filing, unless a delayed time and date is specified:
This the 1st day of July, 1996
CORPORATIONS DIVISION
INTERNATIONAL HERITAGE INC.
By: /s/ Stanley H. Van Etten
Stanley H. Van Etten, President
<PAGE>
AMENDED
BYLAWS
OF
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INTERNATIONAL HERITAGE, INC.
*************************************************
ARTICLE I.
OFFICES
Section 1. Principal Office. The principal office of the corporation
shall be located at such place as the Board of Directors may fix from
time to time.
Section 2. Registered Office. The registered office of the corporation
required by law to be maintained in the State of North Carolina may be,
but need not be, identical with the principal office.
Section 3. Other Offices. The corporation may have offices at such
other places, either within or without the State of North Carolina, as
the Board of Directors may designate or as the affairs of the
corporation may require from time to time.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
at the principal office of the corporation, or at such other place, either
within or without the State of North Carolina, as shall in each case be (i)
fixed by the President, the Secretary, or the Board of Directors and
designated in the notice of the meeting or (ii) agreed upon by a majority of
the shareholders entitled to vote at the meeting.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
held each year at 11:00 o'clock A.M. on the second Monday of the first month
following the month in which the corporation's accounting year ends for the
purpose of electing directors of the corporation and for the transaction of
such other business as may be properly brought before the meeting. If the
day fixed for the annual meeting shall be a legal holiday, such meeting
shall be held on the next succeeding business day.
Section 3. Substitute Annual Meeting. If the annual meeting shall not be
held on the day designated by these bylaws, a substitute annual meeting may
be called in accordance with the provisions of Section 4 of this Article II.
A meeting so called shall be designated and treated for all purposes as the
annual meeting.
<PAGE>
Section 4. Special Meetings. Special meetings of the shareholders may be
called at any time by the President, the Secretary, or the Board of
Directors, and shall be called pursuant to the written request of the
holders of not less than one-tenth of all the votes entitled to be cast on
any issue proposed to be considered at the meeting.
Section 5. Notice of Meetings. Written notice stating the date, time, and
place of the meeting shall be given not less than ten (10) nor more than
sixty (60) days before the date of any shareholders' meeting, either by
personal delivery, or by telegraph, teletype, or other form of wire or
wireless communication, or by facsimile transmission or by mail or private
carrier, by or at the direction of the Board of Directors, the President,
the Secretary, or other person calling the meeting, to each shareholder
entitled to vote at such meeting; provided that such notice must be given to
all shareholders with respect to any meeting at which a merger or share
exchange is to be considered and in such other instances as required by law.
If mailed, such notice shall be deemed to be effective when deposited in the
United States mail, correctly addressed to the shareholder at the
shareholder's address as it appears on the current record of shareholders of
the corporation, with postage thereon prepaid.
In the case of a special meeting, the notice of meeting shall include a
description of the purpose or purposes for which the meeting is called; but,
in the case of an annual or substitute annual meeting, the notice of meeting
need not include a description of the purpose or purposes for which the
meeting is called unless such a description is required by the provisions of
the North Carolina Business Corporation Act.
When a meeting is adjourned to a different date, time, or place, notice need
not be given of the new date, time, or place if the new date, time, or place
is announced at the meeting before adjournment and if a new record date is
not fixed for the adjourned meeting; but if a new record date is fixed for
the adjourned meeting (which must be done if the new date is more than one
hundred twenty (120) days after the date of the original meeting), notice of
the adjourned meeting must be given as provided in this section to persons
who are shareholders as of the new record date.
Section 6. Waiver of Notice. Any shareholder may waive notice of any
meeting before or after the meeting. The waiver must be in writing, signed
by the shareholder, and delivered to the corporation for inclusion in the
minutes or filing with the corporate records. A shareholder's attendance,
in person or by proxy, at a meeting (a) waives objection to lack of notice
or defective notice of the meeting, unless the shareholder or his proxy at
the beginning of the meeting objects to holding the meeting or transacting
business at the meeting, and (b) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder or his proxy objects
to considering the matter before it is voted upon.
Section 7. Shareholders' List. Before each meeting of shareholders, the
Secretary of the corporation shall prepare an alphabetical list of the
shareholders entitled to notice of such meeting. The list shall be arranged
by voting group (and within each voting group by class or series of shares)
and show the address of and number of shares held by each shareholder. The
list shall be kept on file at the principal office of the corporation, or at
a place identified in the meeting notice in the city where the meeting will
be held, for the period beginning two (2) business days after notice of the
meeting is given and continuing through the meeting, and shall be available
for inspection by any shareholder, his agent or attorney, at any time during
regular business hours. The list shall also be available at the meeting and
shall be subject to inspection by any shareholder, his agent or attorney, at
any time during the meeting or any adjournment thereof.
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Section 8. Voting Group. All shares of one or more classes or series that
under the articles of incorporation or the North Carolina Business
Corporation Act are entitled to vote and be counted together collectively on
a matter at a meeting of shareholders constitute a voting group. All shares
entitled by the articles of incorporation or the North Carolina Business
Corporation Act to vote generally on a matter are for that purpose a single
voting group. Classes or series of shares shall not be entitled to vote
separately by voting group unless expressly authorized by the articles of
incorporation or specifically required by law.
Section 9. Quorum. Shares entitled to vote as a separate voting group may
take action on a matter at the meeting only if a quorum of those shares
exists, in person or by proxy. A majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group
for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting.
In the absence of a quorum at the opening of any meeting of shareholders,
such meeting may be adjourned from time to time by the vote of a majority of
the votes cast on the motion to adjourn; and, subject to the provisions of
Section 5 of this Article II, at any adjourned meeting any business may be
transacted that might have been transacted at the original meeting if a
quorum exists with respect to the matter proposed.
Section 10. Proxies. Shares may be voted either in person or by one (1) or
more proxies authorized by a written appointment of proxy signed by the
shareholder or by his duly authorized attorney in fact. An appointment of
proxy is valid for eleven (11) months from the date of its execution, unless
a different period is expressly provided in the appointment form.
Section 11. Voting of Shares. Subject to the provisions of the articles of
incorporation, each outstanding share shall be entitled to one vote on each
matter voted on at a meeting of shareholders.
Except in the election of directors as governed by the provisions of Section
3 of Article III, if a quorum exists, action on a matter by a voting group
is approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless a greater vote is required
by law or the articles of incorporation or these bylaws.
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Absent special circumstances, shares of the corporation are not entitled to
vote if they are owned, directly or indirectly, by another corporation in
which the corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors of the second corporation; provided that this
provision does not limit the power of the corporation to vote its own shares
held by it in a fiduciary capacity.
Section 12. Informal Action by Shareholders. Any action that is required
or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if one (1) or more written consents, describing the action
so taken, shall be signed by all of the shareholders who would be entitled
to vote upon such action at a meeting, and delivered to the corporation for
inclusion in the minutes or filing with the corporate records.
If the corporation is required by law to give notice to nonvoting
shareholders of action to be taken by unanimous written consent of the
voting shareholders, then the corporation shall give the nonvoting
shareholders, if any, written notice of the proposed action at least ten
(10) days before the action is taken.
ARTICLE III.
BOARD OF DIRECTORS
Section 1. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation
shall be managed under the direction of, the Board of Directors.
Section 2. Number and Qualifications. The number of directors constituting
the Board of Directors shall be not less than one (1) nor more than seven
(7) as may be fixed or changed from time to time, within the minimum and
maximum, by the shareholders or by the Board of Directors. Directors need
not be residents of the State of North Carolina or shareholders of the
corporation.
Section 3. Election. Except as otherwise provided in this Article III, the
directors shall be elected at the annual meeting of shareholders. Those
persons who receive the highest number of votes at a meeting at which a
quorum is present shall be deemed to have been elected.
Section 4. Staggered Terms for Directors. The total number of Directors
shall be divided into two (2) groups, one group consisting of three (3)
directors who shall serve a one (1) year term and two (2) of whom shall be
outside directors, the second group shall consist of up to four (4)
directors who shall serve a two (2) year term. Terms shall expire at the
first annual shareholders' meeting after their election and at the second
annual shareholders' meeting after their election, for the first and second
groups, respectively. At each annual shareholders' meeting held thereafter,
directors shall be chosen for a term of one (1) or two (2) years as the case
may be, to succeed those whose terms expire. The term of a director elected
to fill a vacancy expires at the next shareholders' meeting at which the
vacant director would have been elected. A decrease in the number of
directors does not shorten an incumbent director's term. Despite the
expiration of a director's term, such director shall continue to ser ve
until a successor shall be elected and qualifies or until there is a
decrease in the number of directors.
4
<PAGE>
Section 5. Removal. Any director may be removed at any time with or
without cause by a vote of the shareholders if the number of votes cast to
remove such director exceeds the number of votes cast not to remove him. If
a director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove him.
A director may not be removed by the shareholders at a meeting unless the
notice of the meeting states that the purpose, or one of the purposes, of
the meeting is removal of the director. If any directors are so removed,
new directors may be elected at the same meeting.
Section 6. Vacancies. Any vacancy occurring in the Board of Directors,
including without limitation a vacancy resulting from an increase in the
number of directors or from the failure by the shareholders to elect the
full authorized number of directors, may be filled by the shareholders or by
the Board of Directors, whichever group shall act first. If the directors
remaining in office do not constitute a quorum, the directors may fill the
vacancy by the affirmative vote of a majority of the remaining directors.
If the vacant office was held by a director elected by a voting group, only
the remaining director or directors elected by that voting group or the
holders of shares of that voting group are entitled to fill the vacancy.
Section 7. Chairman of Board. There may be a Chairman of the Board of
Directors elected by the directors from their number at any meeting of the
Board. The Chairman shall preside at all meetings of the Board of Directors
and perform such other duties as may be directed by the Board.
Section 8. Compensation. The Board of Directors may provide for the
compensation of directors for their services as such and for the payment or
reimbursement of any or all expenses incurred by them in connection with
such services.
ARTICLE IV.
MEETINGS OF DIRECTORS
Section 1. Regular Meetings. A regular meeting of the Board of Directors
shall be held immediately after, and at the same place as, the annual
meeting of shareholders. In addition, the Board of Directors may provide,
by resolution, the time and place, either within or without the State of
North Carolina. for the holding of additional regular meetings.
Section 2. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, if any, by
the President or by a majority of the duly elected directors. Such a
meeting may be held either within or without the State of North Carolina, as
fixed by the person or persons calling the meeting.
Section 3. Notice of Meetings. Regular meetings of the Board of Directors
may be held without notice. The person or persons calling a special meeting
of the Board of Directors shall, at least two (2) days before the meeting,
give or cause to be given notice thereof by any
5
<PAGE>
usual means of communication. Such notice need not specify the purpose for
which the meeting is called. Any duly convened regular or special meeting
may be adjourned by the directors to a later time without further notice.
Section 4. Waiver of Notice. Any director may waive notice of any meeting
before or after the meeting. The waiver must be in writing, signed by the
director entitled to the notice, and delivered to the corporation for
inclusion in the minutes or filing with the corporate records. A director's
attendance at or participation in a meeting waives any required notice of
such meeting unless the director at the beginning of the meeting, or
promptly upon arrival, objects to holding the meeting or to transacting
business at the meeting and does not thereafter vote for or assent to action
taken at the meeting.
Section 5. Quorum. Unless the articles of incorporation or these bylaws
provide otherwise, a majority of the number of directors fixed by or
pursuant to these bylaws shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, or if no number is so
fixed, the number of directors in office immediately before the meeting
begins shall constitute a quorum.
Section 6. Manner of Acting. Except as otherwise provided in the articles
of incorporation or these bylaws, including Section 9 of this Article IV,
the affirmative vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
Section 7. Presumption of Assent. A director who is present at a meeting
of the Board of Directors or a committee of the Board of Directors when
corporate action is taken is deemed to have assented to the action taken
unless (a) he objects at the beginning of the meeting, or promptly upon his
arrival, to holding it or to transacting business at the meeting, or (b) his
dissent or abstention from the action taken is entered in the minutes of the
meeting, or (c) he files written notice of his dissent or abstention with
the presiding officer of the meeting before its adjournment or with the
corporation immediately after the adjournment of the meeting. Such right of
dissent or abstention is not available to a director who votes in favor of
the action taken.
Section 8. Action Without Meeting. Action required or permitted to be
taken at a meeting of the Board of Directors may be taken without a meeting
if the action is taken by all members of the board. The action must be
evidenced by one or more written consents signed by each director before or
after such action, describing the action taken, and included in the minutes
or filed with the corporate records.
Section 9. Committees of the Board. The Board of Directors may create an
Executive Committee and other committees of the board and appoint members of
the Board of Directors to serve on them. The creation of a committee of the
board and appointment of members to it must be approved by the greater of
(a) a majority of the number of directors in office when the action is taken
or (b) the number of directors required to take action pursuant to Section 6
of this Article IV. Each committee of the board must have two (2) or more
members and, to the extent authorized by law and specified by the Board of
Directors, shall have and may exercise all of the
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authority of the Board of Directors in the management of the corporation.
Each committee member serves at the pleasure of the Board of Directors. The
provisions in these bylaws governing meetings, action without meetings,
notice and waiver of notice, and quorum and voting requirements of the Board
of Directors apply to committees of the board established under this
section.
ARTICLE V.
OFFICERS
Section 1. Officers of the Corporation. The officers of the corporation
shall consist of a President, a Secretary, a Treasurer, and such
Vice-Presidents, Assistant Secretaries, Assistant Treasurers, and other
officers as may from time to time be appointed by or under the authority of
the Board of Directors. Any two (2) or more offices may be held by the same
person, but no officer may act in more than one (1) capacity where action of
two (2) or more officers is required.
Section 2. Appointment and Term. The officers of the corporation shall be
appointed by the Board of Directors or by a duly appointed officer
authorized by the Board of Directors to appoint one (1) or more officers or
assistant officers. Each officer shall hold office until his death,
resignation, retirement, removal, disqualification, or his successor shall
have been appointed.
Section 3. Compensation of Officers. The compensation of all officers of
the corporation shall be fixed by or under the authority of the Board of
Directors, and no officer shall serve the corporation in any other capacity
and receive compensation therefor unless such additional compensation shall
be duly authorized. The appointment of an officer does not itself create
contract rights.
Section 4. Removal. Any officer may be removed by the Board at any time
with or without cause; but such removal shall not itself affect the
officer's contract rights, if any, with the corporation.
Section 5. Resignation. An officer may resign at any time by communicating
his resignation to the corporation, orally or in writing. A resignation is
effective when communicated unless it specifies in writing a later effective
date. If a resignation is made effective at a later date that is accepted
by the corporation, the Board of Directors may fill the pending vacancy
before the effective date if the Board provides that the successor does not
take office until the effective date. An officer's resignation does not
affect the corporation's contract rights, if any, with the officer.
Section 6. Bonds. The Board of Directors may by resolution require any
officer, agent, or employee of the corporation to give bond to the
corporation with sufficient sureties, conditioned on the faithful
performance of the duties of his respective office or position and to comply
with such other conditions as may from time to time be required by the Board
of Directors.
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Section 7. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings
of the shareholders. He shall sign, with the Secretary, an Assistant
secretary, or any other proper officer of the corporation thereunto
authorized by the Board of Directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed;
and in general he shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of
Director s from time to time.
Section 8. Vice Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice Presidents in the
order of their length of service as such, unless otherwise determined by the
Board of Directors, shall perform the duties of the President, and when so
acting shall have all the powers of and be subject to all the restrictions
upon the President. Any Vice President may sign, with the Secretary or an
Assistant Secretary, certificates for shares of the corporation; and shall
perform such other duties as from time to time may be prescribed by the
President or Board of Directors.
Section 9. Secretary. The Secretary shall: (a) keep the minutes of the
meetings of shareholders, of the Board of Directors, and of all committees;
(b) see that all notices are duly given in accordance with the provisions
of these bylaws or as required by law; (c) maintain and authenticate the
records of the corporation and be custodian of the seal of the corporation
and see that the seal of the corporation is affixed to all documents the
execution of which on behalf of the corporation under its seal is duly
authorized; (d) sign with the President, or a Vice President, certificates
for shares of the corporation, the issuance of which shall have been
authorized by resolution of the Board of Directors; (e) maintain and have
general charge of the stock transfer books of the corporation; (f) prepare
or cause to be prepared shareholder lists prior to each meeting of
shareholders as required by law; (g) attest the signature or certify the
incumbency or signature of any officer of the corporation; and (h) in
general perform all duties incident to the office of secretary and such
other duties as from time to time may be prescribed by the President or by
the Board of Directors.
Section 10. Assistant Secretaries. In the absence of the Secretary or in
the event of his death, inability or refusal to act, the Assistant
Secretaries in the order of their length of service as Assistant Secretary,
unless otherwise determined by the Board of Directors, shall perform the
duties of the Secretary, and when so acting shall have all the powers of and
be subject to all the restrictions upon the Secretary. They shall perform
such other duties as may be prescribed by the Secretary, by the President,
or by the Board of Directors. Any Assistant Secretary may sign, with the
President or a Vice President, certificates for shares of the corporation.
Section 11. Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation;
receive and give receipts for moneys
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due and payable to the corporation from any source whatsoever, and deposit
all such moneys in the name of the corporation in such depositories as shall
be selected in accordance with the provisions of Section 4 of Article VI of
these bylaws; (b) maintain appropriate accounting records as required by
law; (c) prepare, or cause to be prepared, annual financial statements of
the corporation that include a balance sheet as of the end of the fiscal
year and an income and cash flow statement for that year, which statements,
or a written notice of their availability, shall be mailed to each
shareholder within one hundred twenty (120) days after the end of such
fiscal year; and (d) in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be
prescribed by the President or by th e Board of Directors.
Section 12. Assistant Treasurers. In the absence of the Treasurer or in
the event of his death, inability or refusal to act, the Assistant
Treasurers in the order of their length of service as such, unless otherwise
determined by the Board of Directors, shall perform the duties of the
Treasurer, and when so acting shall have all the powers of and be subject to
all the restrictions upon the Treasurer. They shall perform such other
duties as may be prescribed by the Treasurer, by the President, or by the
Board of Directors.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name
unless authorized by the Board of Directors. Such authority may be general
or confined to specific instances.
Section 3. Checks and Drafts. All checks, drafts, or other orders for the
payment of money, issued in the name of the corporation, shall be signed by
such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in
such depositories as may be selected by or under the authority of the Board
of Directors.
ARTICLE VII.
SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. The Board of Directors may authorize
the issuance of some or all of the shares of the corporation's classes or
series without issuing certificates to represent such shares. If shares are
represented by certificates, the certificates shall be in such form as
required by law and as determined by the Board of Directors. Certificates
shall be
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signed, either manually or in facsimile, by the President or a
Vice-President and by the Secretary or Treasurer or an Assistant Secretary
or an Assistant Treasurer. All certificates for shares shall be
consecutively numbered or otherwise identified and entered into the stock
transfer books of the corporation. When shares are represented by
certificates, the corporation shall issue and deliver, to each shareholder
to whom such shares have been issued or transferred, certificates
representing the shares owned by him. When shares are not represented by
certificates, then within a reasonable time after the issuance or transfer
of such sh ares, the corporation shall send the shareholder to whom such
shares have been issued or transferred a written statement of the
information required by law to be on certificates.
Section 2. Stock Transfer Books. The corporation shall keep a book or set
of books, to be known as the stock transfer books of the corporation,
containing the name of each shareholder of record, together with such
shareholder's address and the number and class or series of shares held by
him. Transfers of shares of the corporation shall be made only on the stock
transfer books of the corporation by the holder of record thereof or by his
legal representative, who shall furnish proper evidence of authority to
transfer, or by his attorney authorized to effect such transfer by power of
attorney duly executed and filed with the Secretary, and on surrender for
cancellation of the certificate for such shares (if the shares are
represented by certificates).
Section 3. Lost Certificate. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by
the corporation claimed to have been lost or destroyed, upon receipt of an
affidavit of such fact from the person claiming the certificate to have been
lost or destroyed. When authorizing such issue of a new certificate, the
Board of Directors shall require that the owner of such lost or destroyed
certificate, or his legal representative, give the corporation a bond in
such sum and with such surety or other security as the Board may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate claimed to have been lost or destroyed, except
where the Board of Directors by resolution finds that in the judgment of the
directors the circumstances justify omission of a bond.
Section 4. Fixing Record Date. The Board of Directors may fix a future
date as the record date for one (1) or more voting groups in order to
determine the shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to vote, or to take any other action. Such record
date may not be more than seventy (70) days before the meeting or action
requiring a determination of shareholders. A determination of shareholders
entitled to notice of or to vote at a shareholders' meeting is effective for
any adjournment of the meeting unless the Board of Directors fixes a new
record date for the adjourned meeting, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after the date
fixed for the original meeting.
If no record date is fixed by the Board of Directors for the determination
of shareholders entitled to notice of or to vote at a meeting of
shareholders, the close of business on the day before the first notice of
the meeting is delivered to shareholders shall be the record date for such
determination of shareholders.
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The Board of Directors may fix a date as the record date for determining
shareholders entitled to a distribution or share dividend. If no record
date is fixed by the Board of Directors for such determination, it is the
date the Board of Directors authorizes the distribution or share dividend.
Section 5. Holder of Record. Except as otherwise required by law, the
corporation may treat the person in whose name the shares stand of record on
its books as the absolute owner of the shares and the person exclusively
entitled to receive notification and distributions, to vote, and to
otherwise exercise the rights, powers, and privileges of ownership of such
shares.
Section 6. Shares Held by Nominees. The corporation shall recognize the
beneficial owner of shares registered in the name of a nominee as the owner
and shareholder of such shares for certain purposes if the nominee in whose
name such shares are registered files with the Secretary a written
certificate in a form prescribed by the corporation, signed by the nominee,
indicating the following: (i) the name, address, and taxpayer
identification number of the nominee; (ii) the name, address, and taxpayer
identification number of the beneficial owner; (iii) the number and class or
series of shares registered in the name of the nominee as to which the
beneficial owner shall be recognized as the shareholder; and (iv) the
purposes for which the beneficial owner shall be recognized as the
shareholder.
The purposes for which the corporation shall recognize the beneficial owner
as the shareholder may include the following: (i) receiving notice of,
voting at, and otherwise participating in shareholders' meetings; (ii)
executing consents with respect to the shares; (iii) exercising dissenters'
rights under Article 13 of the Business Corporation Act; (iv) receiving
distributions and share dividends with respect to the shares; (v) exercising
inspection rights; (vi) receiving reports, financial statements, proxy
statements, and other communications from the corporation; (vii) making any
demand upon the corporation required or permitted by law; and (viii)
exercising any other rights or receiving any other benefits of a shareholder
with respect to the shares.
The certificate shall be effective ten (10) business days after its receipt
by the corporation and until it is changed by the nominee, unless the
certificate specifies a later effective time or an earlier termination date.
If the certificate affects less than all of the shares registered in the
name of the nominee, the corporation may require the shares affected by the
certificate to be registered separately on the books of the corporation and
be represented by a share certificate that bears a conspicuous legend
stating that there is a nominee certificate in effect with respect to the
shares represented by that share certificate.
ARTICLE VIII.
INDEMNIFICATION
Any person who at any time serves or has served as a director of the
corporation, or who, while serving as a director of the corporation, serves
or has served, at the request of
11
<PAGE>
the corporation, as a director, officer, partner, trustee, employee, or
agent of another corporation, partnership, joint venture, trust, limited
liability company or other enterprise, or as a trustee or administrator
under an employee benefit plan, shall have a right to be indemnified by the
corporation to the fullest extent permitted by law against (a) reasonable
expenses, including attorneys' fees, incurred by him in connection with any
threatened, pending, or completed civil, criminal, administrative,
investigative, or arbitrative action, suit, or proceeding (and any appeal
therein), whether or not brought by or on behalf of the corporation, seeking
to hold him liable by reason of the fact that he is or was acting in such
capacity, and (b) reasonable payments made by him in satisfaction of any
judgment, money decree, fine (includin g an excise tax assessed with respect
to an employee benefit plan), penalty, or settlement for which he may have
become liable in any such action, suit, or proceeding.
The Board of Directors of the corporation shall take all such action as may
be necessary and appropriate to authorize the corporation to pay the
indemnification required by this bylaw, including, without limitation,
making a determination that indemnification is permissible in the
circumstances and a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of indemnity due
him. The Board of Directors may appoint a committee or special counsel to
make such determination and evaluation. To the extent needed, the Board
shall give notice to, and obtain approval by, the shareholders of the
corporation for any decision to indemnify.
Any person who at any time after the adoption of this bylaw serves or has
served in the aforesaid capacity for or on behalf of the corporation shall
be deemed to be doing or to have done so in reliance upon, and as
consideration for, the right of indemnification provided herein. Such right
shall inure to the benefit of the legal representatives of any such person
and shall not be exclusive of any other rights to which such person may be
entitled apart from the provision of this bylaw.
ARTICLE IX.
GENERAL PROVISIONS
Section 1. Distributions. The Board of Directors may from time to time
authorize, and the corporation may grant, distributions and share dividends
to its shareholders pursuant to law and subject to the provisions of its
articles of incorporation.
Section 2. Seal. The corporate seal of the corporation shall be on
such form as shall be approved from time to time by the Board of Directors.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
fixed by the Board of Directors.
Section 4. Amendments. Except as otherwise provided in the articles of
incorporation or by law, these bylaws may be amended or repealed and new
bylaws may be adopted by the Board of Directors.
12
<PAGE>
No bylaw adopted, amended, or repealed by the shareholders shall be
readopted, amended, or repealed by the Board of Directors, unless the
articles of incorporation or a bylaw adopted by the shareholders authorizes
the Board of Directors to adopt, amend, or repeal that particular bylaw or
the bylaws generally.
Section 5. Definitions. Unless the context otherwise requires, terms
used in these bylaws shall have the meanings assigned to them in the North
Carolina Business Corporation Act to the extent defined therein.
These Amended Bylaws were duly adopted by the Board of Directors, and
are effective this 16th day of December, 1996
CONSENTED AND ACCEPTED:
By:
Stanley H. Van Etten, Director /s/
By:
Claude W. Savage, Director /s/
By:
Larry Smith, Director /s/
By:
Barry Ackel, Director /s/
By:
Sabrina Wei, Director /s/
By:
John D. Brothers, Director /s/
By:
Jimmie Knowles, Director /s/
(SEAL)
13
<PAGE>
<EXAMPLE OF FRONT COMMON STOCK CERTIFICATE>
<PAGE>
<EXAMPLE OF BACK OF COMMON STOCK CERTIFICATE>
<PAGE>
<WOOD & FRANCIS, PLLC LETTER HEAD>
February 28, 1997
International Heritage, Inc.
2626 Glenwood Avenue, Suite 200
Raleigh, North Carolina 27608
Re: International Heritage, Inc.
Gentlemen:
We have represented International Heritage, Inc. (the "Company")
in connection with its preparation of a Registration Statement on
Form S-1 and filing of such Registration Statement on Form S-1 and
filing of such Registration Statement with the Securities and
Exchange Commission covering the offering (the "Offering") of shares
of Common Stock (the "Common Stock") of the Company.
We advise you that in our opinion, when the Common Stock is
issued pursuant to the Offering, such Common Stock will be legally
issued, fully paid and non assessable shares of Common Stock of the
Company.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement (File No. 333-5268) relating to Common
Stock referred to above and to the use of our name and to the
references to our firm in said Registration Statement.
Very truly yours,
WOOD & FRANCIS, PLLC
/s/ Brent E. Wood
Brent E. Wood
BEW/lmh
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF WAKE
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter "Agreement") made and
effective as of June 1,1995, by and between International
Heritage, Inc. and International Heritage of Canada, Inc.
(hereinafter collectively referred to as "Employer"), both
of which are corporations with International Heritage, Inc.
being duly organized and existing under the laws of the
State of North Carolina, with a place of business at 2626
Glenwood Avenue, Suite 200, City of Raleigh, County of Wake,
and State of North Carolina, and with International Heritage
of Canada, Inc. being duly organized and existing under the
laws of Canada, with a place of business at 885 West Georgia
Street, Suite LOO, City of Vancouver, Province of British
Columbia, and Stanley H. Van Etten (hereinafter "Employee)
with a residence at 11816 Mt. Batten Way, City of Raleigh,
County of Wake, and State of North Carolina. (Throughout
the Agreement, Employer and Employee will collectively be
referred to as the "Parties.")
RECITALS
WHEREAS, Employer is engaged in the business of multi-level
network marketing, and desires to employ the services of
Employee as Chief Executive Officer of its current
operations and to assist in the opening and operation of
additional regional offices; and
WHEREAS, Employee is willing to be employed by Employer, and
Employer is willing to employ Employee, on the terms, covenants,
and conditions set forth in this Agreement.
NOW, THEREFORE, for the reasons set forth above, and in consideration
of the mutual promises and agreements set forth in this Agreement,
Employer and Employee agree as follows:
<PAGE>
SECTION ONE: EMPLOYMENT
1. Employer hereby employs, engages, and hires Employee as
Chief Executive Officer of Employer to assist Employer in
becoming a successful multi-level network marketing company
and provide financial and management services to the
Employer, and Employee hereby accepts and agrees to such
employment, engagement, and hiring, subject to the
supervision of and pursuant to the orders, advice, and
direction of the Board of Directors of the Employer.
Employee shall perform such other duties as are customarily
performed by one holding such position in other, same, or
similar businesses or enterprises as that engaged in by
Employer, and shall additionally render such specific. other
and unrelated services and duties as may be assigned to the
Employee from time to time by the Board of Directors of the
Employer.
SECTION TWO: BEST EFFORTS OF EMPLOYEE
Employee agrees that he will at all times faithfully,
industriously, and to the best of his ability, experience,
and talents, perform all of the duties that may be required
of and from him pursuant to the express and implicit terns
of this Agreement, to the reasonable satisfaction of
Employer. Such duties shall be rendered at 2626 Glenwood
Avenue, City of Raleigh, State of North Carolina, and at 995
West Georgia Street, Suite 137O, City of Vancouver, Province
of British Columbia, and such other place or places as
Employer shall in good faith require on a temporary basis or
as the interests, needs, business, or opportunities of
Employer shall require.
SECTION THREE: TERM OF EMPLOYMENT
The term of this Agreement shall be for three (3) years
commencing June 1, 1995, and terminating May 31, 1998,
subject, however, to prior termination as provided in this
Agreement.
2
<PAGE>
The execution of this Agreement after June 1,
1995, in no way limits or impacts the enforceability of
this Agreement, and Employer hereby ratifies the terms of
this Agreement for the time period of June 1, 1995, to the
date of execution of this Agreement, and thereafter until
termination of this Agreement pursuant to the provisions
herein.
SECTION FOUR: COMPENSATION OF EMPLOYEE
Employer shall pay Employee, and Employee shall accept from
Employer, in full payment of Employee's services as the
Chief Executive Officer of Employer, a compensation equal
teethe greater of three percent (3%) of the net revenues of
Employer, as defined by general accounting principals, or
FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($425,000.00) per year, payable at least twice each month.'
2. Employer shall reimburse Employee, pursuant to company
policy, for all out-ofpocket expenses that Employee shall
incur in connection with his services for Employer
contemplated by this Agreement on presentation by Employee
of appropriate vouchers or receipts for such expenses to
Employer.
3. In addition to the compensation referenced hereinabove,
and in partial
(FOOTNOTE)
(1)As of October 31, 1995, Employee has
received compensation in the amount of $ 7 7,905 . 7 1
from Employer for services rendered between June 1, 1995,
and October 31, 1995. Employer acknowledges that the
compensation received by the Employee during this time
period is not payment in full pursuant to the compensation
agreement referenced above. Instead, the compensation
received represents three percent (3 %) of the net revenues
of Employer as defined by general accounting principals
between June 1, 1995, and October 31, 1995, which is less
than the $425,000.00 annualized minimum. Therefore, the
Employer acknowledges that additional compensation is owed
to the Employee for services rendered as the Chief
Executive Officer for the period of June 1, 1995, through
October 31, 1995, in the amount of ~ 99.177.62 . Pursuant
to the terms of this Agreement, the Employer agrees to
execute a promissory note for the balance owed as
compensation, which promissory note shall be payable upon
demand and shall bear interest at the rate of eight percent
(8%) per annum. Furthermore, the Employer agrees to
withhold from said additional compensation the necessary
taxes due and owing the federal and state governments with
respect to said compensation and withhold from its own
gross revenues the necessary matching contribution due and
owing the federal and state governments with respect to
said compensation. consideration for the guarantees
previously executed by the Employee for the benefit of
Employer, Employee shall be entitled to a stock bonus of
one percent (1 %) of the issued and outstanding common
stock of Employer as of December 31, 1995, provided that
Employer is open and doing business and provided that
Employer has achieved gross revenue in excess of
55,000,000.00; and a bonus of two percent (2%) of the
issued and outstanding common stock of Employer as of
December 31, 1996, provided that Employer is open and doing
business and provided that Employer has achieved gross
revenue in excess of $25,000,000.00; and a bonus of three
percent (3 %) of the issued and outstanding common stock of
Employer as of December 1, 1997, provided that Employer is
open and doing business and provided that Employer has
achieved gross revenue in excess of $75,000,000.00; and a
bonus of three percent (3%) of the issued and outstanding
common stock of Employer as of December 31, 1998, provided
that Employer is open and doing business and provided that
Employer has achieved gross revenue in excess of
$125,000,000.00; and a bonus of three percent (3%) of the
issued and outstanding common stock of Employer as of
December 31, 1999, provided that Employer is open and doing
business and provided that Employer has achieved gross
revenue in excess of $200,000,000.00; and a bonus of three
percent (3%) of the issued and outstanding common stock of
Employer as of December 31, 2000, provided that Employer is
open and doing business and provided that Employer has
achieved gross revenue in excess of $275,000,000.00.
4. In addition to the compensation set forth hereinabove,
Employee shall receive a semi-annual bonus, which shall be
payable no later than July 15th and January 15th (the first
such installment being due no later than January 15, 1996,
for the initial seven-month term of this agreement), equal
to three percent (3%) of the operating profits of Employer
before taxes,
debt service, and depreciation at that time
and determined by the six-month financial statement of
Employer as of June 30th and December 30th. For the
purpose of this paragraph, debt service shall include any
loan to the Employer for the purpose of conducting business
which is payable over a period of one (1) year or more.
SECTION FIVE: OTHER EMPLOYMENT
Employee shall devote a sufficient amount of his time,
attention, knowledge, and skills solely to the business and
interests of Employer, Employer shall be entitled to all of
the benefits, profits, or other issues arising from or
incident to all work, services, and advice of Employee and
Employee shall not. during the term of this Agreement, be
interested directly or indirectly, in any manner, as
partner, officer, director, shareholder, advisor, employee,
or in any other capacity in any other business similar to
Employer's business or any allied trade; provided, however,
that nothing contained in this section shall be deemed to
prevent or to limit the right of the Employee to invest any
of his money in the capital stock or other securities of any
corporation whose stock or securities are publicly owned or
are regularly traded on any public exchange, nor shall
anything contained in this section be deemed to prevent
Employee from investing or limiting Employee's right to
invest his money in real estate. Furthermore, Employer
acknowledges that the Employee currently has a substantial
business relationship with Mayflower Holdings, Inc. and
Mayflower Capital, LLC, which relationship the Employee
shall not have to terminate during the term of this
Agreement. The Employer acknowledges that nothing contained
in this section shall prevent or limit the right of the
Employee to continue his relationship with Mayflower
Holdings, Inc. and Mayflower Capital, LLC, during the term
of this Agreement, nor shall anything contained in this
section prevent or limit the right of the Employee to devote
a limited amount of his time, attention, knowledge, and
skills to Mayflower Holdings, Inc.'s and Mayflower Capital,
LLC's business or allied trade, so long as such relationship
does not interfere with Employee's performance under this
Agreement.
SECTION SIX: EMPLOYEE'S SERVICES AS DIRECTOR
Employee hereby consents to serve as a director of Employer
or any parent, subsidiary, or corporation affiliated with
Employer, if duly elected and qualified, on condition that
Employee receive the same compensation paid to other
directors of any such company for their services as
directors.
SECTION SEVEN: VACATION
Employee shall be entitled to twenty (20) days of paid
vacation each year during the term of this Agreement, the
time for such vacation to be determined by mutual agreement
between Employer and Employee.
SECTION EIGHT: HEALTH AND DEATH BENEFITS
1. Employer agrees to provide health benefits to the
Employee and his immediate family, which shall include the
Employee's spouse and all children of Employee. In the
event Employee selects a health plan other than that
provided to all employees of Employer, Employer shall pay
on behalf of Employee the amount that Employee and his
immediate family would be charged under the health care
plan provided to all employees of Employer. Any difference
in health care benefit coverage shall be the responsibility
of Employee.
2. Employer agrees to purchase upon the execution of this
Agreement a key man insurance policy in the amount of
$2,500,000.00, which will provide a death benefit of
$1,500,000.00 to Employer and a death benefit of
$1,000,000.00 to Employee's designated beneficiary or his
heirs.
SECTION NINE: TERMINATION FOR DISABILITY
In spite of anything in this Agreement to the contrary,
Employer is hereby given the option to terminate this
Agreement in the event that Employee shall, during the term
of this Agreement, become permanently disabled as the term
"permanently disabled" is fixed and defined in this section.
Such option shall be exercised by Employer giving notice to
Employee by registered mail addressed to him in care of the
Employer at 2626 Glenwood Avenue, Suite 200, City of
Raleigh, State of North Carolina, or at such other address
as Employee shall designate in writing of Employer's
intention to terminate this Agreement on the last day of the
month during which such notice is mailed. On the giving of
such notice, this Agreement shall cease on the last day of
the month for which the notice is so mailed, with the same
force and effect as if such last day of the month were the
date originally set forth in this Agreement as the
termination date of this Agreement; provided, however, that
Employee shall receive from Employer compensation pursuant
to the terms of this Agreement for a period of one (1) year
following the effective date of such termination.
For the purposes of this Agreement, Employee shall be
deemed to have become permanently disabled if, during any
year of the term of this Agreement, because of ill health,
physical or mental disability, or for other causes beyond
Employee's control, he shall have been continuously unable
or shall have failed to perform his duties under this
Agreement for ninety (90) consecutive days, or if, during
any year of the term of this Agreement, Employee shall have
been unable or shall have failed to perform his duties for
a total period of one hundred and twenty (120) days,
irrespective of whether or not such days are consecutive.
For the purposes of this Agreement, the term "any year of
the term of this Agreement" is defined to mean any twelve
(12) calendar months commencing on June 1, 1995, and
terminating on May 31, 1998, during the term of this
Agreement.
SECTION TEN INDEMNIFICATION
In return for the services provided to Employer by Employee
and many risks accepted by the Employee on behalf of the
Employer in the start-up of Employer, Employer shall
indemnify Employee to the fullest extent permitted by law
against (1) reasonable expenses, including attorneys' fees,
actually and necessarily incurred by Employee in connection
with any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative, seeking to hold Employee liable by reason of
the fact that Employee is or was acting in any capacity for
Employer, and (2) payments made by Employee on behalf of
Employer in satisfaction of any judgment, money decree,
fine, penalty, or reasonable settlement for which Employee
may have become liable in any such action, suit, or
proceeding. In the event that there is any threatened or
pending action, suit, or proceeding initiated against the
Employee pursuant to which t'ne Employee may become liable,
the Employee shall have the right to demand and obtain from
the Employer an advance of TWELVE THOUSAND AND NO/100
DOLLARS ($12,000.00) to insure payment of any judgment,
money decree, fine, or penalty, which amount shall be
deposited in the trust account of Employee's chosen counsel,
but which shall not relieve Employer from satisfying
Employee's attorneys' fees and expenses on a monthly basis
while t'ne action, suit, or proceeding is pending.
SECTION ELEVEN: TERMINATION OF AGREEMENT 1. This
Agreement may be terminated by either party on thirty
(30) days written notice to the other; however,
Employer can terminate this agreement "for cause" only,
which cause must be set forth specifically within the
written notice of termination provided to Employee.
Within the Agreement, "for cause" termination will be
limited to these situations when a majority of the
Board of Directors has determined that the Employee has
been grossly negligent with respect to his duties as
Chief Executive Officer or determine that Employee is
in material breach of this Agreement. If Employer
shall so terminate this Agreement, Employee shall be
entitled to compensation for one (1) year pursuant to
the terms of this Agreement from the date of
termination. If Employer terminates this Agreement,
Employer will not be relieved of any obligation under
this Agreement during the one (1) year period of full
compensation If Employee shall so terminate this
Agreement, he shall be entitled to compensation for a
period of six (6) months pursuant to the terms of this
Agreement from the date of termination. Furthermore,
regardless of how or when this Agreement is terminated,
Employer shall at no time be relieved of its obligation
to indemnify Employee pursuant to the terms of this
Agreement.
2. Even though the initial term of employment shall
terminate on May 31, 1998, this Agreement shall
automatically renew for successive three-year periods
unless written notice of the termination of this Agreement
is provided by one party to the other at least ninety (90)
days prior to the end of the initial term of this Agreement
or at the end of each successive term of this Agreement.
Furthermore, the Employer agrees not to terminate this
Agreement at the end of the initial term or any successive
term unless good cause exists to terminate this Agreement,
and Employer agrees to negotiate in good faith with the
Employee at the end of the initial term of this Agreement
and at the end of each successive term of this Agreement so
that Employee will be provided an employment and
compensation package consistent with the value that
Employee provides to Employer.
SECTION TWELVE: AGREEMENTS OUTSIDE OF CONTRACT
This Agreement contains the complete understanding and
agreement concerning the employment arrangement between the
Parties and shall, as of the effective date hereof,
supersede all other agreements, representations, promises or
understandings, written or oral, between the Parties with
respect to the subject matter of this Agreement.
SECTION THIRTEEN: MODIFICATION OF AGREEMENT
Any modification of this Agreement or additional obligation
assumed by either party in connection with the Agreement
shall be binding only if evidenced in writing signed by the
Parties or any authorized representative of the Parties.
SECTION FOURTEEN: ARBITRATION
If there is a dispute over payment of fees or expenses under
this Agreement, the dispute will be resolved by binding
arbitration before the American Arbitration Association, and
Employee and Employer agree to be bound by the final
decision of that arbitration. Any prevailing party in
arbitration shall have the right to recover all costs and
fees, to include attorneys' fees incident to the
arbitration. A demand for arbitration shall be made within
a reasonable time after the claim, dispute, or other matter
in question has arisen and in no event shall the demand for
arbitration be made after the date when the institution of
legal or equitable proceedings based on such dispute, claim,
or controversy would be barred by the applicable statute of
limitations.
SECTION FIFTEEN: EFFECT OF PARTIAL INVALIDITY
The invalidity of any portion of this Agreement will not and
shall not be deemed to affect the validity of any other
provision. In the event that any provision of this
Agreement is held to be invalid, the Parties agree that the
remaining provisions shall be deemed to be in full force and
effect as if they had been executed by both Parties
subsequent to the expungement of the invalid provision.
SECTION SIXTEEN: CHOICE OF LAW
It is the intention of the Parties to this Agreement that
the performance under this Agreement, and all suits and
special proceedings under this Agreement be construed in
accordance with and under and pursuant to the laws of the
State of North Carolina in that, in any action, special
proceeding or any other proceeding that may be brought
arising out of, in connection, or by reason of this
Agreement, the laws of the State of North Carolina shall be
applicable and shall govern to the exclusion of the law of
any other forum, without regard to the jurisdiction in which
any action or special proceeding may be instituted.
SECTION SEVENTEEN: NO WAIVER
The failure of either party to this Agreement to insist upon
the performance of any of the terms and conditions of this
Agreement, or the waiver of any breach of any of the terms
and conditions of this Agreement, shall not be construed as
thereafter waiving any such terms and conditions, but the
same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
SECTION EIGHTEEN: ATTORNEYS' FEES
In the event that any action is filed in relation to
this Agreement, the unsuccessful party in the action shall
pay to the successful party, in addition to all sums that
either party may be called on to pay, a reasonable sum for
the successful party's attorneys' fees.
SECTION NINETEEN: PARAGRAPH HEADINGS
The titles to the paragraphs of this Agreement are solely
for the convenience for the Parties and shall not be used
to explain, modify, simplify, or aid in the interpretation
of the provisions of this Agreement.
SECTION TWENTY: PROMISSORY NOTE
Pursuant to the terms of this Agreement, and simultaneous
with the execution of this Agreement, Employer shall
execute a Promissory Note for the benefit of Employee for
unpaid compensation between the period of June 1, 1995, and
October 31, 1995. IN WITNESS WHEREOF, each party to this
Agreement has caused it to be executed under seal and on
the date indicated below.
EMPLOYEE
/s/ Stanley H. Van Etten
DATE SIGNED: 12/11/95
EMPLOYER
_(SEAL)
/s/ Claude Savage
Claude Savage, Director of Employer
DATE SIGNED: 12/11/95
/s/ Larry Smith
Larry Smith, Director of Employer
DATE SIGNED: _
(CORPORATE SEAL)
12/18/95
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this AS day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and John D. Brothers (the "Employee"), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW. THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15)
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Compliance and Shareholder Relations for the Company.
Employee shall faithfully perform all reasonable duties as
they are prescribed, from time to time, by the President and
CEO, or other designated parties within the Company, or the
Board of Directors, or as may be ordinary or incident to the
position in which Employee is employed. Employee will devote
his or her full time, attention and energy to the duties and
responsibilities incident to his or her position and will not
engage in any other business activities while an Employee of
the Company without prior express written consent of the
Company's President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related tO the Company's business, including,
without limitation, trade secrets, products, systems,
programs, procedures, manuals, guides, confidential reports
and communications, personnel information, client and
customer lists, Independent Retail Sales Representative's
names and any associated information, identities, sales
information of any nature or description, commission paid,
any other data incident to the Company's business, as
confidential information entrusted to him or her solely for
use in his or her capacity as an employee of the Company, and
not to use, divulge, disclose or communicate such information
in any way to any person or entity (other than to an officer,
employee or authorized agent of the Company for use in the
business of the Company) during or after his or her
employment with the Company. The Employee agrees that, in
the event of termination of his or her employment for any
reason, he or she will not under any circumstances retain any
information, written or otherwise, concerning the business
operations of the Company. This covenant shall survive
termination of this Agreement and termination of Employee's
employment.
5. Covenant Not To Compete. It is recognized and understood
by all parties hereto that the Employee, through his or her
employment with the Company, will acquire a considerable
amount of knowledge and goodwill with respect to the business
of the Company, which knowledge and goodwill are extremely
valuable to the Company and which would be extremely
detrimental to the Company if used by the Employee to compete
with the Company. It is, therefore, understood and agreed by
the parties hereto that, because of the nature of the
business of the Company, it is necessary to afford fair
protection to the Company from such unfair competition by the
Employee. Consequently, the Employee covenants and agrees as
follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees: (i) that during the
Employee's employment with the Company, and for a
period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an officer, holder
of or investor in five percent (5%) or more of any
security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the Company.
(ii) that during the Employee's employment with the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not directly or indirectly hire, contract
with, induce or attempt to. influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains - the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS
WHEREOF, the parties hereto have executed this Agreement
and affixed their respective seals as of the day and year
first above written.
ATTEST:
INTERNATIONAL HERITAGE, INC.
By:
EMPLOYEE
/s/ Stanley Van Etten
President and CEO
/s/ John Brothers
CONFIDENTIALITY AND NON-COMPETITIONAGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and Mary Breen (the Employees), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not t disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term. at which time the
Company shall have
a, I , and the compensation received by Employee from the
Company from time to time, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the Company
shall have no further obligation to Employee. The Company
may elect, in its sole discretion, not to have Employee
perform his or her duties during the sixty (60) day notice
term. If Employee is being terminated with cause, the
Company shall give the Employee fifteen (15) days' written
notice and shall pay Employee through the expiration of the
fifteen (15) day notice term, at which time the Company shall
have
(i) that during the Employee's employment with the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an of ricer, holder
of or investor in five percent (5 %) or more of any
security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the, Company.
(ii) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not directly or indirectly hire, contract
with, induce or attempt to, influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree.that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by bot'n
parties. No waiver of any provision of this Agreement shall
be valid unless the same is in writing and signed by the
party against whom such waiver is sought to be enforced;
moreover, no valid waiver of any other provision of this
agreement at any time shall be deemed a waiver of any other
provision of this Agreement at such time, nor will it be
deemed a valid waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee
and the Company with respect to the matters herein
described and no representations, promises, agreement or
understandings, written or oral, not herein contained,
shall be of any force or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement c. the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By: /s/ John Brothers
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
/s/ Stanley H. Van Etten
Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Mary Breen
CONFIDENTIALITY AND NONCOMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company), and Dwight Hallman (the "Employee"), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this
Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of
Employee by the Company, and the compensation received by
Employee from the Company from time to time, the receipt
and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as
follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and
procedures, which policies, practices and procedures may be
amended by the Company from time to time, with or without
notice. Further, the parties hereto acknowledge and agree
that Employee's employment and this Agreement can be
terminated, subject to the provisions herein, by either
party, with or without cause. If Employee is being
terminated without cause, the Company shall give the
Employee sixty (60) days' written notice and shall pay
Employee through the expiration of the sixty (60) day
notice term, at which point the Company shall have no
further obligation to Employee. The Company may elect, in
its sole discretion, not to have Employee perform his or
her duties during the sixty (60) day notice term. If
Employee is being terminated with cause, the Company shall
give the Employee fifteen (15) days' written notice and
shall pay Employee through the expiration of the fifteen
(15) day notice term, at which time the Company shall have
no further obligation to Employee. The Company may elect,
in its sole discretion, not to have Employee perform his or
her duties during the fifteen (15) day notice term. If
Employee elects to terminate his or her employment he or
she must give thirty (30) days' written notice to the
Company and Employee must faithfully fulfill all of his or
her duties through the expiration of the thirty (30) day
notice term in order to be entitled to compensation through
the expiration of said term. The parties acknowledge and
agree that nothing contained herein is or should be
construed as a promise of future or continued employment,
creating in the Employee any right to employment or to any
cause of action on account of termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Operations for the Company. Employee shall faithfully
perform all reasonable duties as they are prescribed, from
time to time, by the President and CEO, or other designated
parties within the Company, or the Board of Directors, or as
may be ordinary or incident to the position in which
Employee is employed. Employee will devote his or her full
time, attention and energy to the duties and
responsibilities incident to his or her position and will
not engage in any other business activities while an
Employee of the Company without prior express written
consent of the Company's President or a majority of the
Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
Representative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and goodwill
are extremely valuable to the Company and which would be
extremely detrimental to the Company if used by the Employee
to compete with the Company. It is, therefore, understood
and agreed by the parties hereto that, because of the nature
of the business of the Company, it is necessary to afford
fair protection to the Company from such unfair competition
by the Employee. Consequently, the Employee covenants and
agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she will
not, directly or indirectly, with or through any family
member or former director, officer, employee of the
Company, or acting alone or as a member of a
partnership, or as an officer, holder of or investor in
five percent (5%) or more of any security of any class,
director, employee, consultant, member or representative
of any corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the Company.
(ii) that during the Employee's employment with
the Company, and for a period of one (1) year from
the date of termination of the Employee's
employment with the Company, whether by Employee
or Company, he or she will not directly or
indirectly hire, contract with, induce or attempt
to, influence any individual who, at any time
during the 180 days prior to the termination of
the Employee's employment with the Company, was an
employee, agent, or Independent Retail Sales
Representative of the Company or any other company
owned or operated by the Company, to terminate his
or her employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and S of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the Company
will suffer irreparable harm in the event that the Employee
breaches any of his or her obligations under this Agreement
and that monetary damages will be inadequate to compensate
the Company for such breach. Accordingly, the Employee
agrees that, in the event of a breach or threatened breach by
the Employee of any of the provisions of this Agreement, the
Company, in addition to and not in limitation of any other
rights, remedies or damages available to the Company at law
or in equity, shall be entitled to an injunction in order to
prevent or to restrain any such breach by the Employee, or by
the Employee's partners, agents, representatives, servants,
employers, employees and/or any and all persons directly or
indirectly acting for or with him or her. The Company shall
not be required to post any bond to obtain any such
injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains - the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By: John Brothers
Secretary
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Dwight Hallman
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1st day of March, 1996, by and between
International Inc., a North Carolina corporation, (the
"Company"), and Clark Jones (the "Employees), an individual
residing in Wake County, North Carolina.
WITNESSETH:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15~
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Controller for
the Company. Employee shall faithfully perform all
reasonable duties as they are prescribed, from time to time,
by the President and CEO, or other designated parties within
the Company, or the Board of Directors, or as may be
ordinary or incident to the position in which Employee is
employed. Employee will devote his or her full time,
attention and energy to the duties and responsibilities
incident to his or her position and will not engage in any
other business activities while an Employee of the Company
without prior express written consent of the Company's
President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides,
confidential reports and communications, personnel
information, client and customer lists, Independent Retail
Sales Representative's names and any associated
information, identities, sales information of any nature or
description, commissions paid, any other data incident to
the Company's business, as confidential information
entrusted to him or her solely for use in his or her
capacity as an employee of the Company, and not to use,
divulge, disclose or communicate such information in any
way to any person or entity (other than to an officer,
employee or authorized agent of the Company for use in the
business of the Company) during or after his or her
employment with the Company. The Employee agrees that, in
the event of termination of his or her employment for any
reason, he or she will not under any circumstances retain
any information, written or otherwise, concerning the
business operations of the Company. This covenant shall
survive termination of this Agreement and termination of
Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and
goodwill are extremely valuable to the Company and which
would be extremely detrimental to the Company if used by
the Employee to compete with the Company. It is,
therefore, understood and agreed by the parties hereto
that, because of the nature of the business of the Company,
it is necessary to afford fair protection to the Company
from such unfair competition by the Employee.
Consequently, the Employee covenants and agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she will
not, directly or indirectly, with or through any family
member or former director, officer, employee of the
Company, or acting alone or as a member of a
partnership, or as an officer, holder of or investor in
five percent (5 %) or more of any security of any class,
director, employee, consultant, member or representative
of any corporation or other business entity:
(1) engage in, perform or provide services
to any network marketing or distribution
company within a radius of twenty-five (25)
miles of any site upon which the Company has
provided services, to include product sales
and opportunity meetings or trailing by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company.
(ii) that during the Employee's employment with the
Company, and for a period of one (1) year from the
date of termination of the Employee's employment
with the Company, whether by Employee or Company,
he or she will not directly or indirectly hire,
contract with, induce or attempt to influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section S(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The coverlets of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, Ames and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Saw. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By John Brothers
/Secretary
INTERNATIONAL HERITAGE INC.
/s/ Stanley H. Van Ellen
President and CEO
EMPLOYEE
/s/ Clark Jones
(SEAL)
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTLALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 5 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the Company), and Dawn McIntyre (the "Employees), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto,, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 19!~6, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15)
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Marketing and Fulfillment for the Company. Employee shall
faithfully perform all reasonable duties as they are
prescribed, from time to time, by the President and CEO, or
other designated parties within the Company, or the Board of
Directors, or as may be ordinary or incident to the position
in which Employee is employed. Employee will devote his or
her full time, attention and energy to the duties and
responsibilities incident to his or her position and will
not engage in any other business activities while an
Employee of the Company without prior express written
consent of the Company's President or a majority of the
Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
~epresentative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and goodwill
are extremely valuable to the Company and which would be
extremely detrimental to the Company if used by the Employee
to compete with the Company. It is, therefore, understood
and agreed by the parties hereto that, because of the nature
of the business of the Company, it is necessary to afford
fair protection to the Company from such unfair competition
by the Employee. Consequently, the Employee covenants and
agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or
she will not, directly or indirectly, with or
through any family member or former director,
officer, employee of the Company, or acting alone
or as a member of a partnership, or as an
officer, holder of or investor in five percent
(5%) or more of any security of any class,
director, employee, consultant, member or
representative of any corporation or other
business entity:
(1) engage in, perform or provide services to any network marketing
or distribution company within a radius of twenty-five (25) miles of any
site upon which the Company has provided services, to include product
sales and opportunity meetings or training by an Independent Retail Sales
Representative of the Company, which are the same or substantially
similar to the services performed or provided by Employee for the
Company, or engage in the same or substantially similar business as that
engaged in by the Company anywhere in the United States, all United
States territories and the provinces of Alberta, Ontario and British
Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company.
(ii) that during the Employee's employment with
the Company, and for a period of one (1) year
from the date of termination of the Employee's
employment with the Company, whether by Employee
or Company, he or she will not directly or
indirectly hire, contract with, induce or attempt
to influence any individual who, at any time
during the 180 days prior to the termination of
the Employee's employment with the Company, was
an employee, agent, or Independent Retail Sales
Representative of the Company or any other
company owned or operated by the Company, to
terminate his or her employment or association
with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to t'ne Company; (iii) gross
negligence or willful misconduct in the performance of
Employee's duties to third parties; (iv) felony behavior, or
(v) violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captious. captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By./s/ John Brothers
/Secretary
Red 00349R 307 RA63982.1
3122196 9-58am
INTERNATIONAL HERITAGE, INC.
By /s/ Stanley H. Van Etten
Stanley H. Van Etten
President and CEO
EMPLOYEE
SEAL)
Dawn McIntyre
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this Ad day of April, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and Stephanie Harris (the "Employee"), an
individual residing in Wake County, North Carolina.
WITNESSETH:
WHEREAS, the Company wishes to employ Employee and Employee wishes
to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received a raise from the Company
effective April 19, 1996, and upon successful completion of
a month-long intensive training with 20/21 shall receive a
subsequent raise; and
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as the
execution of this Agreement, as an employee at-will of the
Company, subject to the Company's policies, practices and
procedures, which policies, practices and procedures may be
amended by the Company from time to time, with or without
notice. Further, the parties hereto acknowledge and agree
that Employee's employment and this Agreement can be
terminated, subject to the provisions herein, by either
party, with or without cause. If Employee is being
terminated without cause, the Company shall give the
Employee sixty (60) days' written notice and shall pay
Employee through the expiration of the sixty (60) day notice
term, at which point the Company shall have no further
obligation to Employee. The Company may elect, in its sole
discretion, not to have Employee perform his or her duties
during the sixty (60) day notice term. If Employee is being
terminated with cause, the Company shall give the Employee
fifteen (15) days' written notice and shall pay Employee
through the expiration of the fifteen (IS) day notice term,
at which time the Company shall have no further obligation
to Employee. The Company may elect, in its sole discretion,
not to have Employee perform his or her duties during the
fifteen (15) day notice term. If Employee elects to
terminate his or her employment he or she must give thirty
(30) days' written notice to the Company and Employee must
faithfully fulfill all of his or her duties through the
expiration of the thirty (30) day notice term in order to be
entitled to compensation through the expiration of said
term. The parties acknowledge and agree that nothing
contained herein is or should be construed as a promise of
future or continued employment, creating in the Employee any
right to employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of date
of execution.
3. Duties. The Employee shall serve as the Data Systems
Manager for the Company. Employee shall faithfully perform
all reasonable duties as they are prescribed, from time to
time, by the President and CEO, or other designated parties
within the Company, or the Board of Directors, or as may be
ordinary or incident to the position in which Employee is
employed. Employee will devote his or her full time,
attention and energy to the duties and responsibilities
incident to his or her position and will not engage in any
other business activities while an Employee of the Company
without prior express written consent of the Company's
President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
Representative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment. G. Covenant Not To
Compete. It is recognized and understood by all parties
hereto that the Employee, through his or her employment with
the Company, will acquire a considerable amount of knowledge
and goodwill with respect to the business of the Company,
which knowledge and goodwill are extremely valuable to the
Company and which would be extremely detrimental to the
Company if used by the Employee to compete with the Company.
It is, therefore, understood and agreed by the parties
hereto that, because of the nature of the business of the
Company, it is necessary to afford fair protection to the
Company from such unfair competition by the Employee.
Consequently, the Employee covenants and agrees as follows:
(A) Except as otherwise approved in writing by the
Company, the Employee agrees. (i) that during the
Employee's employment with the Company, and for a
period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an officer, holder
of or investor in five percent (5 %) or more of
any security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity: (1) engage
in, perform or provide services to any network
marketing or distribution company within a radius
of twenty-five (25) miles of any site upon which
the Company has provided services, to include
product sales and opportunity meetings or training
by an Independent Retail Sales Representative of
the Company, which are the same or substantially
similar to the services performed or provided by
Employee for the Company, or engage in the same or
substantially similar business as that engaged in
by the Company anywhere in the United States, all
United States territories and the provinces of
Alberta, Ontario and British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company. (ii) that
during the Employee's employment with the
Company, and for a period of one (1) year
from the date of termination of the
Employee's employment with the Company,
whether by Employee or Company, he or she
will not directly or indirectly hire,
contract with, induce or attempt to
influence any individual who, at any time
during the 180 days prior to the termination
of the Employee's employment with the
Company, was an employee, agent, or
Independent Retail Sales Representative of
the Company or any other company owned or
operated by the Company, to terminate his or
her employment or association with the
Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section S(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or
threatened breach by the Employee of any of the provisions
of this Agreement, the Company, in addition to and not in
limitation of any other rights, remedies or damages
available to the Company at law or in equity, shall be
entitled to an injunction in order to prevent or to
restrain any such breach by the Employee, or by the
Employee's partners, agents, representatives, servants,
employers, employees and/or any and all persons directly or
indirectly acting for or with him or her. The Company
shall not be required to post any bond to obtain any such
injunction.
7. Indemnification The Company shall indemnify Employee
who was or is a party or is threatened to be made a party
to any pending or completed action, suit or proceeding,
whether civil, administrative or investigative (other than
an action by the Company), by reason of the fact that he or
she is an Employee of the Company, or is or was serving at
the request of the Company, against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her
in connection with such suit, action or proceeding if he or
she acted in good faith and in a manner he or she
reasonably believed so be in or not opposed to the best
interests of the Company. Provided, however, that there
shall be no indemnification for: (i) misconduct in the
performance of the Employee's duties to the Company; (ii)
negligence in the performance of the Employee's duties to
the Company; (iii gross negligence or willful misconduct in
the performance of Employee's duties to third parties; (iv)
felony behavior, or (v) violations of criminal or civil
statutes.
8. Severability. The invalidity or unenforceability of
any provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both
parties. No waiver of any provision of this Agreement
shall be valid unless the same is in writing and signed by
the party against whom such waiver is sought to be
enforced; moreover, no valid waiver of any other provision
of this agreement at any time shall be deemed a waiver of
any other provision of this Agreement at such time, nor
will it be deemed a valid waiver of such provision at any
other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By:
Secretary
CORPORATE SEAL
ID#: ra65464.1
INTERNATIONAL HERITAGE, INC.
By: /s/ Stanley H. Van Etten
-
Stanley H. Van Etten
President and CEO
EMPLOYEE
<g (SEAL)
Stephanie Harris
STATE OF NORTH CAROLINA
COUNTY OF WAKE
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter "Agreement") made and
effective as of June 1,1995, by and between International
Heritage, Inc. and International Heritage of Canada, Inc.
(hereinafter collectively referred to as "Employer"), both
of which are corporations with International Heritage, Inc.
being duly organized and existing under the laws of the
State of North Carolina, with a place of business at 2626
Glenwood Avenue, Suite 200, City of Raleigh, County of Wake,
and State of North Carolina, and with International Heritage
of Canada, Inc. being duly organized and existing under the
laws of Canada, with a place of business at 885 West Georgia
Street, Suite LOO, City of Vancouver, Province of British
Columbia, and Stanley H. Van Etten (hereinafter "Employee)
with a residence at 11816 Mt. Batten Way, City of Raleigh,
County of Wake, and State of North Carolina. (Throughout
the Agreement, Employer and Employee will collectively be
referred to as the "Parties.")
RECITALS
WHEREAS, Employer is engaged in the business of multi-level
network marketing, and desires to employ the services of
Employee as Chief Executive Officer of its current
operations and to assist in the opening and operation of
additional regional offices; and WHEREAS, Employee is
willing to be employed by Employer, and Employer is willing
to employ Employee, on the terms, covenants, and conditions
set forth in this Agreement. NOW, THEREFORE, for the
reasons set forth above, and in consideration of the mutual
promises and agreements set forth in this Agreement,
Employer and Employee agree as follows:
SECTION ONE: EMPLOYMENT
1. Employer hereby employs, engages, and hires Employee as
Chief Executive Officer of Employer to assist Employer in
becoming a successful multi-level network marketing company
and provide financial and management services to the
Employer, and Employee hereby accepts and agrees to such
employment, engagement, and hiring, subject to the
supervision of and pursuant to the orders, advice, and
direction of the Board of Directors of the Employer.
Employee shall perform such other duties as are customarily
performed by one holding such position in other, same, or
similar businesses or enterprises as that engaged in by
Employer, and shall additionally render such specific. other
and unrelated services and duties as may be assigned to the
Employee from time to time by the Board of Directors of the
Employer.
SECTION TWO: BEST EFFORTS OF EMPLOYEE
Employee agrees that he will at all times faithfully,
industriously, and to the best of his ability, experience,
and talents, perform all of the duties that may be required
of and from him pursuant to the express and implicit terns
of this Agreement, to the reasonable satisfaction of
Employer. Such duties shall be rendered at 2626 Glenwood
Avenue, City of Raleigh, State of North Carolina, and at 995
West Georgia Street, Suite 137O, City of Vancouver, Province
of British Columbia, and such other place or places as
Employer shall in good faith require on a temporary basis or
as the interests, needs, business, or opportunities of
Employer shall require.
SECTION THREE: TERM OF EMPLOYMENT
The term of this Agreement shall be for three (3) years
commencing June 1, 1995, and terminating May 31, 1998,
subject, however, to prior termination as provided in this
Agreement. The execution of this Agreement after June 1,
1995, in no way limits or impacts the enforceability of
this Agreement, and Employer hereby ratifies the terms of
this Agreement for the time period of June 1, 1995, to the
date of execution of this Agreement, and thereafter until
termination of this Agreement pursuant to the provisions
herein.
SECTION FOUR: COMPENSATION OF EMPLOYEE
Employer shall pay Employee, and Employee shall accept from
Employer, in full payment of Employee's services as the
Chief Executive Officer of Employer, a compensation equal
teethe greater of three percent (3%) of the net revenues of
Employer, as defined by general accounting principals, or
FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($425,000.00) per year, payable at least twice each month.'
2. Employer shall reimburse Employee, pursuant to company
policy, for all out-ofpocket expenses that Employee shall
incur in connection with his services for Employer
contemplated by this Agreement on presentation by Employee
of appropriate vouchers or receipts for such expenses to
Employer.
3. In addition to the compensation referenced hereinabove,
and in partial (1)As of October 31, 1995, Employee has
received compensation in the amount of $ 7 7,905 . 7 1
from Employer for services rendered between June 1, 1995,
and October 31, 1995. Employer acknowledges that the
compensation received by the Employee during this time
period is not payment in full pursuant to the compensation
agreement referenced above. Instead, the compensation
received represents three percent (3 %) of the net revenues
of Employer as defined by general accounting principals
between June 1, 1995, and October 31, 1995, which is less
than the $425,000.00 annualized minimum. Therefore, the
Employer acknowledges that additional compensation is owed
to the Employee for services rendered as the Chief
Executive Officer for the period of June 1, 1995, through
October 31, 1995, in the amount of ~ 99.177.62 . Pursuant
to the terms of this Agreement, the Employer agrees to
execute a promissory note for the balance owed as
compensation, which promissory note shall be payable upon
demand and shall bear interest at the rate of eight percent
(8%) per annum. Furthermore, the Employer agrees to
withhold from said additional compensation the necessary
taxes due and owing the federal and state governments with
respect to said compensation and withhold from its own
gross revenues the necessary matching contribution due and
owing the federal and state governments with respect to
said compensation. consideration for the guarantees
previously executed by the Employee for the benefit of
Employer, Employee shall be entitled to a stock bonus of
one percent (1 %) of the issued and outstanding common
stock of Employer as of December 31, 1995, provided that
Employer is open and doing business and provided that
Employer has achieved gross revenue in excess of
55,000,000.00; and a bonus of two percent (2%) of the
issued and outstanding common stock of Employer as of
December 31, 1996, provided that Employer is open and doing
business and provided that Employer has achieved gross
revenue in excess of $25,000,000.00; and a bonus of three
percent (3 %) of the issued and outstanding common stock of
Employer as of December 1, 1997, provided that Employer is
open and doing business and provided that Employer has
achieved gross revenue in excess of $75,000,000.00; and a
bonus of three percent (3%) of the issued and outstanding
common stock of Employer as of December 31, 1998, provided
that Employer is open and doing business and provided that
Employer has achieved gross revenue in excess of
$125,000,000.00; and a bonus of three percent (3%) of the
issued and outstanding common stock of Employer as of
December 31, 1999, provided that Employer is open and doing
business and provided that Employer has achieved gross
revenue in excess of $200,000,000.00; and a bonus of three
percent (3%) of the issued and outstanding common stock of
Employer as of December 31, 2000, provided that Employer is
open and doing business and provided that Employer has
achieved gross revenue in excess of $275,000,000.00.
4. In addition to the compensation set forth hereinabove,
Employee shall receive a semi-annual bonus, which shall be
payable no later than July 15th and January 15th (the first
such installment being due no later than January 15, 1996,
for the initial seven-month term of this agreement), equal
to three percent (3%) of the operating profits of Employer
before taxes, debt service, and depreciation at that time
and determined by the six-month financial statement of
Employer as of June 30th and December 30th. For the
purpose of this paragraph, debt service shall include any
loan to the Employer for the purpose of conducting business
which is payable over a period of one (1) year or more.
SECTION FIVE: OTHER EMPLOYMENT
Employee shall devote a sufficient amount of his time,
attention, knowledge, and skills solely to the business and
interests of Employer, Employer shall be entitled to all of
the benefits, profits, or other issues arising from or
incident to all work, services, and advice of Employee and
Employee shall not. during the term of this Agreement, be
interested directly or indirectly, in any manner, as
partner, officer, director, shareholder, advisor, employee,
or in any other capacity in any other business similar to
Employer's business or any allied trade; provided, however,
that nothing contained in this section shall be deemed to
prevent or to limit the right of the Employee to invest any
of his money in the capital stock or other securities of any
corporation whose stock or securities are publicly owned or
are regularly traded on any public exchange, nor shall
anything contained in this section be deemed to prevent
Employee from investing or limiting Employee's right to
invest his money in real estate. Furthermore, Employer
acknowledges that the Employee currently has a substantial
business relationship with Mayflower Holdings, Inc. and
Mayflower Capital, LLC, which relationship the Employee
shall not have to terminate during the term of this
Agreement. The Employer acknowledges that nothing contained
in this section shall prevent or limit the right of the
Employee to continue his relationship with Mayflower
Holdings, Inc. and Mayflower Capital, LLC, during the term
of this Agreement, nor shall anything contained in this
section prevent or limit the right of the Employee to devote
a limited amount of his time, attention, knowledge, and
skills to Mayflower Holdings, Inc.'s and Mayflower Capital,
LLC's business or allied trade, so long as such relationship
does not interfere with Employee's performance under this
Agreement.
SECTION SIX: EMPLOYEE'S SERVICES AS DIRECTOR
Employee hereby consents to serve as a director of Employer
or any parent, subsidiary, or corporation affiliated with
Employer, if duly elected and qualified, on condition that
Employee receive the same compensation paid to other
directors of any such company for their services as
directors.
SECTION SEVEN: VACATION
Employee shall be entitled to twenty (20) days of paid
vacation each year during the term of this Agreement, the
time for such vacation to be determined by mutual agreement
between Employer and Employee.
SECTION EIGHT: HEALTH AND DEATH BENEFITS
1. Employer agrees to provide health benefits to the
Employee and his immediate family, which shall include the
Employee's spouse and all children of Employee. In the
event Employee selects a health plan other than that
provided to all employees of Employer, Employer shall pay
on behalf of Employee the amount that Employee and his
immediate family would be charged under the health care
plan provided to all employees of Employer. Any difference
in health care benefit coverage shall be the responsibility
of Employee.
2. Employer agrees to purchase upon the execution of this
Agreement a key man insurance policy in the amount of
$2,500,000.00, which will provide a death benefit of
$1,500,000.00 to Employer and a death benefit of
$1,000,000.00 to Employee's designated beneficiary or his
heirs.
SECTION NINE: TERMINATION FOR DISABILITY
In spite of anything in this Agreement to the contrary,
Employer is hereby given the option to terminate this
Agreement in the event that Employee shall, during the term
of this Agreement, become permanently disabled as the term
"permanently disabled" is fixed and defined in this section.
Such option shall be exercised by Employer giving notice to
Employee by registered mail addressed to him in care of the
Employer at 2626 Glenwood Avenue, Suite 200, City of
Raleigh, State of North Carolina, or at such other address
as Employee shall designate in writing of Employer's
intention to terminate this Agreement on the last day of the
month during which such notice is mailed. On the giving of
such notice, this Agreement shall cease on the last day of
the month for which the notice is so mailed, with the same
force and effect as if such last day of the month were the
date originally set forth in this Agreement as the
termination date of this Agreement; provided, however, that
Employee shall receive from Employer compensation pursuant
to the terms of this Agreement for a period of one (1) year
following the effective date of such termination.
For the purposes of this Agreement, Employee shall be
deemed to have become permanently disabled if, during any
year of the term of this Agreement, because of ill health,
physical or mental disability, or for other causes beyond
Employee's control, he shall have been continuously unable
or shall have failed to perform his duties under this
Agreement for ninety (90) consecutive days, or if, during
any year of the term of this Agreement, Employee shall have
been unable or shall have failed to perform his duties for
a total period of one hundred and twenty (120) days,
irrespective of whether or not such days are consecutive.
For the purposes of this Agreement, the term "any year of
the term of this Agreement" is defined to mean any twelve
(12) calendar months commencing on June 1, 1995, and
terminating on May 31, 1998, during the term of this
Agreement.
SECTION TEN INDEMNIFICATION
In return for the services provided to Employer by Employee
and many risks accepted by the Employee on behalf of the
Employer in the start-up of Employer, Employer shall
indemnify Employee to the fullest extent permitted by law
against (1) reasonable expenses, including attorneys' fees,
actually and necessarily incurred by Employee in connection
with any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative, seeking to hold Employee liable by reason of
the fact that Employee is or was acting in any capacity for
Employer, and (2) payments made by Employee on behalf of
Employer in satisfaction of any judgment, money decree,
fine, penalty, or reasonable settlement for which Employee
may have become liable in any such action, suit, or
proceeding. In the event that there is any threatened or
pending action, suit, or proceeding initiated against the
Employee pursuant to which t'ne Employee may become liable,
the Employee shall have the right to demand and obtain from
the Employer an advance of TWELVE THOUSAND AND NO/100
DOLLARS ($12,000.00) to insure payment of any judgment,
money decree, fine, or penalty, which amount shall be
deposited in the trust account of Employee's chosen counsel,
but which shall not relieve Employer from satisfying
Employee's attorneys' fees and expenses on a monthly basis
while t'ne action, suit, or proceeding is pending.
SECTION ELEVEN: TERMINATION OF AGREEMENT 1. This
Agreement may be terminated by either party on thirty
(30) days written notice to the other; however,
Employer can terminate this agreement "for cause" only,
which cause must be set forth specifically within the
written notice of termination provided to Employee.
Within the Agreement, "for cause" termination will be
limited to these situations when a majority of the
Board of Directors has determined that the Employee has
been grossly negligent with respect to his duties as
Chief Executive Officer or determine that Employee is
in material breach of this Agreement. If Employer
shall so terminate this Agreement, Employee shall be
entitled to compensation for one (1) year pursuant to
the terms of this Agreement from the date of
termination. If Employer terminates this Agreement,
Employer will not be relieved of any obligation under
this Agreement during the one (1) year period of full
compensation If Employee shall so terminate this
Agreement, he shall be entitled to compensation for a
period of six (6) months pursuant to the terms of this
Agreement from the date of termination. Furthermore,
regardless of how or when this Agreement is terminated,
Employer shall at no time be relieved of its obligation
to indemnify Employee pursuant to the terms of this
Agreement.
2. Even though the initial term of employment shall
terminate on May 31, 1998, this Agreement shall
automatically renew for successive three-year periods
unless written notice of the termination of this Agreement
is provided by one party to the other at least ninety (90)
days prior to the end of the initial term of this Agreement
or at the end of each successive term of this Agreement.
Furthermore, the Employer agrees not to terminate this
Agreement at the end of the initial term or any successive
term unless good cause exists to terminate this Agreement,
and Employer agrees to negotiate in good faith with the
Employee at the end of the initial term of this Agreement
and at the end of each successive term of this Agreement so
that Employee will be provided an employment and
compensation package consistent with the value that
Employee provides to Employer.
SECTION TWELVE: AGREEMENTS OUTSIDE OF CONTRACT
This Agreement contains the complete understanding and
agreement concerning the employment arrangement between the
Parties and shall, as of the effective date hereof,
supersede all other agreements, representations, promises or
understandings, written or oral, between the Parties with
respect to the subject matter of this Agreement.
SECTION THIRTEEN: MODIFICATION OF AGREEMENT
Any modification of this Agreement or additional obligation
assumed by either party in connection with the Agreement
shall be binding only if evidenced in writing signed by the
Parties or any authorized representative of the Parties.
SECTION FOURTEEN: ARBITRATION
If there is a dispute over payment of fees or expenses under
this Agreement, the dispute will be resolved by binding
arbitration before the American Arbitration Association, and
Employee and Employer agree to be bound by the final
decision of that arbitration. Any prevailing party in
arbitration shall have the right to recover all costs and
fees, to include attorneys' fees incident to the
arbitration. A demand for arbitration shall be made within
a reasonable time after the claim, dispute, or other matter
in question has arisen and in no event shall the demand for
arbitration be made after the date when the institution of
legal or equitable proceedings based on such dispute, claim,
or controversy would be barred by the applicable statute of
limitations.
SECTION FIFTEEN: EFFECT OF PARTIAL INVALIDITY
The invalidity of any portion of this Agreement will not and
shall not be deemed to affect the validity of any other
provision. In the event that any provision of this
Agreement is held to be invalid, the Parties agree that the
remaining provisions shall be deemed to be in full force and
effect as if they had been executed by both Parties
subsequent to the expungement of the invalid provision.
SECTION SIXTEEN: CHOICE OF LAW
It is the intention of the Parties to this Agreement that
the performance under this Agreement, and all suits and
special proceedings under this Agreement be construed in
accordance with and under and pursuant to the laws of the
State of North Carolina in that, in any action, special
proceeding or any other proceeding that may be brought
arising out of, in connection, or by reason of this
Agreement, the laws of the State of North Carolina shall be
applicable and shall govern to the exclusion of the law of
any other forum, without regard to the jurisdiction in which
any action or special proceeding may be instituted.
SECTION SEVENTEEN: NO WAIVER
The failure of either party to this Agreement to insist upon
the performance of any of the terms and conditions of this
Agreement, or the waiver of any breach of any of the terms
and conditions of this Agreement, shall not be construed as
thereafter waiving any such terms and conditions, but the
same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
SECTION EIGHTEEN: ATTORNEYS' FEES
In the event that any action is filed in relation to
this Agreement, the unsuccessful party in the action shall
pay to the successful party, in addition to all sums that
either party may be called on to pay, a reasonable sum for
the successful party's attorneys' fees.
SECTION NINETEEN: PARAGRAPH HEADINGS
The titles to the paragraphs of this Agreement are solely
for the convenience for the Parties and shall not be used
to explain, modify, simplify, or aid in the interpretation
of the provisions of this Agreement.
SECTION TWENTY: PROMISSORY NOTE
Pursuant to the terms of this Agreement, and simultaneous
with the execution of this Agreement, Employer shall
execute a Promissory Note for the benefit of Employee for
unpaid compensation between the period of June 1, 1995, and
October 31, 1995. IN WITNESS WHEREOF, each party to this
Agreement has caused it to be executed under seal and on
the date indicated below.
EMPLOYEE
/s/ Stanley H. Van Etten
DATE SIGNED: 12/11/95
EMPLOYER
_(SEAL)
/s/ Claude Savage
Claude Savage, Director of Employer
DATE SIGNED: 12/11/95
/s/ Larry Smith
Larry Smith, Director of Employer
DATE SIGNED: _
(CORPORATE SEAL)
12/18/95
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this AS day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and John D. Brothers (the "Employee"), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW. THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15)
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Compliance and Shareholder Relations for the Company.
Employee shall faithfully perform all reasonable duties as
they are prescribed, from time to time, by the President and
CEO, or other designated parties within the Company, or the
Board of Directors, or as may be ordinary or incident to the
position in which Employee is employed. Employee will devote
his or her full time, attention and energy to the duties and
responsibilities incident to his or her position and will not
engage in any other business activities while an Employee of
the Company without prior express written consent of the
Company's President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related tO the Company's business, including,
without limitation, trade secrets, products, systems,
programs, procedures, manuals, guides, confidential reports
and communications, personnel information, client and
customer lists, Independent Retail Sales Representative's
names and any associated information, identities, sales
information of any nature or description, commission paid,
any other data incident to the Company's business, as
confidential information entrusted to him or her solely for
use in his or her capacity as an employee of the Company, and
not to use, divulge, disclose or communicate such information
in any way to any person or entity (other than to an officer,
employee or authorized agent of the Company for use in the
business of the Company) during or after his or her
employment with the Company. The Employee agrees that, in
the event of termination of his or her employment for any
reason, he or she will not under any circumstances retain any
information, written or otherwise, concerning the business
operations of the Company. This covenant shall survive
termination of this Agreement and termination of Employee's
employment.
5. Covenant Not To Compete. It is recognized and understood
by all parties hereto that the Employee, through his or her
employment with the Company, will acquire a considerable
amount of knowledge and goodwill with respect to the business
of the Company, which knowledge and goodwill are extremely
valuable to the Company and which would be extremely
detrimental to the Company if used by the Employee to compete
with the Company. It is, therefore, understood and agreed by
the parties hereto that, because of the nature of the
business of the Company, it is necessary to afford fair
protection to the Company from such unfair competition by the
Employee. Consequently, the Employee covenants and agrees as
follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees: (i) that during the
Employee's employment with the Company, and for a
period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an officer, holder
of or investor in five percent (5%) or more of any
security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the Company.
(ii) that during the Employee's employment with the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not directly or indirectly hire, contract
with, induce or attempt to. influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains - the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS
WHEREOF, the parties hereto have executed this Agreement
and affixed their respective seals as of the day and year
first above written.
ATTEST:
INTERNATIONAL HERITAGE, INC.
By:
EMPLOYEE
/s/ Stanley Van Etten
President and CEO
/s/ John Brothers
CONFIDENTIALITY AND NON-COMPETITIONAGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and Mary Breen (the Employees), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not t disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term. at which time the
Company shall have
a, I , and the compensation received by Employee from the
Company from time to time, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the Company
shall have no further obligation to Employee. The Company
may elect, in its sole discretion, not to have Employee
perform his or her duties during the sixty (60) day notice
term. If Employee is being terminated with cause, the
Company shall give the Employee fifteen (15) days' written
notice and shall pay Employee through the expiration of the
fifteen (15) day notice term, at which time the Company shall
have
(i) that during the Employee's employment with the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an of ricer, holder
of or investor in five percent (5 %) or more of any
security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the, Company.
(ii) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not directly or indirectly hire, contract
with, induce or attempt to, influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree.that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by bot'n
parties. No waiver of any provision of this Agreement shall
be valid unless the same is in writing and signed by the
party against whom such waiver is sought to be enforced;
moreover, no valid waiver of any other provision of this
agreement at any time shall be deemed a waiver of any other
provision of this Agreement at such time, nor will it be
deemed a valid waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee
and the Company with respect to the matters herein
described and no representations, promises, agreement or
understandings, written or oral, not herein contained,
shall be of any force or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement c. the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By: /s/ John Brothers
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
/s/ Stanley H. Van Etten
Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Mary Breen
CONFIDENTIALITY AND NONCOMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company), and Dwight Hallman (the "Employee"), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this
Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of
Employee by the Company, and the compensation received by
Employee from the Company from time to time, the receipt
and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as
follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and
procedures, which policies, practices and procedures may be
amended by the Company from time to time, with or without
notice. Further, the parties hereto acknowledge and agree
that Employee's employment and this Agreement can be
terminated, subject to the provisions herein, by either
party, with or without cause. If Employee is being
terminated without cause, the Company shall give the
Employee sixty (60) days' written notice and shall pay
Employee through the expiration of the sixty (60) day
notice term, at which point the Company shall have no
further obligation to Employee. The Company may elect, in
its sole discretion, not to have Employee perform his or
her duties during the sixty (60) day notice term. If
Employee is being terminated with cause, the Company shall
give the Employee fifteen (15) days' written notice and
shall pay Employee through the expiration of the fifteen
(15) day notice term, at which time the Company shall have
no further obligation to Employee. The Company may elect,
in its sole discretion, not to have Employee perform his or
her duties during the fifteen (15) day notice term. If
Employee elects to terminate his or her employment he or
she must give thirty (30) days' written notice to the
Company and Employee must faithfully fulfill all of his or
her duties through the expiration of the thirty (30) day
notice term in order to be entitled to compensation through
the expiration of said term. The parties acknowledge and
agree that nothing contained herein is or should be
construed as a promise of future or continued employment,
creating in the Employee any right to employment or to any
cause of action on account of termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Operations for the Company. Employee shall faithfully
perform all reasonable duties as they are prescribed, from
time to time, by the President and CEO, or other designated
parties within the Company, or the Board of Directors, or as
may be ordinary or incident to the position in which
Employee is employed. Employee will devote his or her full
time, attention and energy to the duties and
responsibilities incident to his or her position and will
not engage in any other business activities while an
Employee of the Company without prior express written
consent of the Company's President or a majority of the
Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
Representative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and goodwill
are extremely valuable to the Company and which would be
extremely detrimental to the Company if used by the Employee
to compete with the Company. It is, therefore, understood
and agreed by the parties hereto that, because of the nature
of the business of the Company, it is necessary to afford
fair protection to the Company from such unfair competition
by the Employee. Consequently, the Employee covenants and
agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she will
not, directly or indirectly, with or through any family
member or former director, officer, employee of the
Company, or acting alone or as a member of a
partnership, or as an officer, holder of or investor in
five percent (5%) or more of any security of any class,
director, employee, consultant, member or representative
of any corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the Company.
(ii) that during the Employee's employment with
the Company, and for a period of one (1) year from
the date of termination of the Employee's
employment with the Company, whether by Employee
or Company, he or she will not directly or
indirectly hire, contract with, induce or attempt
to, influence any individual who, at any time
during the 180 days prior to the termination of
the Employee's employment with the Company, was an
employee, agent, or Independent Retail Sales
Representative of the Company or any other company
owned or operated by the Company, to terminate his
or her employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and S of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the Company
will suffer irreparable harm in the event that the Employee
breaches any of his or her obligations under this Agreement
and that monetary damages will be inadequate to compensate
the Company for such breach. Accordingly, the Employee
agrees that, in the event of a breach or threatened breach by
the Employee of any of the provisions of this Agreement, the
Company, in addition to and not in limitation of any other
rights, remedies or damages available to the Company at law
or in equity, shall be entitled to an injunction in order to
prevent or to restrain any such breach by the Employee, or by
the Employee's partners, agents, representatives, servants,
employers, employees and/or any and all persons directly or
indirectly acting for or with him or her. The Company shall
not be required to post any bond to obtain any such
injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains - the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By: John Brothers
Secretary
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Dwight Hallman
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1st day of March, 1996, by and between
International Inc., a North Carolina corporation, (the
"Company"), and Clark Jones (the "Employees), an individual
residing in Wake County, North Carolina.
WITNESSETH:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15~
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Controller for
the Company. Employee shall faithfully perform all
reasonable duties as they are prescribed, from time to time,
by the President and CEO, or other designated parties within
the Company, or the Board of Directors, or as may be
ordinary or incident to the position in which Employee is
employed. Employee will devote his or her full time,
attention and energy to the duties and responsibilities
incident to his or her position and will not engage in any
other business activities while an Employee of the Company
without prior express written consent of the Company's
President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides,
confidential reports and communications, personnel
information, client and customer lists, Independent Retail
Sales Representative's names and any associated
information, identities, sales information of any nature or
description, commissions paid, any other data incident to
the Company's business, as confidential information
entrusted to him or her solely for use in his or her
capacity as an employee of the Company, and not to use,
divulge, disclose or communicate such information in any
way to any person or entity (other than to an officer,
employee or authorized agent of the Company for use in the
business of the Company) during or after his or her
employment with the Company. The Employee agrees that, in
the event of termination of his or her employment for any
reason, he or she will not under any circumstances retain
any information, written or otherwise, concerning the
business operations of the Company. This covenant shall
survive termination of this Agreement and termination of
Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and
goodwill are extremely valuable to the Company and which
would be extremely detrimental to the Company if used by
the Employee to compete with the Company. It is,
therefore, understood and agreed by the parties hereto
that, because of the nature of the business of the Company,
it is necessary to afford fair protection to the Company
from such unfair competition by the Employee.
Consequently, the Employee covenants and agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she will
not, directly or indirectly, with or through any family
member or former director, officer, employee of the
Company, or acting alone or as a member of a
partnership, or as an officer, holder of or investor in
five percent (5 %) or more of any security of any class,
director, employee, consultant, member or representative
of any corporation or other business entity:
(1) engage in, perform or provide services
to any network marketing or distribution
company within a radius of twenty-five (25)
miles of any site upon which the Company has
provided services, to include product sales
and opportunity meetings or trailing by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company.
(ii) that during the Employee's employment with the
Company, and for a period of one (1) year from the
date of termination of the Employee's employment
with the Company, whether by Employee or Company,
he or she will not directly or indirectly hire,
contract with, induce or attempt to influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section S(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The coverlets of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, Ames and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Saw. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By John Brothers
/Secretary
INTERNATIONAL HERITAGE INC.
/s/ Stanley H. Van Ellen
President and CEO
EMPLOYEE
/s/ Clark Jones
(SEAL)
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTLALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 5 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the Company), and Dawn McIntyre (the "Employees), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto,, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 19!~6, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15)
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Marketing and Fulfillment for the Company. Employee shall
faithfully perform all reasonable duties as they are
prescribed, from time to time, by the President and CEO, or
other designated parties within the Company, or the Board of
Directors, or as may be ordinary or incident to the position
in which Employee is employed. Employee will devote his or
her full time, attention and energy to the duties and
responsibilities incident to his or her position and will
not engage in any other business activities while an
Employee of the Company without prior express written
consent of the Company's President or a majority of the
Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
~epresentative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and goodwill
are extremely valuable to the Company and which would be
extremely detrimental to the Company if used by the Employee
to compete with the Company. It is, therefore, understood
and agreed by the parties hereto that, because of the nature
of the business of the Company, it is necessary to afford
fair protection to the Company from such unfair competition
by the Employee. Consequently, the Employee covenants and
agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or
she will not, directly or indirectly, with or
through any family member or former director,
officer, employee of the Company, or acting alone
or as a member of a partnership, or as an
officer, holder of or investor in five percent
(5%) or more of any security of any class,
director, employee, consultant, member or
representative of any corporation or other
business entity:
(1) engage in, perform or provide services to any network marketing
or distribution company within a radius of twenty-five (25) miles of any
site upon which the Company has provided services, to include product
sales and opportunity meetings or training by an Independent Retail Sales
Representative of the Company, which are the same or substantially
similar to the services performed or provided by Employee for the
Company, or engage in the same or substantially similar business as that
engaged in by the Company anywhere in the United States, all United
States territories and the provinces of Alberta, Ontario and British
Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company.
(ii) that during the Employee's employment with
the Company, and for a period of one (1) year
from the date of termination of the Employee's
employment with the Company, whether by Employee
or Company, he or she will not directly or
indirectly hire, contract with, induce or attempt
to influence any individual who, at any time
during the 180 days prior to the termination of
the Employee's employment with the Company, was
an employee, agent, or Independent Retail Sales
Representative of the Company or any other
company owned or operated by the Company, to
terminate his or her employment or association
with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to t'ne Company; (iii) gross
negligence or willful misconduct in the performance of
Employee's duties to third parties; (iv) felony behavior, or
(v) violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captious. captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By./s/ John Brothers
/Secretary
Red 00349R 307 RA63982.1
3122196 9-58am
INTERNATIONAL HERITAGE, INC.
By /s/ Stanley H. Van Etten
Stanley H. Van Etten
President and CEO
EMPLOYEE
SEAL)
Dawn McIntyre
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this Ad day of April, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and Stephanie Harris (the "Employee"), an
individual residing in Wake County, North Carolina.
WITNESSETH:
WHEREAS, the Company wishes to employ Employee and Employee wishes
to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received a raise from the Company
effective April 19, 1996, and upon successful completion of
a month-long intensive training with 20/21 shall receive a
subsequent raise; and
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as the
execution of this Agreement, as an employee at-will of the
Company, subject to the Company's policies, practices and
procedures, which policies, practices and procedures may be
amended by the Company from time to time, with or without
notice. Further, the parties hereto acknowledge and agree
that Employee's employment and this Agreement can be
terminated, subject to the provisions herein, by either
party, with or without cause. If Employee is being
terminated without cause, the Company shall give the
Employee sixty (60) days' written notice and shall pay
Employee through the expiration of the sixty (60) day notice
term, at which point the Company shall have no further
obligation to Employee. The Company may elect, in its sole
discretion, not to have Employee perform his or her duties
during the sixty (60) day notice term. If Employee is being
terminated with cause, the Company shall give the Employee
fifteen (15) days' written notice and shall pay Employee
through the expiration of the fifteen (IS) day notice term,
at which time the Company shall have no further obligation
to Employee. The Company may elect, in its sole discretion,
not to have Employee perform his or her duties during the
fifteen (15) day notice term. If Employee elects to
terminate his or her employment he or she must give thirty
(30) days' written notice to the Company and Employee must
faithfully fulfill all of his or her duties through the
expiration of the thirty (30) day notice term in order to be
entitled to compensation through the expiration of said
term. The parties acknowledge and agree that nothing
contained herein is or should be construed as a promise of
future or continued employment, creating in the Employee any
right to employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of date
of execution.
3. Duties. The Employee shall serve as the Data Systems
Manager for the Company. Employee shall faithfully perform
all reasonable duties as they are prescribed, from time to
time, by the President and CEO, or other designated parties
within the Company, or the Board of Directors, or as may be
ordinary or incident to the position in which Employee is
employed. Employee will devote his or her full time,
attention and energy to the duties and responsibilities
incident to his or her position and will not engage in any
other business activities while an Employee of the Company
without prior express written consent of the Company's
President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
Representative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment. G. Covenant Not To
Compete. It is recognized and understood by all parties
hereto that the Employee, through his or her employment with
the Company, will acquire a considerable amount of knowledge
and goodwill with respect to the business of the Company,
which knowledge and goodwill are extremely valuable to the
Company and which would be extremely detrimental to the
Company if used by the Employee to compete with the Company.
It is, therefore, understood and agreed by the parties
hereto that, because of the nature of the business of the
Company, it is necessary to afford fair protection to the
Company from such unfair competition by the Employee.
Consequently, the Employee covenants and agrees as follows:
(A) Except as otherwise approved in writing by the
Company, the Employee agrees. (i) that during the
Employee's employment with the Company, and for a
period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an officer, holder
of or investor in five percent (5 %) or more of
any security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity: (1) engage
in, perform or provide services to any network
marketing or distribution company within a radius
of twenty-five (25) miles of any site upon which
the Company has provided services, to include
product sales and opportunity meetings or training
by an Independent Retail Sales Representative of
the Company, which are the same or substantially
similar to the services performed or provided by
Employee for the Company, or engage in the same or
substantially similar business as that engaged in
by the Company anywhere in the United States, all
United States territories and the provinces of
Alberta, Ontario and British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company. (ii) that
during the Employee's employment with the
Company, and for a period of one (1) year
from the date of termination of the
Employee's employment with the Company,
whether by Employee or Company, he or she
will not directly or indirectly hire,
contract with, induce or attempt to
influence any individual who, at any time
during the 180 days prior to the termination
of the Employee's employment with the
Company, was an employee, agent, or
Independent Retail Sales Representative of
the Company or any other company owned or
operated by the Company, to terminate his or
her employment or association with the
Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section S(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or
threatened breach by the Employee of any of the provisions
of this Agreement, the Company, in addition to and not in
limitation of any other rights, remedies or damages
available to the Company at law or in equity, shall be
entitled to an injunction in order to prevent or to
restrain any such breach by the Employee, or by the
Employee's partners, agents, representatives, servants,
employers, employees and/or any and all persons directly or
indirectly acting for or with him or her. The Company
shall not be required to post any bond to obtain any such
injunction.
7. Indemnification The Company shall indemnify Employee
who was or is a party or is threatened to be made a party
to any pending or completed action, suit or proceeding,
whether civil, administrative or investigative (other than
an action by the Company), by reason of the fact that he or
she is an Employee of the Company, or is or was serving at
the request of the Company, against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her
in connection with such suit, action or proceeding if he or
she acted in good faith and in a manner he or she
reasonably believed so be in or not opposed to the best
interests of the Company. Provided, however, that there
shall be no indemnification for: (i) misconduct in the
performance of the Employee's duties to the Company; (ii)
negligence in the performance of the Employee's duties to
the Company; (iii gross negligence or willful misconduct in
the performance of Employee's duties to third parties; (iv)
felony behavior, or (v) violations of criminal or civil
statutes.
8. Severability. The invalidity or unenforceability of
any provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both
parties. No waiver of any provision of this Agreement
shall be valid unless the same is in writing and signed by
the party against whom such waiver is sought to be
enforced; moreover, no valid waiver of any other provision
of this agreement at any time shall be deemed a waiver of
any other provision of this Agreement at such time, nor
will it be deemed a valid waiver of such provision at any
other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By:
Secretary
CORPORATE SEAL
ID#: ra65464.1
INTERNATIONAL HERITAGE, INC.
By: /s/ Stanley H. Van Etten
-
Stanley H. Van Etten
President and CEO
EMPLOYEE
<g (SEAL)
Stephanie Harris
The execution of this Agreement after June 1,
1995, in no way limits or impacts the enforceability of
this Agreement, and Employer hereby ratifies the terms of
this Agreement for the time period of June 1, 1995, to the
date of execution of this Agreement, and thereafter until
termination of this Agreement pursuant to the provisions
herein.
SECTION FOUR: COMPENSATION OF EMPLOYEE
Employer shall pay Employee, and Employee shall accept from
Employer, in full payment of Employee's services as the
Chief Executive Officer of Employer, a compensation equal
teethe greater of three percent (3%) of the net revenues of
Employer, as defined by general accounting principals, or
FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($425,000.00) per year, payable at least twice each month.'
2. Employer shall reimburse Employee, pursuant to company
policy, for all out-ofpocket expenses that Employee shall
incur in connection with his services for Employer
contemplated by this Agreement on presentation by Employee
of appropriate vouchers or receipts for such expenses to
Employer.
3. In addition to the compensation referenced hereinabove,
and in partial (1)As of October 31, 1995, Employee has
received compensation in the amount of $ 7 7,905 . 7 1
from Employer for services rendered between June 1, 1995,
and October 31, 1995. Employer acknowledges that the
compensation received by the Employee during this time
period is not payment in full pursuant to the compensation
agreement referenced above. Instead, the compensation
received represents three percent (3 %) of the net revenues
of Employer as defined by general accounting principals
between June 1, 1995, and October 31, 1995, which is less
than the $425,000.00 annualized minimum. Therefore, the
Employer acknowledges that additional compensation is owed
to the Employee for services rendered as the Chief
Executive Officer for the period of June 1, 1995, through
October 31, 1995, in the amount of ~ 99.177.62 . Pursuant
to the terms of this Agreement, the Employer agrees to
execute a promissory note for the balance owed as
compensation, which promissory note shall be payable upon
demand and shall bear interest at the rate of eight percent
(8%) per annum. Furthermore, the Employer agrees to
withhold from said additional compensation the necessary
taxes due and owing the federal and state governments with
respect to said compensation and withhold from its own
gross revenues the necessary matching contribution due and
owing the federal and state governments with respect to
said compensation.
<END FOOTNOTE>
3
<PAGE>
consideration for the guarantees
previously executed by the Employee for the benefit of
Employer, Employee shall be entitled to a stock bonus of
one percent (1 %) of the issued and outstanding common
stock of Employer as of December 31, 1995, provided that
Employer is open and doing business and provided that
Employer has achieved gross revenue in excess of
55,000,000.00; and a bonus of two percent (2%) of the
issued and outstanding common stock of Employer as of
December 31, 1996, provided that Employer is open and doing
business and provided that Employer has achieved gross
revenue in excess of $25,000,000.00; and a bonus of three
percent (3 %) of the issued and outstanding common stock of
Employer as of December 1, 1997, provided that Employer is
open and doing business and provided that Employer has
achieved gross revenue in excess of $75,000,000.00; and a
bonus of three percent (3%) of the issued and outstanding
common stock of Employer as of December 31, 1998, provided
that Employer is open and doing business and provided that
Employer has achieved gross revenue in excess of
$125,000,000.00; and a bonus of three percent (3%) of the
issued and outstanding common stock of Employer as of
December 31, 1999, provided that Employer is open and doing
business and provided that Employer has achieved gross
revenue in excess of $200,000,000.00; and a bonus of three
percent (3%) of the issued and outstanding common stock of
Employer as of December 31, 2000, provided that Employer is
open and doing business and provided that Employer has
achieved gross revenue in excess of $275,000,000.00.
4. In addition to the compensation set forth hereinabove,
Employee shall receive a semi-annual bonus, which shall be
payable no later than July 15th and January 15th (the first
such installment being due no later than January 15, 1996,
for the initial seven-month term of this agreement), equal
to three percent (3%) of the operating profits of Employer
before taxes,
4
<PAGE>
debt service, and depreciation at that time
and determined by the six-month financial statement of
Employer as of June 30th and December 30th. For the
purpose of this paragraph, debt service shall include any
loan to the Employer for the purpose of conducting business
which is payable over a period of one (1) year or more.
SECTION FIVE: OTHER EMPLOYMENT
Employee shall devote a sufficient amount of his time,
attention, knowledge, and skills solely to the business and
interests of Employer, Employer shall be entitled to all of
the benefits, profits, or other issues arising from or
incident to all work, services, and advice of Employee and
Employee shall not. during the term of this Agreement, be
interested directly or indirectly, in any manner, as
partner, officer, director, shareholder, advisor, employee,
or in any other capacity in any other business similar to
Employer's business or any allied trade; provided, however,
that nothing contained in this section shall be deemed to
prevent or to limit the right of the Employee to invest any
of his money in the capital stock or other securities of any
corporation whose stock or securities are publicly owned or
are regularly traded on any public exchange, nor shall
anything contained in this section be deemed to prevent
Employee from investing or limiting Employee's right to
invest his money in real estate. Furthermore, Employer
acknowledges that the Employee currently has a substantial
business relationship with Mayflower Holdings, Inc. and
Mayflower Capital, LLC, which relationship the Employee
shall not have to terminate during the term of this
Agreement. The Employer acknowledges that nothing contained
in this section shall prevent or limit the right of the
Employee to continue his relationship with Mayflower
Holdings, Inc. and Mayflower Capital, LLC, during the term
of this Agreement, nor shall anything contained in this
section prevent or limit the right of the
5
<PAGE>
Employee to devote
a limited amount of his time, attention, knowledge, and
skills to Mayflower Holdings, Inc.'s and Mayflower Capital,
LLC's business or allied trade, so long as such relationship
does not interfere with Employee's performance under this
Agreement.
SECTION SIX: EMPLOYEE'S SERVICES AS DIRECTOR
Employee hereby consents to serve as a director of Employer
or any parent, subsidiary, or corporation affiliated with
Employer, if duly elected and qualified, on condition that
Employee receive the same compensation paid to other
directors of any such company for their services as
directors.
SECTION SEVEN: VACATION
Employee shall be entitled to twenty (20) days of paid
vacation each year during the term of this Agreement, the
time for such vacation to be determined by mutual agreement
between Employer and Employee.
SECTION EIGHT: HEALTH AND DEATH BENEFITS
1. Employer agrees to provide health benefits to the
Employee and his immediate family, which shall include the
Employee's spouse and all children of Employee. In the
event Employee selects a health plan other than that
provided to all employees of Employer, Employer shall pay
on behalf of Employee the amount that Employee and his
immediate family would be charged under the health care
plan provided to all employees of Employer. Any difference
in health care benefit coverage shall be the responsibility
of Employee.
2. Employer agrees to purchase upon the execution of this
Agreement a key man insurance policy in the amount of
$2,500,000.00, which will provide a death benefit of
$1,500,000.00 to Employer and a death benefit of
$1,000,000.00 to Employee's designated
6
<PAGE>
beneficiary or his heirs.
SECTION NINE: TERMINATION FOR DISABILITY
In spite of anything in this Agreement to the contrary,
Employer is hereby given the option to terminate this
Agreement in the event that Employee shall, during the term
of this Agreement, become permanently disabled as the term
"permanently disabled" is fixed and defined in this section.
Such option shall be exercised by Employer giving notice to
Employee by registered mail addressed to him in care of the
Employer at 2626 Glenwood Avenue, Suite 200, City of
Raleigh, State of North Carolina, or at such other address
as Employee shall designate in writing of Employer's
intention to terminate this Agreement on the last day of the
month during which such notice is mailed. On the giving of
such notice, this Agreement shall cease on the last day of
the month for which the notice is so mailed, with the same
force and effect as if such last day of the month were the
date originally set forth in this Agreement as the
termination date of this Agreement; provided, however, that
Employee shall receive from Employer compensation pursuant
to the terms of this Agreement for a period of one (1) year
following the effective date of such termination.
For the purposes of this Agreement, Employee shall be
deemed to have become permanently disabled if, during any
year of the term of this Agreement, because of ill health,
physical or mental disability, or for other causes beyond
Employee's control, he shall have been continuously unable
or shall have failed to perform his duties under this
Agreement for ninety (90) consecutive days, or if, during
any year of the term of this Agreement, Employee shall have
been unable or shall have failed to perform his duties for
a total period of one hundred and twenty (120) days,
irrespective of whether or not such days are consecutive.
For the purposes
7
<PAGE>
of this Agreement, the term "any year of
the term of this Agreement" is defined to mean any twelve
(12) calendar months commencing on June 1, 1995, and
terminating on May 31, 1998, during the term of this
Agreement.
SECTION TEN INDEMNIFICATION
In return for the services provided to Employer by Employee
and many risks accepted by the Employee on behalf of the
Employer in the start-up of Employer, Employer shall
indemnify Employee to the fullest extent permitted by law
against (1) reasonable expenses, including attorneys' fees,
actually and necessarily incurred by Employee in connection
with any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative, seeking to hold Employee liable by reason of
the fact that Employee is or was acting in any capacity for
Employer, and (2) payments made by Employee on behalf of
Employer in satisfaction of any judgment, money decree,
fine, penalty, or reasonable settlement for which Employee
may have become liable in any such action, suit, or
proceeding. In the event that there is any threatened or
pending action, suit, or proceeding initiated against the
Employee pursuant to which t'ne Employee may become liable,
the Employee shall have the right to demand and obtain from
the Employer an advance of TWELVE THOUSAND AND NO/100
DOLLARS ($12,000.00) to insure payment of any judgment,
money decree, fine, or penalty, which amount shall be
deposited in the trust account of Employee's chosen counsel,
but which shall not relieve Employer from satisfying
Employee's attorneys' fees and expenses on a monthly basis
while t'ne action, suit, or proceeding is pending.
SECTION ELEVEN: TERMINATION OF AGREEMENT 1.
This Agreement may be terminated by either party on thirty
(30) days written
8
<PAGE>
notice to the other; however,
Employer can terminate this agreement "for cause" only,
which cause must be set forth specifically within the
written notice of termination provided to Employee.
Within the Agreement, "for cause" termination will be
limited to these situations when a majority of the
Board of Directors has determined that the Employee has
been grossly negligent with respect to his duties as
Chief Executive Officer or determine that Employee is
in material breach of this Agreement. If Employer
shall so terminate this Agreement, Employee shall be
entitled to compensation for one (1) year pursuant to
the terms of this Agreement from the date of
termination. If Employer terminates this Agreement,
Employer will not be relieved of any obligation under
this Agreement during the one (1) year period of full
compensation If Employee shall so terminate this
Agreement, he shall be entitled to compensation for a
period of six (6) months pursuant to the terms of this
Agreement from the date of termination. Furthermore,
regardless of how or when this Agreement is terminated,
Employer shall at no time be relieved of its obligation
to indemnify Employee pursuant to the terms of this
Agreement.
2. Even though the initial term of employment shall
terminate on May 31, 1998, this Agreement shall
automatically renew for successive three-year periods
unless written notice of the termination of this Agreement
is provided by one party to the other at least ninety (90)
days prior to the end of the initial term of this Agreement
or at the end of each successive term of this Agreement.
Furthermore, the Employer agrees not to terminate this
Agreement at the end of the initial term or any successive
term unless good cause exists to terminate this Agreement,
and Employer agrees to negotiate in good faith with the
Employee at the end of the initial term of this Agreement
and at the end of each successive term of this Agreement so
9
<PAGE>
that Employee will be provided an employment and
compensation package consistent with the value that
Employee provides to Employer.
SECTION TWELVE: AGREEMENTS OUTSIDE OF CONTRACT
This Agreement contains the complete understanding and
agreement concerning the employment arrangement between the
Parties and shall, as of the effective date hereof,
supersede all other agreements, representations, promises or
understandings, written or oral, between the Parties with
respect to the subject matter of this Agreement.
SECTION THIRTEEN: MODIFICATION OF AGREEMENT
Any modification of this Agreement or additional obligation
assumed by either party in connection with the Agreement
shall be binding only if evidenced in writing signed by the
Parties or any authorized representative of the Parties.
SECTION FOURTEEN: ARBITRATION
If there is a dispute over payment of fees or expenses under
this Agreement, the dispute will be resolved by binding
arbitration before the American Arbitration Association, and
Employee and Employer agree to be bound by the final
decision of that arbitration. Any prevailing party in
arbitration shall have the right to recover all costs and
fees, to include attorneys' fees incident to the
arbitration. A demand for arbitration shall be made within
a reasonable time after the claim, dispute, or other matter
in question has arisen and in no event shall the demand for
arbitration be made after the date when the institution of
legal or equitable proceedings based on such dispute, claim,
or controversy would be barred by the applicable statute of
limitations.
10
<PAGE>
SECTION FIFTEEN: EFFECT OF PARTIAL INVALIDITY
The invalidity of any portion of this Agreement will not and
shall not be deemed to affect the validity of any other
provision. In the event that any provision of this
Agreement is held to be invalid, the Parties agree that the
remaining provisions shall be deemed to be in full force and
effect as if they had been executed by both Parties
subsequent to the expungement of the invalid provision.
SECTION SIXTEEN: CHOICE OF LAW
It is the intention of the Parties to this Agreement that
the performance under this Agreement, and all suits and
special proceedings under this Agreement be construed in
accordance with and under and pursuant to the laws of the
State of North Carolina in that, in any action, special
proceeding or any other proceeding that may be brought
arising out of, in connection, or by reason of this
Agreement, the laws of the State of North Carolina shall be
applicable and shall govern to the exclusion of the law of
any other forum, without regard to the jurisdiction in which
any action or special proceeding may be instituted.
SECTION SEVENTEEN: NO WAIVER
The failure of either party to this Agreement to insist upon
the performance of any of the terms and conditions of this
Agreement, or the waiver of any breach of any of the terms
and conditions of this Agreement, shall not be construed as
thereafter waiving any such terms and conditions, but the
same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
SECTION EIGHTEEN: ATTORNEYS' FEES
In the event that any action is filed in relation to
this Agreement, the unsuccessful party
11
<PAGE>
in the action shall
pay to the successful party, in addition to all sums that
either party may be called on to pay, a reasonable sum for
the successful party's attorneys' fees.
SECTION NINETEEN: PARAGRAPH HEADINGS
The titles to the paragraphs of this Agreement are solely
for the convenience for the Parties and shall not be used
to explain, modify, simplify, or aid in the interpretation
of the provisions of this Agreement.
SECTION TWENTY: PROMISSORY NOTE
Pursuant to the terms of this Agreement, and simultaneous
with the execution of this Agreement, Employer shall
execute a Promissory Note for the benefit of Employee for
unpaid compensation between the period of June 1, 1995, and
October 31, 1995. IN WITNESS WHEREOF, each party to this
Agreement has caused it to be executed under seal and on
the date indicated below.
12
<PAGE>
EMPLOYEE
/s/ Stanley H. Van Etten
DATE SIGNED: 12/11/95
EMPLOYER
_(SEAL)
/s/ Claude Savage
Claude Savage, Director of Employer
DATE SIGNED: 12/11/95
/s/ Larry Smith
Larry Smith, Director of Employer
DATE SIGNED: _
(CORPORATE SEAL)
12/18/95
<PAGE>
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this AS day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and John D. Brothers (the "Employee"), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW. THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15)
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Compliance and Shareholder Relations for the Company.
Employee shall faithfully perform all reasonable duties as
they are prescribed, from time to time, by the President and
CEO, or other designated parties within the Company, or the
Board of Directors, or as may be ordinary or incident to the
position in which Employee is employed. Employee will devote
his or her full time, attention and energy to the duties and
responsibilities incident to his or her position and will not
engage in any other business activities while an Employee of
the Company without prior express written consent of the
Company's President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related tO the Company's business, including,
without limitation, trade secrets, products, systems,
programs, procedures, manuals, guides, confidential reports
and communications, personnel information, client and
customer lists, Independent Retail Sales Representative's
names and any associated information, identities, sales
information of any nature or description, commission paid,
any other data incident to the Company's business, as
confidential information entrusted to him or her solely for
use in his or her capacity as an employee of the Company, and
not to use, divulge, disclose or communicate such information
in any way to any person or entity (other than to an officer,
employee or authorized agent of the Company for use in the
business of the Company) during or after his or her
employment with the Company. The Employee agrees that, in
the event of termination of his or her employment for any
reason, he or she will not under any circumstances retain any
information, written or otherwise, concerning the business
operations of the Company. This covenant shall survive
termination of this Agreement and termination of Employee's
employment.
5. Covenant Not To Compete. It is recognized and understood
by all parties hereto that the Employee, through his or her
employment with the Company, will acquire a considerable
amount of knowledge and goodwill with respect to the business
of the Company, which knowledge and goodwill are extremely
valuable to the Company and which would be extremely
detrimental to the Company if used by the Employee to compete
with the Company. It is, therefore, understood and agreed by
the parties hereto that, because of the nature of the
business of the Company, it is necessary to afford fair
protection to the Company from such unfair competition by the
Employee. Consequently, the Employee covenants and agrees as
follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees: (i) that during the
Employee's employment with the Company, and for a
period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an officer, holder
of or investor in five percent (5%) or more of any
security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the Company.
(ii) that during the Employee's employment with the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not directly or indirectly hire, contract
with, induce or attempt to. influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver.
This Agreement may be changed or modified only if consented
to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains - the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS
WHEREOF, the parties hereto have executed this Agreement
and affixed their respective seals as of the day and year
first above written.
ATTEST:
INTERNATIONAL HERITAGE, INC.
By:
EMPLOYEE
/s/ Stanley Van Etten
President and CEO
/s/ John Brothers
CONFIDENTIALITY AND NON-COMPETITIONAGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and Mary Breen (the Employees), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not t disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term. at which time the
Company shall have
a, I , and the compensation received by Employee from the
Company from time to time, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the Company
shall have no further obligation to Employee. The Company
may elect, in its sole discretion, not to have Employee
perform his or her duties during the sixty (60) day notice
term. If Employee is being terminated with cause, the
Company shall give the Employee fifteen (15) days' written
notice and shall pay Employee through the expiration of the
fifteen (15) day notice term, at which time the Company shall
have
(i) that during the Employee's employment with the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an of ricer, holder
of or investor in five percent (5 %) or more of any
security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the, Company.
(ii) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not directly or indirectly hire, contract
with, induce or attempt to, influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree.that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by bot'n
parties. No waiver of any provision of this Agreement shall
be valid unless the same is in writing and signed by the
party against whom such waiver is sought to be enforced;
moreover, no valid waiver of any other provision of this
agreement at any time shall be deemed a waiver of any other
provision of this Agreement at such time, nor will it be
deemed a valid waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee
and the Company with respect to the matters herein
described and no representations, promises, agreement or
understandings, written or oral, not herein contained,
shall be of any force or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement c. the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By: /s/ John Brothers
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
/s/ Stanley H. Van Etten
Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Mary Breen
CONFIDENTIALITY AND NONCOMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company), and Dwight Hallman (the "Employee"), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this
Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of
Employee by the Company, and the compensation received by
Employee from the Company from time to time, the receipt
and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as
follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and
procedures, which policies, practices and procedures may be
amended by the Company from time to time, with or without
notice. Further, the parties hereto acknowledge and agree
that Employee's employment and this Agreement can be
terminated, subject to the provisions herein, by either
party, with or without cause. If Employee is being
terminated without cause, the Company shall give the
Employee sixty (60) days' written notice and shall pay
Employee through the expiration of the sixty (60) day
notice term, at which point the Company shall have no
further obligation to Employee. The Company may elect, in
its sole discretion, not to have Employee perform his or
her duties during the sixty (60) day notice term. If
Employee is being terminated with cause, the Company shall
give the Employee fifteen (15) days' written notice and
shall pay Employee through the expiration of the fifteen
(15) day notice term, at which time the Company shall have
no further obligation to Employee. The Company may elect,
in its sole discretion, not to have Employee perform his or
her duties during the fifteen (15) day notice term. If
Employee elects to terminate his or her employment he or
she must give thirty (30) days' written notice to the
Company and Employee must faithfully fulfill all of his or
her duties through the expiration of the thirty (30) day
notice term in order to be entitled to compensation through
the expiration of said term. The parties acknowledge and
agree that nothing contained herein is or should be
construed as a promise of future or continued employment,
creating in the Employee any right to employment or to any
cause of action on account of termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Operations for the Company. Employee shall faithfully
perform all reasonable duties as they are prescribed, from
time to time, by the President and CEO, or other designated
parties within the Company, or the Board of Directors, or as
may be ordinary or incident to the position in which
Employee is employed. Employee will devote his or her full
time, attention and energy to the duties and
responsibilities incident to his or her position and will
not engage in any other business activities while an
Employee of the Company without prior express written
consent of the Company's President or a majority of the
Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
Representative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and goodwill
are extremely valuable to the Company and which would be
extremely detrimental to the Company if used by the Employee
to compete with the Company. It is, therefore, understood
and agreed by the parties hereto that, because of the nature
of the business of the Company, it is necessary to afford
fair protection to the Company from such unfair competition
by the Employee. Consequently, the Employee covenants and
agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she will
not, directly or indirectly, with or through any family
member or former director, officer, employee of the
Company, or acting alone or as a member of a
partnership, or as an officer, holder of or investor in
five percent (5%) or more of any security of any class,
director, employee, consultant, member or representative
of any corporation or other business entity:
(1) engage in, perform or provide services to
any network marketing or distribution company
within a radius of twenty-five (25) miles of
any site upon which the Company has provided
services, to include product sales and
opportunity meetings or training by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment with
the Company; or (b) any suppliers or vendors
of the Company during the one (1) year prior
to termination of the Employee's employment
with the Company.
(ii) that during the Employee's employment with
the Company, and for a period of one (1) year from
the date of termination of the Employee's
employment with the Company, whether by Employee
or Company, he or she will not directly or
indirectly hire, contract with, induce or attempt
to, influence any individual who, at any time
during the 180 days prior to the termination of
the Employee's employment with the Company, was an
employee, agent, or Independent Retail Sales
Representative of the Company or any other company
owned or operated by the Company, to terminate his
or her employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and S of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the Company
will suffer irreparable harm in the event that the Employee
breaches any of his or her obligations under this Agreement
and that monetary damages will be inadequate to compensate
the Company for such breach. Accordingly, the Employee
agrees that, in the event of a breach or threatened breach by
the Employee of any of the provisions of this Agreement, the
Company, in addition to and not in limitation of any other
rights, remedies or damages available to the Company at law
or in equity, shall be entitled to an injunction in order to
prevent or to restrain any such breach by the Employee, or by
the Employee's partners, agents, representatives, servants,
employers, employees and/or any and all persons directly or
indirectly acting for or with him or her. The Company shall
not be required to post any bond to obtain any such
injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains - the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By: John Brothers
Secretary
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Dwight Hallman
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 1st day of March, 1996, by and between
International Inc., a North Carolina corporation, (the
"Company"), and Clark Jones (the "Employees), an individual
residing in Wake County, North Carolina.
WITNESSETH:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 1996, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15~
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Controller for
the Company. Employee shall faithfully perform all
reasonable duties as they are prescribed, from time to time,
by the President and CEO, or other designated parties within
the Company, or the Board of Directors, or as may be
ordinary or incident to the position in which Employee is
employed. Employee will devote his or her full time,
attention and energy to the duties and responsibilities
incident to his or her position and will not engage in any
other business activities while an Employee of the Company
without prior express written consent of the Company's
President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides,
confidential reports and communications, personnel
information, client and customer lists, Independent Retail
Sales Representative's names and any associated
information, identities, sales information of any nature or
description, commissions paid, any other data incident to
the Company's business, as confidential information
entrusted to him or her solely for use in his or her
capacity as an employee of the Company, and not to use,
divulge, disclose or communicate such information in any
way to any person or entity (other than to an officer,
employee or authorized agent of the Company for use in the
business of the Company) during or after his or her
employment with the Company. The Employee agrees that, in
the event of termination of his or her employment for any
reason, he or she will not under any circumstances retain
any information, written or otherwise, concerning the
business operations of the Company. This covenant shall
survive termination of this Agreement and termination of
Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and
goodwill are extremely valuable to the Company and which
would be extremely detrimental to the Company if used by
the Employee to compete with the Company. It is,
therefore, understood and agreed by the parties hereto
that, because of the nature of the business of the Company,
it is necessary to afford fair protection to the Company
from such unfair competition by the Employee.
Consequently, the Employee covenants and agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment the Company, and
for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she will
not, directly or indirectly, with or through any family
member or former director, officer, employee of the
Company, or acting alone or as a member of a
partnership, or as an officer, holder of or investor in
five percent (5 %) or more of any security of any class,
director, employee, consultant, member or representative
of any corporation or other business entity:
(1) engage in, perform or provide services
to any network marketing or distribution
company within a radius of twenty-five (25)
miles of any site upon which the Company has
provided services, to include product sales
and opportunity meetings or trailing by an
Independent Retail Sales Representative of
the Company, which are the same or
substantially similar to the services
performed or provided by Employee for the
Company, or engage in the same or
substantially similar business as that
engaged in by the Company anywhere in the
United States, all United States territories
and the provinces of Alberta, Ontario and
British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company.
(ii) that during the Employee's employment with the
Company, and for a period of one (1) year from the
date of termination of the Employee's employment
with the Company, whether by Employee or Company,
he or she will not directly or indirectly hire,
contract with, induce or attempt to influence any
individual who, at any time during the 180 days
prior to the termination of the Employee's
employment with the Company, was an employee,
agent, or Independent Retail Sales Representative
of the Company or any other company owned or
operated by the Company, to terminate his or her
employment or association with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section S(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The coverlets of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, Ames and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to the Company; (iii) gross negligence
or willful misconduct in the performance of Employee's
duties to third parties; (iv) felony behavior, or (v)
violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Saw. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By John Brothers
/Secretary
<PAGE>
INTERNATIONAL HERITAGE INC.
/s/ Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Clark Jones
(SEAL)
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTLALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 5 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the Company), and Dawn McIntyre (the "Employees), an
individual residing in Wake County, North Carolina.
W I T N E S S E T H:
WHEREAS, the Company wishes to employ Employee and Employee
wishes to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received from the Board of
Directors of the Company a new compensation package
including a raise effective January 1, 1996, said raise
being retroactively paid upon the signing of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto,, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as of
January 1, 19!~6, as an employee at-will of the Company,
subject to the Company's policies, practices and procedures,
which policies, practices and procedures may be amended by
the Company from time to time, with or without notice.
Further, the parties hereto acknowledge and agree that
Employee's employment and this Agreement can be terminated,
subject to the provisions herein, by either party, with or
without cause. If Employee is being terminated without
cause, the Company shall give the Employee sixty (60) days'
written notice and shall pay Employee through the expiration
of the sixty (60) day notice term, at which point the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the sixty (60) day
notice term. If Employee is being terminated with cause,
the Company shall give the Employee fifteen (15) days'
written notice and shall pay Employee through the expiration
of the fifteen (15) day notice term, at which time the
Company shall have no further obligation to Employee. The
Company may elect, in its sole discretion, not to have
Employee perform his or her duties during the fifteen (15)
day notice term. If Employee elects to terminate his or her
employment he or she must give thirty (30) days' written
notice to the Company and Employee must faithfully fulfill
all of his or her duties through the expiration of the
thirty (30) day notice term in order to be entitled to
compensation through the expiration of said term. The
parties acknowledge and agree that nothing contained herein
is or should be construed as a promise of future or
continued employment, creating in the Employee any right to
employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of
January 1, 1996.
3. Duties. The Employee shall serve as the Director of
Marketing and Fulfillment for the Company. Employee shall
faithfully perform all reasonable duties as they are
prescribed, from time to time, by the President and CEO, or
other designated parties within the Company, or the Board of
Directors, or as may be ordinary or incident to the position
in which Employee is employed. Employee will devote his or
her full time, attention and energy to the duties and
responsibilities incident to his or her position and will
not engage in any other business activities while an
Employee of the Company without prior express written
consent of the Company's President or a majority of the
Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
~epresentative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment.
5. Covenant Not To Compete. It is recognized and
understood by all parties hereto that the Employee, through
his or her employment with the Company, will acquire a
considerable amount of knowledge and goodwill with respect
to the business of the Company, which knowledge and goodwill
are extremely valuable to the Company and which would be
extremely detrimental to the Company if used by the Employee
to compete with the Company. It is, therefore, understood
and agreed by the parties hereto that, because of the nature
of the business of the Company, it is necessary to afford
fair protection to the Company from such unfair competition
by the Employee. Consequently, the Employee covenants and
agrees as follows:
(A) Except as otherwise approved in writing by the Company,
the Employee agrees:
(i) that during the Employee's employment with the Company,
and for a period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or
she will not, directly or indirectly, with or
through any family member or former director,
officer, employee of the Company, or acting alone
or as a member of a partnership, or as an
officer, holder of or investor in five percent
(5%) or more of any security of any class,
director, employee, consultant, member or
representative of any corporation or other
business entity:
(1) engage in, perform or provide services to any network marketing
or distribution company within a radius of twenty-five (25) miles of any
site upon which the Company has provided services, to include product
sales and opportunity meetings or training by an Independent Retail Sales
Representative of the Company, which are the same or substantially
similar to the services performed or provided by Employee for the
Company, or engage in the same or substantially similar business as that
engaged in by the Company anywhere in the United States, all United
States territories and the provinces of Alberta, Ontario and British
Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company.
(ii) that during the Employee's employment with
the Company, and for a period of one (1) year
from the date of termination of the Employee's
employment with the Company, whether by Employee
or Company, he or she will not directly or
indirectly hire, contract with, induce or attempt
to influence any individual who, at any time
during the 180 days prior to the termination of
the Employee's employment with the Company, was
an employee, agent, or Independent Retail Sales
Representative of the Company or any other
company owned or operated by the Company, to
terminate his or her employment or association
with the Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section 5(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or threatened
breach by the Employee of any of the provisions of this
Agreement, the Company, in addition to and not in limitation
of any other rights, remedies or damages available to the
Company at law or in equity, shall be entitled to an
injunction in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners,
agents, representatives, servants, employers, employees
and/or any and all persons directly or indirectly acting for
or with him or her. The Company shall not be required to
post any bond to obtain any such injunction.
7. Indemnification. The Company shall indemnify Employee
who was or is a party or is threatened to be made a party to
any pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action
by the Company), by reason of the fact that he or she is an
Employee of the Company, or is or was serving at the request
of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such suit, action or proceeding 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 Company.
Provided, however, that there shall be no indemnification
for: (i) misconduct in the performance of the Employee's
duties to the Company; (ii) negligence in the performance of
the Employee's duties to t'ne Company; (iii) gross
negligence or willful misconduct in the performance of
Employee's duties to third parties; (iv) felony behavior, or
(v) violations of criminal or civil statutes.
8. Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both parties.
No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party
against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this agreement at
any time shall be deemed a waiver of any other provision of
this Agreement at such time, nor will it be deemed a valid
waiver of such provision at any other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates.
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained, shall be of any force
or effect.
13. Captious. captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By./s/ John Brothers
/Secretary
Red 00349R 307 RA63982.1
3122196 9-58am
INTERNATIONAL HERITAGE, INC.
By /s/ Stanley H. Van Etten
Stanley H. Van Etten
President and CEO
EMPLOYEE
(SEAL)
Dawn McIntyre
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this Ad day of April, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and Stephanie Harris (the "Employee"), an
individual residing in Wake County, North Carolina.
WITNESSETH:
WHEREAS, the Company wishes to employ Employee and Employee wishes
to be employed by the Company; and
WHEREAS, Employee will be employed in a position of trust
and confidence to aid the Company in its business; and
WHEREAS, incident to and as a necessary part of Employee's
employment by the Company, Employee will have access to the
Company's confidential and proprietary information, and,
therefore, the Company desires to receive from Employee a
covenant not to disclose any information related to the
Company's business; and
WHEREAS, as a condition of and for and in consideration of
the Company's employment of Employee, the Company requires
that Employee enter into this Agreement; and
WHEREAS, the Employee has received a raise from the Company
effective April 19, 1996, and upon successful completion of
a month-long intensive training with 20/21 shall receive a
subsequent raise; and
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises herein contained, and of other good and
valuable consideration, including the employment of Employee
by the Company, and the compensation received by Employee
from the Company from time to time, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. Employee is employed, effective as the
execution of this Agreement, as an employee at-will of the
Company, subject to the Company's policies, practices and
procedures, which policies, practices and procedures may be
amended by the Company from time to time, with or without
notice. Further, the parties hereto acknowledge and agree
that Employee's employment and this Agreement can be
terminated, subject to the provisions herein, by either
party, with or without cause. If Employee is being
terminated without cause, the Company shall give the
Employee sixty (60) days' written notice and shall pay
Employee through the expiration of the sixty (60) day notice
term, at which point the Company shall have no further
obligation to Employee. The Company may elect, in its sole
discretion, not to have Employee perform his or her duties
during the sixty (60) day notice term. If Employee is being
terminated with cause, the Company shall give the Employee
fifteen (15) days' written notice and shall pay Employee
through the expiration of the fifteen (IS) day notice term,
at which time the Company shall have no further obligation
to Employee. The Company may elect, in its sole discretion,
not to have Employee perform his or her duties during the
fifteen (15) day notice term. If Employee elects to
terminate his or her employment he or she must give thirty
(30) days' written notice to the Company and Employee must
faithfully fulfill all of his or her duties through the
expiration of the thirty (30) day notice term in order to be
entitled to compensation through the expiration of said
term. The parties acknowledge and agree that nothing
contained herein is or should be construed as a promise of
future or continued employment, creating in the Employee any
right to employment or to any cause of action on account of
termination of employment.
2. Effective Date. This Agreement is effective as of date
of execution.
3. Duties. The Employee shall serve as the Data Systems
Manager for the Company. Employee shall faithfully perform
all reasonable duties as they are prescribed, from time to
time, by the President and CEO, or other designated parties
within the Company, or the Board of Directors, or as may be
ordinary or incident to the position in which Employee is
employed. Employee will devote his or her full time,
attention and energy to the duties and responsibilities
incident to his or her position and will not engage in any
other business activities while an Employee of the Company
without prior express written consent of the Company's
President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters
and information related to the Company's business,
including, without limitation, trade secrets, products,
systems, programs, procedures, manuals, guides, confidential
reports and communications, personnel information, client
and customer lists, Independent Retail Sales
Representative's names and any associated information,
identities, sales information of any nature or description,
commissions paid, any other data incident to the Company's
business, as confidential information entrusted to him or
her solely for use in his or her capacity as an employee of
the Company, and not to use, divulge, disclose or
communicate such information in any way to any person or
entity (other than to an officer, employee or authorized
agent of the Company for use in the business of the Company)
during or after his or her employment with the Company. The
Employee agrees that, in the event of termination of his or
her employment for any reason, he or she will not under any
circumstances retain any information, written or otherwise,
concerning the business operations of the Company. This
covenant shall survive termination of this Agreement and
termination of Employee's employment. G. Covenant Not To
Compete. It is recognized and understood by all parties
hereto that the Employee, through his or her employment with
the Company, will acquire a considerable amount of knowledge
and goodwill with respect to the business of the Company,
which knowledge and goodwill are extremely valuable to the
Company and which would be extremely detrimental to the
Company if used by the Employee to compete with the Company.
It is, therefore, understood and agreed by the parties
hereto that, because of the nature of the business of the
Company, it is necessary to afford fair protection to the
Company from such unfair competition by the Employee.
Consequently, the Employee covenants and agrees as follows:
(A) Except as otherwise approved in writing by the
Company, the Employee agrees. (i) that during the
Employee's employment with the Company, and for a
period of one (1) year from the date of
termination of the Employee's employment with the
Company, whether by Employee or Company, he or she
will not, directly or indirectly, with or through
any family member or former director, officer,
employee of the Company, or acting alone or as a
member of a partnership, or as an officer, holder
of or investor in five percent (5 %) or more of
any security of any class, director, employee,
consultant, member or representative of any
corporation or other business entity: (1) engage
in, perform or provide services to any network
marketing or distribution company within a radius
of twenty-five (25) miles of any site upon which
the Company has provided services, to include
product sales and opportunity meetings or training
by an Independent Retail Sales Representative of
the Company, which are the same or substantially
similar to the services performed or provided by
Employee for the Company, or engage in the same or
substantially similar business as that engaged in
by the Company anywhere in the United States, all
United States territories and the provinces of
Alberta, Ontario and British Columbia, Canada;
(2) request, solicit, approach, or otherwise
interfere with or seek to interfere with the
relationship between the Company and (a) any
Independent Retail Sales Representative of
the Company during the one (1) year prior to
termination of the Employee's employment
with the Company; or (b) any suppliers or
vendors of the Company during the one (1)
year prior to termination of the Employee's
employment with the Company. (ii) that
during the Employee's employment with the
Company, and for a period of one (1) year
from the date of termination of the
Employee's employment with the Company,
whether by Employee or Company, he or she
will not directly or indirectly hire,
contract with, induce or attempt to
influence any individual who, at any time
during the 180 days prior to the termination
of the Employee's employment with the
Company, was an employee, agent, or
Independent Retail Sales Representative of
the Company or any other company owned or
operated by the Company, to terminate his or
her employment or association with the
Company.
(B) The parties hereto agree that, in the event that
either the length of time or the geographic area set
forth in Section S(A) of this Agreement is found to be
unreasonable by a court, the court may reduce such
restrictions to those which it deems reasonable under
the circumstances.
(C) The Company's employment of the Employee shall
constitute sufficient and valuable consideration for
Employee's obligations under this Agreement.
(D) The covenants of Sections 4 and 5 of this Agreement
shall survive any termination of this Agreement and
termination of Employee's employment with the
Corporation.
6. Remedy. Employee understands and agrees that the
Company will suffer irreparable harm in the event that the
Employee breaches any of his or her obligations under this
Agreement and that monetary damages will be inadequate to
compensate the Company for such breach. Accordingly, the
Employee agrees that, in the event of a breach or
threatened breach by the Employee of any of the provisions
of this Agreement, the Company, in addition to and not in
limitation of any other rights, remedies or damages
available to the Company at law or in equity, shall be
entitled to an injunction in order to prevent or to
restrain any such breach by the Employee, or by the
Employee's partners, agents, representatives, servants,
employers, employees and/or any and all persons directly or
indirectly acting for or with him or her. The Company
shall not be required to post any bond to obtain any such
injunction.
7. Indemnification The Company shall indemnify Employee
who was or is a party or is threatened to be made a party
to any pending or completed action, suit or proceeding,
whether civil, administrative or investigative (other than
an action by the Company), by reason of the fact that he or
she is an Employee of the Company, or is or was serving at
the request of the Company, against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her
in connection with such suit, action or proceeding if he or
she acted in good faith and in a manner he or she
reasonably believed so be in or not opposed to the best
interests of the Company. Provided, however, that there
shall be no indemnification for: (i) misconduct in the
performance of the Employee's duties to the Company; (ii)
negligence in the performance of the Employee's duties to
the Company; (iii gross negligence or willful misconduct in
the performance of Employee's duties to third parties; (iv)
felony behavior, or (v) violations of criminal or civil
statutes.
8. Severability. The invalidity or unenforceability of
any provision hereto shall in no way affect the validity or
enforceability of any other provision.
9. Modification and Waiver. This Agreement may be changed
or modified only if consented to in writing by both
parties. No waiver of any provision of this Agreement
shall be valid unless the same is in writing and signed by
the party against whom such waiver is sought to be
enforced; moreover, no valid waiver of any other provision
of this agreement at any time shall be deemed a waiver of
any other provision of this Agreement at such time, nor
will it be deemed a valid waiver of such provision at any
other time.
10. Governing Law. This Agreement shall be governed by and
according to the laws of the State of North Carolina.
11. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto,
and to their respective heirs, representatives, successors,
assigns and affiliates
12. Entire Agreement. This Agreement contains the entire
agreement and understandings by and between the Employee and
the Company with respect to the matters herein described and
no representations, promises, agreement or understandings,
written or oral, not herein contained shall be of any force
or effect.
13. Captions. The captions in this Agreement are for
convenience only and in no way define, bind or describe the
scope or intent of this Agreement.
14. Arbitration. Any dispute arising out of or in
connection with this Agreement or the breach thereof shall
be decided by arbitration to be conducted in Raleigh, North
Carolina in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association,
and judgment thereof may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen and in no event shall
the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred
by the applicable state of limitations. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement and affixed
their respective seals as of the day and year first above
written.
ATTEST:
By:
Secretary
CORPORATE SEAL
ID#: ra65464.1
INTERNATIONAL HERITAGE, INC.
By: /s/ Stanley H. Van Etten
-
Stanley H. Van Etten
President and CEO
EMPLOYEE
<g (SEAL)
Stephanie Harris
<PAGE>
LICENSE AGREEMENT
THIS AGREEMENT made as of the 28 Day of June, 1995, by and
between Premium Concepts, Inc., a North Carolina corporation, having
its principal place of business at 5805 Cold Harbor Drive,
Greensboro, North Carolina 27410 (hereinafter referred to as
"Licensee"), and International Heritage Inc., a North Carolina
Corporation, having its principal place of business at 2626 Glenwood
Avenue, Suite 120, Raleigh, North Carolina 27608 (hereinafter
referred to as "Licensor). WITNESSETH:
WHEREAS, Licensor is the owner of the Licensed Marks (as
hereinafter defined) and the good will associated therewith, in the
United States of America, and elsewhere, and has the exclusive right
to license others to use the Licensed Marks on and in connection
with the manufacture and sale of Products (as hereinafter defined);
and
WHEREAS, the Licensed Marks are developing a significant amount
of good will in connection with the sales of Fine Jewelry and
Collectibles; and
WHEREAS, Licensee desires to obtain the right to use the
Licensed Marks and the good will associated therewith in connection
with the manufacture (in accordance with Licensor's standard) and
the sale within the Territory (as hereinafter defined) of Licensed
Products (as hereinafter defined); and
WHEREAS, Licensor is willing to grant Licensee the exclusive
right to use the Licensed Marks on and in connection with the
manufacture and sale of Licensed Products by Licensee in the
Territory, upon the terms and conditions hereinafter provided. NOW,
THEREFORE, in consideration of the mutual promises, covenants,
agreements,
<PAGE>
and other good and valuable consideration the receipt and
sufficiency which is hereby acknowledged, the parties hereby agree
as follows:
1. DEFINITIONS.
"Contract Year" shall mean the twelve (12) month period
beginning January 1 and ending December 31 during the term of the
Agreement.
1.2 Gross Sales" shall mean all sales of Licensed Products by
Licensee and all related Parties, to unaffiliated third parties,
without any reduction whatsoever.
1.3 "High Quality" shall mean quality commensurate with or
surpassing the quality of the approved samples of Licensed Products.
1.4 "Licensed Marks" shall mean the name "International
Heritage, Inc." the initials "IHI" and any associated designs,
whether or not such marks are officially recognized by any state or
federal governmental authority, to include but not limited to: the
United States Patent and Trademark Office, the United States
Copyright Office and/or the North Carolina Department of the
Secretary of State, Trademark Division.
1.5 "Licensed Products" shall mean Products (as hereinafter
defined) produced and sold by the Licensee as approved by the
Licensor pursuant to this Agreement utilizing or incorporating the
Licensed Marks except as set forth in paragraph 3.6 below.
1.6 "Net Sales" shall mean Gross Sales of Licensed Products
shipped by Licensee and all Related Parties (as hereinafter
defined), to unaffiliated third parties, less usual and customary
trade discounts which are shown on the face of the invoice, if any,
freight and insurance charges to the extent separately billed, if
any, and credits actually applied or paid for the return of
merchandise in accordance with standard industry practice, if any.
1.7 "Products" shall mean, and be strictly limited to, Licensor
pre-approved apparel, apparel-related items, and personalized
accessories.
1.8 "Related Parties" shall mean any parent or subsidiary of
Licensee or any company affiliated with or related to the Licensee
or any company under direct or indirect common control with
Licensee.
1.9 "Territory" shall mean the United States of America and its
territories and possessions, including Puerto Rico, and Canada and
its provinces.
2. Grant of License.
2.1
Licensor hereby grants to Licensee, upon the terms and
conditions of this Agreement, the exclusive personal and
nontransferable right and license to use the Licensed Marks within
the Territory on and in connection with the sale of Licensed
Products.
2.2 All Licensed Products or packaging therefore shall bear the
Licensed Marks except as may be hereinafter provided. Licensee
shall not use the Licensed Marks, or manufacture or sell Products
using or incorporating the Licensed Marks, except as expressly
provided in this Agreement.
2.3 Licensor reserves all rights to the Licensed Marks except as
specifically granted herein to Licensee, including, but not by way
of limitation the right to use the Licensed Marks: (i) in the
Territory, with regard to any services or goods other than the
Licensed Products, and ' (ii) outside the Territory, with regard to
any services or goods.
2.4 Licensee shall not export Licensed Products from the
Territory and shall not sell to any third party which it knows or
has reason to believe, intends to export Licensed Products
<PAGE>
from the Territory.
2.5 Nothing contained herein shall be deemed or construed to
prohibit Licensee from selling any Licensed Products or any other
services or goods under brand names or trademarks other than the
Licensed Marks. However, designs and colors not otherwise in use
and specifically supplied by Licensor for Licensed Products shall
not be used on Products. Product Control.
3.1 Licensee acknowledges that the preservation and enhancement
of the prestige and value of the Licensed Marks require Licensor to
control the type, image and quality of goods manufactured and sold
using the Licensed Marks, and the use of the Licensed Marks in
connection with the manufacture, distribution, advertising,
promotion and sale of Licensed Products.
3.2 Licensee shall submit to Licensor, for Licensor's
pre-approval, all materials, fabrics, colors and designs intended to
be used in connection with Licensed Products. No materials, fabric,
color or design shall be used by Licensee on Licensed Products
unless and until a sample or samples incorporating the same has been
approved by Licensor.
3.3 Licensee shall submit to Licensor, for Licensor's approval
prior to use or publication, all labels, tags, packaging,
advertising, promotional materials, publicity materials and any
other materials intended to be used in connection with Licensed
Products or using the Licensed Marks before the same 'may be used.
3.4 The contents, workmanship and fit of Licensed Products
shall, at all times, be of High Quality, and Licensed Products shall
be distributed, merchandised and sold with labels, tags, packaging
and promotional materials which are appropriate for High Quality
products of
<PAGE>
that type of merchandise, it being understood that the primary
audience for the sale of Licensed Products are Independent Retail
Sales Representatives of International Heritage, Inc.
3.5 Before manufacturing or having manufactured for it any
product intended to bear the Licensed Marks, Licensee shall deliver
to Licensor, or as Licensor may direct, for Licensor's approval,
free of charge, one pre-production sample of each different item and
style of such Licensed Product, together with prototype tags, labels
and packaging intended to be sold by Licensee.
3.6 All Products bearing the Licensed Marks manufactured by or
for Licensee or sold, distributed or promoted by it, shall conform
in all respects to the samples approved by Licensor. All Licensed
Products will bear the Licensed Marks in such form and manner as may
be approved by Licensor. Should Licensee desire to sell any
Licensed Products manufactured pursuant to this Agreement which,
because of defects in manufacture, do not conform in quality to the
samples approved by Licensor, it shall clearly mark each garment,
packaging, tag and label thereon, as the case may be, as ~irregular"
or "second".
3.7 Licensee will use and display the Licensed Marks only in
such form and manner as are specifically approved by Licensor.
Licensee will cause to appear on all Licensed Products, and on all
labels, tags, packaging and the like, and on all advertising and
promotional material used in connection therewith, such legends,
markings and notices as Licensor shall reasonably require.
3.8 All material submitted for approval hereunder shall be sent
to the person or address as may, from time to time, be designated by
Licensor. 3.9 Licensee agrees that all Licensed Products will be
manufactured, labeled, sold,
<PAGE>
distributed, promoted and advertised in accordance with any and all
applicable laws and any rules and/or regulations promulgated
thereunder.
4. Compensation to Licensor.
4.1 In consideration of the license and rights granted by
Licensor, Licensee shall pay to Licensor during each Contract Year,
or part thereof, a royalty of seven and a half percent (7.5%) of
Licensee's Net Sales of Licensed Products during such Contract Year,
or part thereof ("Percentage Royalty").
4.2 Licensee will prepare and maintain, in such manner and allow
them to be audited, and in accordance with generally accepted
accounting principles consistently applied, separate, accurate and
complete books of account and records (specifically, including
without limitation, the originals or copies of documents supporting
entries in the books of account) covering all sales transactions
relating to the license hereby granted and Licensee's performance
hereunder. Licensor and its duly authorized representatives shall
have the right, during regular business hours, upon reasonable
notice, for the duration of this Agreement, to examine said books of
account and records and all other documents and material in the
possession or under the control of Licensee or its Related Parties
or affiliates with respect to the subject matter and the terms of
this Agreement including, but not limited to, invoices, shipping
documents and correspondence. Licensor and its duly authorized
representatives shall conduct not more than one (1) examination
during any Contract Year, which examination shall comprise such
period of time whether on consecutive days or not, so as to be
complete, as determined by Licensor and its duly authorized
representative(s). All such books of account, records, documents
will be kept available by Licensee for at least one (1) year after
the Contract Year to which they
<PAGE>
relate. Nothing in this paragraph shall limit Licensor'sright to
make inquiry of Licensee regarding any sales transaction, keeping of
accounts, records and documents or other matter related to the
keeping of records and account incident to this Agreement.
4.3 If, as a result of any examination of Licensee's books and
records, it is shown that the amount of Percentage Royalty paid to
Licensor for any period was less than the amount of Percentage
Royalty which should have been paid for the period in question, the
Licensee will promptly remit, upon demand by Licensor, all payments
required to be made to eliminate any discrepancy which was revealed
by said examination, along with interest at a rate of eight percent
(8%) per annum, calculated as of the date such payment should have
been made. If such payment is not made within ten (10) days after
discovery, Licensor shall have the right to terminate this Agreement
as set forth in paragraph 9.2.1.
4.4 The Percentage Royalty, based upon sales by Licensee of
Licensed Products, shall be accounted for and paid quarterly within
thirty (303 days after the close of each three (3) month period
during each Contract Year, the first accounting and payment made on
or before December 31, 1995. The Percentage Royalty payable for
each accounting period shall be computed on the basis of Net Sales
from the beginning of such Contract Year through the last day of the
most recent accounting period (during such Contract Year) with a
credit for the Percentage Royalties, if any, previously paid to
Licensor for such Contract Year. Each report shall be certified by
the chief accounting officer of Licensee and shall show, by month,
and cumulatively for the period covered (by such report), the Gross
Sales and Net Sales of Licensed Products, separately for each
category of Licensed Products, designating the style number, number
of units, unit price, total amount of Gross Sales, the type and
nature of any deductions
<PAGE>
from Gross Sales claimed in arriving at Net Sales, and a computation
of the Percentage Royalty payable hereunder. Such reports shall be
furnished to Licensor whether or not any Licensed Products have been
sold during the period for which such report is due, and shall be
accompanied by appropriate payment.
4.5 All payments hereunder shall be made in United States
dollars, cash or certified funds. In the event that any sale is
made in a foreign country, the amount of the Percentage Royalty
payable with respect to such sales shall be based upon the
conversion rate of such local currency to United States dollars in
effect in New York, New York on the last business day of the month
for which the Percentage Royalty applicable to such sale(s) is to be
calculated. 5. Promotion and Cooperation.
5.1 Licensee agrees to use its best efforts to manufacture,
advertise and promote the sale of Licensed Products in the
Territory, to develop and maintain a substantial, permanent and
expanding business in the Territory under this Agreement, and to see
maximum quantities of each category of Licensed Products consistent
with the High Quality of Licensed Products and the prestige
represented therein by the Licensed Marks, taking into consideration
that Licensee sells and shall continue to sell products not bearing
the Licensed Marks which may be competitive with the Licensed
Products.
5.2 Licensee will conduct the promotion and sale of Licensed
Products in a manner consistent with the promotion and sale of High
Quality merchandise and the prestige of the Licensed Marks.
5.3 All costs and expenses of manufacture, advertising,
promotion, samples, packaging, labels and tags, and other costs and
expenses in connection with the manufacture,
<PAGE>
sale, distribution, advertising and promotion of Licensed Products,
shall be borne by Licensee. 5.4 Licensor will cooperate with
Licensee by advising Licensee of its customers and contracts.
Further, Licensor shall include Licensee's approved brochure or
marketing materials of Licensed Products in the Retail Business
Career Kit which is distributed to each of Licensor's Independent
Retail Sales Representatives.
5.5 Licensee shall sell all Licensed Products to corporate
employees of Licensor at a discount of at least twenty-five percent
(25%) off of the standard price for any Licensed Product.
5.6 Licensee shall provide miscellaneous Licensed Products to
members of the Licensor's Board of Directors, free of charge, in
order to further promote the sales of Licensed Products to the
Licensor's Independent Retail Sales Representatives and corporate
employees.
6. Trademark.
6.1 Licensee acknowledges on behalf of itself and its Related
Parties that Licensor is the owner of all right, title and interest
in and to the Licensed Marks in the Territory in any form or
embodiment thereof and is also the owner of the good will associated
with or which shall become associated with the Licensed Mark in
connection with the business and goods in relation to which the same
has been, is or shall be used. Any copyright which will be created
by Licensee in connection with Licensee in any package, design,
label, tag or the like, or any advertising or promotional material
or the like, bearing the Licensed Marks, shall also be the property
of Licensor. Sales by Licensee and its Related Parties shall be
deemed to have been made by Licensor for purposes of trademark
registration, and all uses of the Licensed Marks by Licensee shall
inure to the benefit of Licensor and any rights resulting therefrom
or created
<PAGE>
thereby shall be assigned by Licensee to Licensor. Licensee will
not, at any time, do or suffer to be done by anyone acting on its
behalf or in connection with Licensee, any act or thing which would,
or reasonably could, in any way impair any rights of Licensor in and
to the Licensed Marks or any registrations therefore, any
applications for registration thereof or which, directly or
indirectly, would, or reasonably could, depreciate the value of the
Licensed Marks or detract from any reputation, image or prestige of
the Licensed Marks.
6.2 Licensee shall, at the request of Licensor, fully cooperate
with Licensee in preparing, executing and causing to be recorded or
filed, such registered user agreements and all other documents
reasonably required by Licensor to confirm Licensor's ownership of
the Licensed Marks' and to evidence, protect and implement its
rights and the respective rights of Licensor and Licensee pursuant
to this Agreement. Licensee acknowledges that only Licensor may
file and prosecute trademark applications regarding the Licensed
Marks or Licensee's use of the Licensed Marks anywhere. Licensee
will cooperate with Licensor at Licensor's request, in connection
with the filing and prosecution by Licensor of applications in the
name of Licensor to register the Licensed Marks for Licensed
Products in the Territory and in connection with the maintenance and
renewal of such registrations as may issue. Upon expiration or
termination of this Agreement for any reason whatsoever, Licensee
will execute and file such documents as shall be required by
Licensor including, without limitation, termination of any
registered user agreements to evidence such termination.
6.3 Licensee will cause to appear on all Licensed Products and
on all materials on or in ronnectinn with which the Licensed Marks
are used. such legends. markings and notices as Licensor may
reasonably require and as may reasonably be necessary in order to
give
<PAGE>
appropriate notice of any trademark, trade name or other rights
therein or pertaining thereto, and shall comply with all notice and
marking requirements of any law applicable or necessary to the
protection of the Licensed Marks.
6.4 Licensee agrees that (a) no name or names shall be cojoined
with the Licensed Marks and (b) no names or names shall be used in
connection with the Licensed Marks in any advertising, promotion,
publicity, labeling, packaging or printed matter of any kind
utilized by Licensee in connection with the Licensed Products unless
specifically consented thereto, and only in the form approved, by
Licensor.
6.5 Licensee will never (a) challenge Licer~sor's ownership of
or the validity of the Licensed Marks or any application of
registration thereof, or any trademark registration thereof, or any
rights of Licensor therein, nor (b) challenge the fact that
Licensee's rights pursuant to this Agreement are solely those of a
licensee; whether during the term of this Agreement or subsequent to
its termination.
7. Copyright.
Any copyright which may be created in any package, design,
label, tag or the like, or any advertisement, promotional material
or the like utilized in connection with the Licensed Marks shall be
the property of Licensor. Licensee shall not, at any time, do or
suffer to be done any act or thing which may adversely affect any
rights of Licensor in any packages, designs, labels, tag, or any
advertisements, promotional material or the like, including but not
by way of limitation, filing any application to record in its name
any claims to copyrights with respect to Licensed Products or
material utilizing the Licensed Marks. Licensee agrees to cooperate
in connection with the prosecution of any trademark or copyright
application which
<PAGE>
Licensor may desire to file, and for that purpose Licensee shall
supply to the Licensor, at no cost to Licensor, from time to time,
such samples, containers, labels and similar materials as may be in
possession of Licensee and as may reasonably be required in
connection with any such application. Licensee shall do any and all
things reasonably required by Licensor to preserve and protect said
rights, including, but not by way of limitation, placing the
copyright notice specified by the Universal Copyright Convention on
all such copyrighted material. Any actions taken by Licensee at
Licensor's request shall be at Licensor's expense.
8. Infringement by Third Parties.
In the event that Licensee learns of any infringement or
limitation of the Licensed Marks relating to the Licensed Products
or of any use by any person of a trademark similar to the Licensed
Marks or of any acts of unfair competition involving the Licensed
Marks relating to Products, it will promptly notify Licensor
thereof. Licensor will thereupon take such action as it deems
necessary for the protection of Licensor's rights in and to the
Licensed Marks including, but not limited to, requesting Licensee to
take action relating to Licensed Products, and Licensee shall
cooperate with Licensor in all respects. Licensee will have no
right to take any action with respect to the Licensed Marks without
Licensor's prior written approval. In the event Licensor requests
Licensee to take action on its behalf, Licensee will do so, as
Licensor deems appropriate, which determination will be reasonably
made after consulting with Licensee, keeping Licensor advised as
developments occur and, taking such actions including, but not
limited to, selecting counsel, settling any action, appealing any
adverse decision or discontinuing any action taken by it only as is
approved in advance by Licensor. Any actions taken by Licensee at
Licensor's request shall be at Licensor's expense.
<PAGE>
9. Termination.
9.1 The initial term of this Agreement shall be through December
31, 1996, unless sooner terminated in accordance with the provisions
hereof. Licensee is hereby granted an automatic renewal for three
(3) years, upon the same terms and conditions set forth herein,
provided however, that this Agreement is not sooner terminated as
set forth in paragraph 9.2, and there exists no outstanding default
as of December 31, 1996.
9.2 Licensor shall have the right to terminate this Agreement
upon notice to Licensee upon the occurrence of any of the following
events (each of which shall be deemed an event of default
hereunder):
9.2.1 If Licensee shall fail to make, when due, any payment due to
Licensor, whether of fees or any other payment required to be made
by Licensee, and such failure shall continue for a period of ten
(10) days after notice thereof from Licensor.
9.2.2 If There shall be a failure by Licensee to comply with any
provision of this Agreement and such failure continues unremedied
for a period of ten (10) days after notice thereof from Licensor,
provided however, that if the nature of the default is curable but
is such that it cannot be cured within ten (10) days, Licensee shall
have an additional twenty (20) days within which to effect such
cure, upon the condition that Licensee shall proceed diligently and
continuously to effect the same.
9.2.3 If the Licensee makes any assignment of assets or business for
the benefit of creditors, or if a trustee or receiver is appointed
to administer or conduct its business or affairs, or if it is
adjudged in any legal proceeding to be either voluntary, or
involuntary bankrupt, then all rights granted herein shall forthwith
cease and terminate
<PAGE>
without prior notice or legal action by Licensor. No assignee for
the benefit of creditors, custodian, receiver, trustee in
bankruptcy, sheriff or any other officer of the court or official
charged with taking over custody of Licensee's assets or business
shall be permitted to liquidate finished goods, work in process and
raw material or to exploit or in any way use the Licensed Marks if
this Agreement terminates pursuant to the provisions hereof.
9.2.4 If Licensee fails to:
(a) manufacture, distribute, advertise or promote Licensed Products
in and form other than that which was pre-approved by Licensor;
(b) deliver Licensed Products to any party according to the terms
and conditions of such delivery;
(c) otherwise manufacture, distribute, advertise, promote or deliver
to any party conforming, pre-approved Licensed Products.
9.3 Upon the termination of this Agreement, except as otherwise
expressly provided herein, all rights of Licensee hereunder shall
terminate and revert automatically to Licensor, and neither Licensee
nor its receivers, trustees, representatives, agents, successors or
assigns shall have any right to exploit or in any way use the
Licensed Marks in any manner. Except.as otherwise expressly
provided in paragraph 6.4 hereof, upon the termination of this
Agreement Licensee shall forthwith: Products;
9.3.1 discontinue all manufacture, sales, advertising and promotion
of Licensed
9.3.2 discontinue all use of the Licensed Marks; and
<PAGE>
9.3.3 pay all Royalties due Licensor in respect of the period prior
to the expiration or termination of the Agreement.
9.4 Notwithstanding any termination in accordance with the
foregoing, Licensor shall have, and hereby reserves all the rights
and remedies which it has or which are granted to it by operation of
law, to collect Percentage Royalties due, earned or payable by
Licensee or permitted assigns pursuant to this Agreement, to be
compensated for damages for breach of the Agreement and to enjoin
the unlawful or unauthorized use of the Licensed Mark (which
injunctive relief may also be sought prior to or in lieu of
termination).
10. indemnity by Licensee. Licensee hereby indemnifies and holds
harmless the Licensor against all losses, liability, damages and
expenses (including reasonable attorney's fees and expenses)
incurred as a result of or related to claims of third persons
involving the manufacture or sale of Licensed Products or the
use of the Licensed Marks. Licensor shall give prompt notice to
Licensee of any claim, action or suit that may give rise to
liability hereunder when it becomes aware of the same. Licensee
shall have the option to defend any such claim, action or suit
including, but not limited to, the right to select counsel,
control the defense, assert counterclaims and crossclaims, bond
any lien or judgment, take any appeal and to settle on such
terms as Licensee deems advisable. Licensee will take no such
action without first consulting with Licensor (and where a
settlement of such claim, action or suit relates to Licensor's
ownership of or the validity or value of the Licensed Marks,
without first obtaining Licensor's approval), and will keep
Licensor apprised of all on-going actions as they occur and,
where practicable, in advance of any action to be taken by
Licensee. The provisions of this paragraph and the obligations
of Licensee set forth
<PAGE>
therein shall survive expiration or other termination of this
Agreement.
11. Indemnity by Licensor.
The Licensor assumes no liability to the Licensee or to third
parties with respect to the performance characteristics of the
Licensed Products manufactured or sold by Licensee or the Licensed
Marks in the Territory. Licensor indemnifies and holds harmless the
Licensee against all losses, liability, damages and expenses
(including reasonable attorney's fees and expenses) incurred as a
result of any breach of any representation or warranty made by
Licensor hereunder. Licensee shall give prompt notice to Licensor
of any claim, action or suit that may give rise to liability
hereunder. Licensor shall have the option to defend any such claim,
action or suit including, but not limited to, the right to select
counsel, control the defense, assert counterclaims and crossclaims,
bond any lien or judgment, take any appeal and to settle on such
terms as Licensor deems advisable. The provisions of this paragraph
and the obligations of Licensor set forth therein shall survive
expiration or other termination of this Agreement.
12. Representations and Warranties.
12.1 Licensor represents and warrants that:
12.1.1 it is a corporation duly organized and validly existing under
the laws of the State of North Carolina;
12.1.2 it has the full right, power and authority to enter into this
Agreement and to perform all of its obligations hereunder;
12.1.3 it is the owner of the Licensed Marks and has the exclusive
right to license others to use the Licensed Marks on and in
connection with the manufacture and sale of Products in the
Territory;
<PAGE>
12.1.4 it has not granted and will not grant during the term hereof
a license to any third party to use the Licensed Marks in connection
with the sale of Licensed Products in the Territory;
12.1.5 it has not employed or engaged a broker or finder to
bring about this transaction;
12.1.6 there is no litigation or controversy of which Licensor is
aware which may adversely affect the use of the Licensed Marks on
Products by Licensee in the Territory.
12.2 Licensee represents and warrants that:
12.2.1 it is a corporation duly organized and validly existing
under the laws of the State of North Carolina;
12.2.2 it has full legal right, power and authority to enter
into this Agreement and to consummate all the transactions
contemplated herein;
12.2.3 it is not a party to any agreement that would restrict or
limit its activities hereunder; and
12.2.4 it has not employed or engaged a broker or finder to bring
about this transaction.
13. Licensor in Advisory Capacity.
In providing any information hereunder, Licensor is and will be
acting in an advisory capacity only, and Licensor shall have no
responsibility for the operation and production of Licensee's
business or its manufacture, distribution, advertising or sales, or
for the facilities used in connection therewith, or for any decision
that may be made in connection therewith, whether
<PAGE>
upon the recommendation of Licensor or otherwise.
14. No Partnership or Joint Venture.
Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as agent
of the other, and neither Licensee nor Licensor shall have the power
to obligate or bind the other in any manner whatsoever.
15. Confidentiality.
Each party acknowledges that all information of a business or
technical nature imparted to the other during the course of this
Agreement with respect to the business of such party was acquired,
designed and developed by them at great expense' are secret and
confidential, are unique and constitute the trade secrets and
exclusive property of such party and that any use by the other party
of such trade secrets and property other than pursuant to this
Agreement would be wrongful and would cause irreparable injury to
such party.
16. Notice.
Any notices by this Agreement will be deemed sufficient given if
hand~elivered or mailed via United States Mail, postage prepaid,
certified return receipt requested to the following:
To Licensor:
International Heritage, Inc.
2626 Glenwood Avenue, Suite 120
Raleigh, North Carolina 27608
And a Copy to:
Ragsdale, Liggett & Foley
Post Office Box 31507
Raleigh, North Carolina 27622-1507
Attention: Georgina Mollick
<PAGE>
To Licensee: Premium Concepts, Inc.
5805 Cold Harbor Drive
Greensboro, North Carolina 27410
17. Insurance.
Licensee shall maintain, at its own expense, in full force and
effect at all times during which Licensed Products are being sold
and used, with a recognized and responsible insurance carrier
licensed to do business in the State of North Carolina, acceptable
to Licensor, a public liability insurance policy, including products
liability coverage, with limits of liability of at least $500,000
per accident or occurrence (with a deductible of not more than
$1000) with respect to the Licensed Products and this Agreement.
Such insurance policy shall be in such form or duration as shall
insure against all accidents or occurrences happening at any time
during which Licensed Products are being sold or used regardless of
when claims may be made. Such insurance policy shall be written for
the benefit of and shall name as co-insured Licensor, and Licensee
and will provide for at least ten (10) days' prior written notice to
Licensor and Licensee of the cancellation or any substantial
modifications thereof. Such insurance may be obtained for Licensor
by Licensee in conjunction with a policy or products liability
insurance which covers products other than Licensed Products.
Licensee will deliver a cer~cate of such insurance to Licensor
promptly upon issuance of said insurance policy and shall, annually
and otherwise, from time to time, upon reasonable request by
Licensor, promptly furnish to Licensor evidence of the maintenance
of said insurance policy. Nothing contained in this paragraph 17
shall be deemed to limit, in any way, the indemnification provisions
of paragraph 10 above. <PAGE>
18. This Agreement contains the entire understanding and agreement
and is a complete statement of all the arrangements between the
parties with respect to its subject matter, supersedes all prior
oral and written understandings and agreements relating thereto,
and may not be modified, discharged or terminated orally.
19. Applicable Law.
This Agreement shall be construed and interpreted in accordance
with the laws of the State of North Carolina. However, any
disputes, controversies or claims relating to or affecting
Licensor's ownership of, or the validity of the Licensed Marks or
any application thereof ("Licensed Mark Disputes") shall be resolved
in accordance with the federal trademark and related laws, statutes,
rules and regulations where applicable.
20. Invalid Provision.
The invalidity or enforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as of such invalid
or unenforceable provision were omitted.
21. Duplicate Originals.
This Agreement may be executed in any number of typewritten or
mechanically reproduced counterparts, each of which shall be deemed
to be an original, but all of which together shall constitute one
and same Agreement.
22. Arbitration.
Any controversy or claim arising out of or relating to this
Agreement, of the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association, Entire
A~reement/Modification.
<PAGE>
under its Commercial Arbitration Rules, and judgment on the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be made within
a reasonable time after the claim, dispute or controversy has arisen
and in no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on
such claim, dispute or other matter in controversy would be banned
by applicable statute of limitations. [SIGNATURE PAGE ATTACHED]
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seal as of
the day and year first hereinabove written.
LICENSOR:
INTERNATIONAL HERITAGE INCORPORATED
/s/ STANLEY VAN ETTEN
TITLE: PRESIDENT
ATTEST: DWIGHT D. HALLMAN
(SEAL)
LICENSEE:
PREMIUM CONCEPTS, INC.
BY: RONALD CASSESEE
TITLE: PRESIDENT
ATTEST:
SECRETARY
(SEAL)
<PAGE>
ADDENDUM TO LICENSE AGREEMENT
THIS ADDENDUM to the License Agreement dated June 30, 1995, is made
this ~ day of September, 1995, executed by and between Premium
Concepts, Inc., a North Carolina Corporation, having its
principal place of business at: 5805 Cold Harbor Drive,
Greensboro, North Carolina 27410 (hereinafter referred to as
"Licensee"), and International Heritage, Inc. a North Carolina
Corporation, having its principal place of business at: 2626
Glenwood Avenue, Suite 120, Raleigh, North Carolina 27608
(hereinafter referred to as "Licensor").
WITNESSETH:
WHEREAS, Licensor and Licensee have had a valid exchange of new
and adequate consideration; and
WHEREAS, the underlying License Agreement still accurately
reflects the intent of the parties but for the specified changes
below;
NOW, THEREFORE, in consideration of the mutual promises,
covenants and agreements and other good and valuable consideration,
let the underlying Agreement dated the 30th day of June, 1995, be
changed to encompass the Agreement as follows:
1. New Compensation to Licensor. In consideration of the
taking and processing of all orders incident to the Agreement by
Licensor, Licensee shall pay to Licensor during each contract year,
or part thereof, a royalty of ten percent (10%) of Licensee's net
sales of licensed products during such contract year, or part
thereof. This Addendum shall have the power and intent of making
null and void paragraph 4.1 of the underlying Agreement (providing
that Licensee's compensation to Licensor shall be seven and one-half
percent (7.5%) of net sales).
2. New Compensation to Licensee. As new and valuable
consideration for this change in compensation to Licensor, the
Licensee shall enjoy the benefit of Licensor taking and processing
all orders incident to the Agreement.
IN WITNESS WHEREOF, the parties have set their hands and seal as of
the day and year first hereinabove written.
LICENSOR:
INTERNATIONAL HERITAGE, INCORPORATED
by: /s/ Stanley H. Van Etten
Title: President
Attest
Dwight D. Hallman
Secretary
(Seal)
LICENSEE:
PREMUM CONCEPTS, INC
BY: /s/ RONALD W. CASSEE
TITLE: PRESIDENT
ATTEST:
/s/ Mike Ward
Secretary
(Seal)
<PAGE>
INVENTORY MANAGEMENT AND FULFILLMENT SERVICES AGREEMENT
This Agreement is made and entered into between SPECIALTY
ATLANTA, INC. (hereinafter "SPECIALTY") and INTERNATIONAL HERITAGE,
INC. hereinafter "CUSTOMER"), this 1st day of November, 1996.
WITNESSETH
WHEREAS, SPECIALTY is in the business of (a) producing custom
logoed materials, including promotional products, business forms,
stationery and commercially printed products, (b) producing catalogs
to promote and distribute promotional materials, and (c) warehousing
and shipping such products on behalf of its customers; said business
hereinafter collectively referred to as "promotional materials"; and
WHEREAS, CUSTOMER desires to contract with SPECIALTY for such
promotional materials;
NOW THEREFORE, for and in consideration of the covenants and
promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. General Description of Services.
a) Consulting. SPECIALTY shall consult CUSTOMER in developing
promotional materials appropriate for CUSTOMER's needs.
b) Production. SPECIALTY shall produce such promotional
materials, including promotional catalogs under the terms and
conditions described herein.
c) Inventory Control. SPECIALTY shall order and warehouse the
promotional materials described herein and replenish such
inventory as may be required from time to time.
d) Order Fulfillment. SPECIALTY shall receive, process, fill
and ship orders for the materials described.
2. Selection and Pricing of Catalog Products.
(a) Selection. CUSTOMER shall, with the assistance of
SPECIALTY, select the materials to be included in the catalog, and
shall determine the content and location of imprinted copy to be
included on each item. SPECIALTY shall provide CUSTOMER with
reproduction samples of each promotional item, for approval by
CUSTOMER. The cost of preproduction samples shall be paid by
CUSTOMER when invoiced by SPECIALTY. All promotional materials
approved by CUSTOMER shall be described in as Exhibit "A." Exhibit
"A" may be supplemented or modified from time to time by the parties
by means of addenda executed by both parties hereto.
(b) Pricing. The price for promotional materials shall be
as agreed and set forth in
Exhibit "A" and shall remain in effect for one year. Any
desired changes in pricing shall be supplied by one party to the
other no later than sixty (60) days before the anniversary date
of this Agreement.
3. Catalog.
(a) Description of Catalog. The promotional materials
described herein shall be
promoted through a catalog prepared for CUSTOMER by SPECIALTY,
containing pictures and descriptions of promotional materials,
appropriate order forms, minimum order requirements and other
information relating to purchase and shipping of such materials.
The specific nature and number of catalogs to be provided shall
be as specified in Exhibit "B," which shall be attached hereto
and shall be incorporated herein.
(b) Catalog Proofs. SPECIALTY SHALL provide CUSTOMER with
proofs of
such catalogs before printing, and shall arrange for printing of
such catalogs. CUSTOMER shall be responsible for and shall pay
to SPECIALTY the direct out-of-pocket production costs incurred
with respect to outside photographers, printers and other vendors
involved in preparing, printing and shipping the catalog, as
noted in Exhibit "B."
(c) Method of Ordering. Order for material in inventory
may be placed by verbal telephone order or facsimile hard copy
order via toll free telephone/fax numbers provided by SPECIALTY
or by hard copy order on the forms provided with the catalogs.
Should CUSTOMER desire to restrict to place limitations on the
manner of placing orders, or limit the persons authorized to
place orders, it shall be CUSTOMER'S responsibility to so notify
SPECIALTY in writing. Orders for less than minimum specified in
catalog shall be filled at SPECIALTY'S discretion.
4. Inventory Control.
(a) Ownership of Inventory. The inventory covered by this
Agreement shall be at all times be the property of CUSTOMER.
SPECIALTY agrees that it shall provide all necessary insurance
coverage with respect to hazards in an amount at all times
sufficient to cover the highest value of inventory covered by
this Agreement stored on or off-site.
(b) Inventory Levels. The initial inventory and any
subsequent additions of promotional materials to inventory shall
be determined by CUSTOMER, based on projected four (4) months
usage. SPECIALTY shall monitor the demand for each item in
inventory and shall endeavor to maintain a continuing inventory
equivalent to a four (4) month supply of each item. Provided,
however, that this inventory level may be exceeded with respect
to items which are subject to minimum purchasing requirements
and/or cost-prohibitive minimums. In such exceptional cases
SPECIALTY, with CUSTOMER'S written approval, shall maintain the
inventory of such items in a quantity larger than a four (4)
month supply. Any inventory in excess of a four (4) month supply
may be maintained at the off-site storage facility pursuant to
the excess inventory provisions of paragraph 4(c).
(c) Excess and Discontinued Inventory. If at any time the
inventory level of any materials exceeds a four (4) month supply,
SPECIALTY shall have the right to store the excess inventory at
CUSTOMER'S expense at an off-site warehouse storage facility
located within a ten (10) mile radius of SPECIALTY's Atlanta
offices. SPECIALTY may, as its option store such excess
inventory at its Atlanta facility at the expense of CUSTOMER,
provided that the expense of storage of the excess inventory on-
site shall not exceed the lowest cost of suitable off-site
storage. CUSTOMER shall have the right to discontinue items from
inventory from time to time, provided that it shall pay for all
reorders made by SPECIALTY prior to SPECIALTY being notified of
the discontinuation. CUSTOMER shall be responsible for the
disposal of any discontinued or obsolete items in inventory at
its own expense or, upon agreement with SPECIALTY, shall
compensate SPECIALTY for disposal of such items.
(d) Material Review. The parties agree to perform a review
of materials in inventory on at least a semi-annual basis to
eliminate obsolete items, to determine whether inventory should
be increased or decreased and to identify excess inventory for
storage off-site.
(e) Shipping. All orders shall be shipped within forty-
eight (48) hours of receipt and shall be shipped domestically by
UPS ground and internationally by DHL, unless special
arrangements have been otherwise made in advance.
5. Fees and Billings.
(a) Monthly Orders. On a monthly basis, SPECIALTY will
bill directly to CUSTOMER on a consolidated basis for all
handling and shipping charges for orders shipped from inventory
during the preceding month. The monthly billing shall be on the
basis of three dollars and fifty cents ($3.50) per order handling
charge for domestic shipments and fifteen dollars ($15.00) per
order handling charge for international shipments, plus outbound
freight charges.
(b) Inventory Replenishment Billings. The cost of
replacement or new inventory, plus inbound freight charges, shall
be billed to and paid by CUSTOMER on an as incurred basis.
(c) Fulfillment Service Fee on Ancillary Products. As
noted in Exhibit C, certain promotional materials pertaining to
the conduct of the program are provided by CUSTOMER for storage
and fulfillment and are not sold to Customer by SPECIALTY. On a
monthly basis, SPECIALTY will bill direct to CUSTOMER on a
consolidated basis for all fulfillment, handling, and shipping
charges for orders noted in Exhibit C during the preceding month.
The monthly billing shall be on the basis of 15% of the cost of
the inventory items shipped (fulfillment fee), plus three dollars
and fifty cents ($3.50) per order handling charge for domestic
shipments and fifteen dollars ($15.00) per order handling charge
for international shipments, plus outbound freight charges.
6. Payment. CUSTOMER shall pay to SPECIALTY amounts as
invoiced by SPECIALTY under this Agreement on a net thirty (30)
day basis. Interest shall accrue on payments not made within
thirty (30) days after invoice at the rate of 1.5% per month.
7. Right of Inspection. CUSTOMER, with the provision of
reasonable notice to SPECIALTY, shall be entitled to audit
SPECIALTY'S CUSTOMER warehouse inventory, books and records at
SPECIALTY'S location.
8. Warranties.
(a) Work Standard. SPECIALTY represents and warrants to
CUSTOMER that all services will be performed in a professional
and workmanlike manner in accordance with industry standards and
practices applicable to the performance of such services to be
rendered hereunder.
(b) Personnel. SPECIALTY represents and warrants to
CUSTOMER that the personnel assigned to perform services for
CUSTOMER pursuant to this Agreement will be qualified individuals
of suitable training, experience and skill to perform the
services.
(c) Quality of Product. SPECIALTY represents and warrants
that the materials provided hereunder will be top quality
materials, free from material defects. SPECIALTY'S failure to
produce materials which conform to proofs provided to CUSTOMER
for materials hereunder approved by CUSTOMER for production shall
be deemed nonconforming under the requirements of this provision.
Any materials as noted in Exhibit "A" which are deemed as
nonconforming by this provision shall be replaced or credited to
CUSTOMER.
9. Exclusivity of Agreement. The parties agree that
during the life of this Agreement CUSTOMER shall utilize
SPECIALTY as the sole supplier of promotional materials
specifically included in the catalog and Exhibit "A" attached
hereto, and additional promotional materials that CUSTOMER elects
to add to Exhibit "A" during the term of this Agreement. In the
event CUSTOMER elects to offer other promotional materials not
covered by this Agreement nor which are not added to Exhibit "A"
during the term hereunder, CUSTOMER will extend to SPECIALTY a
reasonable opportunity to match any bona fide offer from another
company for the production of those promotional materials.
10. Use of CUSTOMER'S Logomarks. SPECIALTY shall not be
allowed to use CUSTOMER'S logo for any purposes other than those
specifically contemplated herein and shall not sell or otherwise
distribute any promotional materials or other materials
containing CUSTOMER's logo except pursuant to the terms hereof.
Logos for purposes of preceding sections shall include names,
logos, trademarks, or other promotional words, phrases, drawings
or copyrighted matter used by CUSTOMER to promote itself.
11. Termination. This Agreement shall be in force for two
(2) years and thereafter for one (1) year terms unless one party
gives notice of termination to the other no later than thirty
(30) days before the anniversary date of the Agreement. This
Agreement may be terminated by CUSTOMER in accordance with this
provision without any continuing liability to SPECIALTY.
CUSTOMER shall be responsible for payment to SPECIALTY for
merchandise ordered and received before the effective date of
termination. In the event of termination by SPECIALTY hereunder,
it shall be responsible for the delivery of all merchandise
ordered by CUSTOMER before the effective date of termination.
In the event either party is in material breach of this
Agreement and said breach is not cured to the reasonable
satisfaction of the nonbreaching party within thirty (30) days
following notice of breach to the party in breach, the
nonbreaching party may terminate this Agreement without further
notice. Breach hereunder shall include, but is not limited to,
nonperformance, poor performance, or material noncompliance with
any provision of this Agreement. In the event SPECIALTY cannot
effect the cure, CUSTOMER shall have the right but not the
obligation to undertake the cure itself.
12. Miscellaneous.
(a) Effects of Headings. Headings to articles and
paragraphs of this Agreement are to facilitate reference only and
shall not in any way affect the interpretation hereof.
(b) Assignment. No rights or obligations hereunder shall
be assigned or delegated, in whole or in part, by SPECIALTY to
any other person, firm or corporation without the express written
consent of CUSTOMER/
(c) Non-waiver. Neither party's failure hereunder to
assert any rights under this Agreement against the other party
for nonperformance, breach of contract or any other conduct shall
be deemed a waiver of any right or option under this Agreement,
either in equity or law.
(d) Limitation of Liability. Neither party shall be liable
to any third party for loss of business opportunity, lost profits
or any special or consequential damages, regardless of the legal
theory asserted and even if advised of the possibility of any
such occurrences.
(e) Notices. Except as otherwise provided in this
Agreement, all notices required or permitted to be given
hereunder shall be made by certified mail, return receipt
requested, or by an overnight mail service having record of
receipt and addressed as follows:
If to CUSTOMER:
INTERNATIOANL HERITAGE, INC.
2626 Glenwood Ave., Suite 120
Raleigh, NC 27608
If to SPECIALTY:
Specialty Atlanta, Inc.
1690 Bluegrass Lakes Parkway
Alpharetta, Georgia 30201
(f) Severability. Should any part of this Agreement for
any reason be declared invalid by court order, such order shall
not affect the validity of any remaining portion, which shall
remain in force and effect as if this Agreement had been executed
with the invalid portion thereof eliminated, and is hereby
declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without
including herein any such party or portion which may, for any
reason, by hereby declared invalid.
(g) Force Majeure. The parties' performance under this
Agreement shall be
excused if such nonperformance is due to labor difficulties,
governmental orders, equipment failures, acts of nature, weather
disturbances or adverse weather conditions, and other
circumstances beyond the parties' reasonable control.
(h) Controlling Documents. The terms and conditions of
this Agreement supersede any and all prior to contemporance
agreements, whether oral or written. Any amendment to this
Agreement shall be designated as such and shall be in writing and
signed by a duly authorized employee of each of the parties
hereto.
(i) No Joint-Employer Relationship. This Agreement is not
intended to create a joint employer, shared employee or leased
employee relationship with respect to any employees of either
party. If any provision of this Agreement is deemed to do so,
such provision shall be deemed to be restated to reflect the
intention of the parties, and the remainder of this Agreement
shall remain in full force and effect.
(j) This Agreement shall be interpreted under the laws of the
State of Georgia.
THIS PORTION LEFT INTENTIONALLY BLANK
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their respective corporate names by
the proper officers, all with authority duly given by the Board
of Directors if each corporation to be effective as of the day
and year first above written.
SPECIALTY ATLANTA, INC.
By:__________________________
Attest:
____________________________
Secretary
INTERNATIONAL HERITAGE, INC.
By:__________________________
Attest:
____________________________
Secretary
CORPORATE SEAL
EXHIBIT A
INTERNATIONAL HERITAGE, INC.
LAPEL PIN PROGRAM
PROGRAM 1
RETAIL SALES ORGANIZATION ACHIEVEMENT
Level 1
Designation: Associate
Design: Oval _"
Finish: die struck brass with antique bronze finish
Stones: none
Attachment: deluxe clutch
Package: plastic gift box
Sample: yes
Net Cost: $ 3.22
Level 2
Designation: Senior Associate
Design: Oval _"
Finish: die struck brass with nickel silver finish
Stones: none
Attachment: deluxe clutch
Package: plastic gift box
Sample: yes
Net Cost: $ 3.22
Level 3
Designation: Executive
Design: Oval _"
Finish: die struck brass with 22K gold finish
Stones: none
Attachment: deluxe clutch
Package: plastic gift box
Sample: yes
Net Cost: $ 3.22
Level 4
Designation: Senior Executive
Design: Diamond Shape _"
Finish: die struck brass with 22K gold finish
Stones: none
Attachment: deluxe clutch
Package: velvet gift box
Sample: yes
Net Cost: $ 5.52
Level 5
Designation: Director
Design: Diamond Shape w/panel
Finish: 10K gold fill
Stones: none
Attachment: deluxe clutch
Package: velvet gift box
Sample: yes
Net Cost: $ 15.70
Level 6
Designation: Senior Director
Design: Diamond Shape w/panel
Finish: 10K gold fill
Stones: 3 point ruby-synthetic stone
Attachment: deluxe clutch
Package: velvet gift box
Sample: yes
Net Cost: $ 18.90
Level 7
Designation: Presidential Director
Design: Diamond Shape w/panel
Finish: 10K gold fill
Stones: 3 point ruby and sapphire-synthetic stones
Attachment: deluxe clutch
Package: velvet gift box
Sample: yes
Net Cost: $ 2.10
Level 8
Designation: Ambassador
Design: Diamond Shape w/panel
Finish: 10K gold fill
Stones: 3 point ruby, sapphire, and emerald-synthetic stones
Attachment: deluxe clutch
Package: velvet gift box
Sample: yes
Net Cost: $ 25.30
Level 9
Designation: International Ambassador
Design: Diamond Shape w/panel
Finish: 10K gold fill
Stones: 3 point ruby, sapphire, emerald and diamond-synthetic
Attachment: deluxe clutch
Package: velvet gift box
Sample: yes
Net Cost: $ 28.50
Level 10
Designation: Chairman's Circle
Design: Diamond Shape w/panel
Finish: 14K gold fill
Stones: 5 point genuine diamond
Attachment: deluxe clutch
Package: deluxe jewelry box
Sample: yes
Net Cost: $ 232.80
PROGRAM 2
RETAIL SALES ACHIEVEMENT
Level 1
Designation: Bronze
Design: rectangle design
Finish: die struck brass with antique bronze finish
Stones: none
Attachment: deluxe clutch
Package: plastic gift box
Sample: pending
Net Cost: $ 2.87
Level 2
Designation: Silver
Design: rectangle design
Finish: die struck brass with nickel silver finish
Stones: none
Attachment: deluxe clutch
Package: plastic gift box
Sample: pending
Net Cost: $ 3.22
Level 3
Designation: Gold
Design: rectangle design
Finish: die struck brass with 22K gold finish
Stones: none
Attachment: deluxe clutch
Package: plastic gift box
Sample: pending
Net Cost: $ 3.58
Level 4
Designation: Ruby
Design: rectangle design
Finish: die struck brass with two tone finish - 22K gold and
silver
Stones: genuine 3 point ruby
Attachment: deluxe clutch
Package: velvet gift box
Sample: pending
Net Cost: $ 12.50
Level 5
Designation: Sapphire
Design: rectangle design
Finish: die struck brass with two tone finish - 22K gold and
silver
Stones: genuine 3 point sapphire
Attachment: deluxe clutch
Package: velvet gift box
Sample: pending
Net Cost: $ 12.50
Level 6
Designation: Emerald
Design: rectangle design
Finish: die struck brass with two tone finish - 22K gold and
silver
Stones: genuine 3 point emerald
Attachment: deluxe clutch
Package: velvet gift box
Sample: pending
Net Cost: $ 12.50
Level 7
Designation: Diamond
Design: rectangle design
Finish: die struck brass with two tone finish - 22K gold and
silver
Stones: genuine 3 point diamond
Attachment: deluxe clutch
Package: velvet box
Sample: pending
Net Cost: $ 43.40
Level 8
Designation: Gold Diamond
Design: rectangle design
Finish: 10K gold fill (solid - no two tone)
Stones: genuine 3 point diamond
Attachment: deluxe clutch
Package: black jewelry box
Sample: no
Net Cost: $ 54.40
Level 9
Designation: Platinum
Design: rectangle design
Finish: 14K sold white gold (no two tone)
Stones: none
Attachment: deluxe clutch
Package: black jewelry box
Sample: no
Net Cost: $ 233.00
Level 10
Designation: Platinum Diamond
Design: rectangle design
Finish: 14K solid white gold (solid - no two tone)
Stones: genuine 5 point diamond
Attachment: deluxe clutch
Package: black jewelry box
Sample: no
Net Cost: $ 296.00
One Time
Tooling Charges: oval design: $ 150.00
diamond design: 150.00
diamond w/panel: 550.00
rectangle design: 150.00
$1000.00
Prices are guaranteed under contract until December 31, 1997.
<PAGE>
AGREEMENT
THIS AGREEMENT is made this 27TH day of September, 1995, by
and between Stanley H. Van Etten and Stanley L. Van Etten
(collectively "Authors") and International Heritage, Inc., a North
Carolina corporation ("IHI").
W I T N E S S E T H:
WHEREAS, Authors are the proprietors and creators of the work
"Gettin' the Business: A Sales Professionals' Handbook" which is
the subject of this Agreement; and
WHEREAS, IHI would like a special edition of "Gettin' the
Business: A Sales Professionals' Handbook" ("Special Edition")
created for use as the Company's sales training manual for
distribution to its independent Retail Sales Representatives; and
WHEREAS, Authors desire to maintain all future and present
right, title, interest and any and all intellectual property rights
associated with the book; and
WHEREAS, IHI agrees to expressly disclaim any future or present
right, title or interest and any and all intellectual property
rights associated with the book or its contents; and
WHEREAS, Authors shall arrange for publishing the Special
Edition and IHI shall pay to Authors a per book price.
NOW THEREFORE, upon the mutual promises of the parties, and good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, it is agreed as follows:
1. Creation of Special Edition. Authors shall create a Special
Edition of "Gettin' the Business: A Sales Professionals' Handbook"
for IHI. The Special Edition shall contain a rewrite of the
original text to relate specifically to the business of IH1, in
addition, the Special Edition shall contain a chapter on Network
Marketing, specifically drafted for IHI. The Special Edition shall
be reviewed and approved by IHI prior to any publication duplication
and distribution thereof.
2. Fee for Creation of Special Edition. IHI shall pay to
Authors a fee of Ten Thousand Dollars ($10,000.00) for preparation
of the Special Edition. IHI shall pay Five Thousand Dollars
($5,000.00) upon the execution of this Agreement and the balance of
Five Thousand Dollars ($5,000.00) upon approval of the Special
Edition for publication, duplication and distribution.
3. Publication of the IHI Special Edition. Authors shall make
arrangements to publish the Special Edition on behalf of IHI and
will sell the copies to IHI at a price of Ten and 00/100 Dollars
($10.00) per book. The suggested retail price of the book shall be
Nineteen and 951100 Dollars ($19.95) per book. The Special Edition
must be ordered in multiples of five
<PAGE> thousand (5,000) copies, with fifty percent (50%) of the
order cost to be paid to Authors at the tone the order is placed and
fifty percent (50%) upon delivery.
4. Rights in Special Edition. All present and future rights,
title and interest in the Special Edition are hereby expressly
reserved to the Authors and may be exercised, sold, licensed, or
otherwise disposed of by them, in whole or in part, at any time.
Further, the Authors shall have the exclusive right to sell,
license, lease or otherwise dispose of any associated or subsidiary
rights to the Special Edition. IHI expressly disclaims any present
or future rights, title or interest, as well as any associated or
subsidiary rights in or to the Special Edition or any portion of the
contents thereof.
5. infringement. The Authors shall have the right to prosecute
any act of infringement by any third party of any of the right,
title, interest, the copyright or any other rights in or to the
Special Edition held or owned by the Authors. IHl shall cooperate
completely with Authors in prosecuting any alleged infringement,
with the costs associated with such cooperation requested by Author
being borne by the Authors.
6. IHl's Bankruptcy or Liquidation. In the event IHI becomes
bankrupt or liquidates for any cause, the Authors shall have the
right to any remaining, but undistributed copies of the Special
Edition.
7. Tennination. This Agreement shall continue in force and
effect until such time as the Special Edition is printed.
Subsequent printing of the Special Edition shall be permitted, at
the expense of IHI, and all such reprints shall be subject to the
provisions of this Agreement.
8. Notices. Any notice to be given hereunder shall be sent via
registered or certified mail, return receipt requested, or via hand
delivery, or via overnight mail addressed to the parties at the
following:
If to Authors:
Stanley H. Van Etten
Mayflower Holdings, Inc.
2626 Glenwood Ave., Suite 300
Raleigh, NC 27608
and: Stanley L. Van Etten
Route 1, Box 75
Lawsonville, NC 27022
If to IHI: International Heritage, Inc.
2626 Glenwood Ave., Ste. 120
Raleigh, NC 27608
<2>
<PAGE>
With a Copy To:
Ragsdale, Liggett & Foley, PLLC
Post Office Box 31507
Raleigh, NC 27622-1507
Attn: Georgina Marie Mollick
9. Waiver or Modification. The waiver of a breach of any term
hereof or of any default hereunder shall not be deemed a waiver of
any subsequent breach or default, whether of the same or similar
nature, and shall not 'in any way affect the other terms hereof. No
waiver or modification shall be valid or binding unless in writing
and signed by the parties.
10. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled
by arbitration administered by the American Arbitration Association,
under its Commercial Arbitration Rules, and judgment on the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. A demand for arbitration shall be made within
a reasonable time after the claim, dispute or controversy has arisen
and in no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on
such claim, dispute or other matter in controversy would be banned
by the applicable statute of limitations.
11. Applicable Law. This Agreement shall be governed by the
laws of the State of North Carolina.
12 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the executors, administrators, and assigns
of the Authors and the successors and assigns of IHI.
13 Entire Agreement. This Agreement supersedes all agreements
previously made between the parties relating to its subject matter.
There are no other understandings or agreement.
14. Invalid Prove on. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the
other provisions hereof, and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision were
omitted.
15. Headings. Headings in this Agreement are for convenience
only and shall not be used to interpret or constme, its provisions.
16. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
[SIGNATURE PAGE ATTACHED]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first hereinabove written.
STANLEY H. VAN ETTEN
/s/ STANLEY H. VAN ETTEN
/s/
Witness STANLEY L. VAN ETTEN
/s/ STANLEY L. VAN ETTEN
INTERNATIONAL HERITAGE, INC
By: Dwight D. Hallman
Title: Assistant Secretary
<PAGE>
INTERNATIONAL HERITAGE, INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan. The purposes of this 1996 Stock
Option Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide
additional incentive to Employees, Consultants and Independent
Retail Sales Representatives of the Company and its Subsidiaries
(as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended ("Code")) and to promote the success of the
Company's business. Options granted under the Plan may be
incentive stock options (as defined under Section 422 of the
Code) or nonstatutory stock options, as determined by the
Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions
shall apply:
(a) "Administrator" means the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the
Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4
of the Plan.
(e) "Common Stock" means the Common Stock of the
Company.
(f) "Company" means International Heritage, Inc., a
North Carolina corporation.
(g) "Consultant" means any person, including an
advisor, who is engaged by the Company or any Subsidiary to
render services and is compensated for such services, and any
director of the Company whether compensated for such services or
not, provided that if and in the event the Company registers any
class of any equity security pursuant to the Exchange Act, the
term Consultant shall thereafter not include directors who are
not compensated for their services or are paid only a director's
fee by the Company.
(h) "Continuous Status as an Employee" means the
absence of any interruption or termination of the employment
relationship by the Company or any Subsidiary. Continuous Status
as an Employee shall not be considered interrupted in the case
of: (i) sick leave; (ii) military leave; or (iii) any other
leave of absence approved by the Board, provided that such leave
is for a period of not more than (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy
adopted from time to time.
(i) "Employee" means any person, including officers
and directors, employed by the Company or any Subsidiary of the
Company. The payment of a director's fee by the Company shall
not be sufficient to constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(k) "Fair Market Value" means, as of any date, the
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system including
without limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange, or the exchange
with the greatest volume of trading in Common Stock, for the last
market trading day prior to the time of determination) as
reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or
regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean
between the high bid and low asked prices for the Common Stock;
or
(iii) In the absence of an established market
for the Common Stock, the Fair Market Value thereof shall be
determined in good faith by the Administration.
(l) "Incentive Stock Option" means an Option intended
to qualify as an incentive stock option within the meaning of
Section 422 of the Code.
(m) "Independent Retail Sales Representative" an
independent contractor (non-employee) who purchases products from
the Company and resells them to the public or consumers such
products him or herself.
(n) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to
the Plan.
(p) "Optioned Stock" means the Common Stock subject to
an Option.
(q) "Optionee" means an Employee, Consultant or
Independent Retail Sales Representative who receives an Option
under the Plan.
(r) "Parent" means a "parent corporation," whether nor
or hereafter existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 1996 Stock Option Plan.
(t) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 12 of the Plan.
(u) "Subsidiary" means a "subsidiary corporation,"
whether nor or hereafter existing, as defined in Section 424(f)
of the Code.
(3) Stock Subject to the Plan. Subject to the provisions
of Section 12 of the Plan, the maximum aggregate number of Shares
which may be optioned and sold under the Plan is up to fifteen
percent (15%) of the authorized Shares of common stock but not to
exceed thirty percent (30%) of the issued and outstanding Shares
of common stock as of the date of Plan adoption.
If an Option should expire or become unexercisable for
any reason without having been exercised in full, the unpurchased
Shares which were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the
Plan.
(4) Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of options to Employees who are
also officers or directors of the Company, the Plan shall be
administered by (A) the Board if the Board may administer the
Plan in compliance with Rule 16b-3 promulgated under the Exchange
Act or any successor thereto ("Rule 16b-3") with respect to a
plan intended to qualify thereunder as a discretionary plan, or
(B) a committee designated by the Board to administer the Plan,
which committee shall be constituted in such a manner as to
permit the Plan to comply with Rule 16b-3 with respect to a plan
intended to qualify thereunder as a discretionary plan. Once
appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor,
fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the
extent permitted by Rule 16b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted
by Rule 16b-3, the Plan may be administered by different bodies
with respect to directors, non-director officers and Employees
who are neither directors nor officers.
(iii) Administration With Respect to
Consultants, Independent Retail Sales Representatives and Other
Employees. With respect to grants of Options to Employees,
Independent Retail Sales Representatives or Consultants who are
neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a committee designated by
the Board, which committee shall be constituted in such a manner
as to satisfy the legal requirements relating to the
administration of incentive stock options plans, if any, of North
Carolina corporate and securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer
the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan and in the case of a Committee, the
specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants, Independent Retail
Sales Representatives and Employees to whom Options may from time
to time be granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
(iv) to determine the number of Shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted
hereunder;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under subsection
9(f) instead of Common Stock; and
(viii) to reduce the exercise price of any
Option to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option shall have
declined since the date the Option was granted.
(c) Effect of Administrator's Decision. All
decisions, determinations and interpretations of the
Administrator shall be final and binding on all Optionees and any
other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to
Employees, Independent Retail Sales Representatives and
Consultants. Incentive Stock Options may be granted only to
Employees. An Employee, Independent Retail Sales Representatives
or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted an additional Option or Options
(Nonstatutory Stock Options and/or Incentive Stock Options).
(b) Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding such
designations, to the extent that the aggregate Fair Market Value
of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company
or any Parent or Subsidiary) exceeds $100,000 such excess Options
shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares
is granted.
(d) The Plan shall not confer upon any Optionee any
right with respect to the continuation of employment or
consulting or independent contractor relationship with the
Company, nor shall it interfere in any way with his or her right
or the Company's right to terminate his or her employment or
consulting or independent contractor relationship at any time,
with or without cause.
6. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its
approval by the shareholders of the Company as described in
Section 18 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 14 of
the Plan.
7. Term of Option. The term of each Option shall be the
term stated in the Option Agreement; provided, however, that the
term shall be no more than five (5) years from the date of grant
thereof for an incentive stock option and no more than ten (10)
years from the date of grant thereof for a nonstatutory option.
However, in the case of an Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of
the Company or any Subsidiary, the term of the Option shall be
five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as
is determined by the Board, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock
representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any Subsidiary, the per
share exercise price shall be no less than 110% of the Fair
Market Value per share on the date of grant.
(B) granted to any other Employee, the per
share exercise price shall be no less than 100% of the Fair
Market Value per share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option.
(A) granted to a person who, at the time of
the grant of such Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or any Subsidiary, the per share exercise price shall be
no less than 110% of the Fair Market Value per share on the date
of the grant.
(B) granted to any other person, the per
share exercise price shall be no less than 85% of the Fair Market
per share on the date of grant.
(b) The consideration to be paid for the Shares to be
issued upon exercise of any Option, including the method of
payment, shall be determined by the Administrator (and, in the
case of an Incentive Stock Option, shall be determined at the
time of grant) and may consist entirely of:
(1) cash:
(2) check:
(3) promissory note:
(4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the
Optionee for more than six (6) months on the date of surrender,
and (y), have a Fair Market Value on the date of surrender equal
to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(5) authorization from the Company to retain from
the total number of Shares as to which the Option is exercised
that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of
Shares as to which the Option is exercised;
(6) delivery of a properly executed exercise
notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to
effect an exercise of the Option and delivery to the Company of
the sales or loan proceeds required to pay the exercise price;
(7) by delivering an irrevocable subscription
agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve (12)
months after the date of delivery of the subscription agreement;
(8) any combination of the foregoing methods of
payment; or,
(9) such other consideration and method of
payment of the issuance of Shares to the extent permitted under
Applicable Laws. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance
of such consideration may be reasonable expected to benefit the
Company.
9. Exercise of Option.
(a) Procedure for Exercise: Rights as a Shareholder.
Any Option granted hereunder shall be exercisable at such times
and under such conditions as determined by the Administrator,
including performance criteria with respect to the Company and/or
the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the Shares with respect
to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under
Section 8(b) of the Plan.
Until the stock certificate evidencing such Shares is issued
(as evidenced by the appropriate entry on the books of the
Company or of a duty authorized transfer agent of the Company),
no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be
available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Employment. In the event of
termination of an Optionee's consulting or Independent Retail
Sales Representative relationship or Continuous Status as an
Employee with the Company (as the case may be ), such Optionee
may, but only within a period of at least thirty (30) days (or
such other period of time as is determined by the Board, which,
in the case of an Incentive Stock Option shall not exceed three
(3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent
that Optionee was entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. Notwithstanding the
provisions of Section 9(b) above, in the event of termination of
Continuous Status as an Employee as a result of his or her
disability (as defined in Section 22(c)(3) of the Code), Optionee
may, but only within twelve (12) months from the date of such
termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement),
exercise the Option to the extent otherwise entitled to exercise
it at the date of such termination. To the extent that Optionee
was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the
extent so entitled with the time specified herein, the Option
shall terminate.
(d) Death of Optionee. In the event of the death of
an Optionee, the Option may be exercised, at any time within
twelve (12) months following the date of death (but in no event
later than the expiration date of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled
to exercise the Option at the date of death. To the extent that
Optionee was not entitled to exercise the Option at the date of
death, or if Optionee does not exercise such Option to the extent
so entitled within the time specified herein, the Option shall
terminate.
(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and
shall contain such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any
time offer to buy out for a payment in cash or Shares, an Option
previously granted, based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at
the time that such offer is made.
10. Non-Transferability of Options. The Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Withholding to Satisfy Withholding Tax
Obligations. At the discretion of the Administrator, Optionees
may satisfy withholding obligations as provided in this
paragraph. When an Optionee incurs tax liability in connection
with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay
the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation
by one of some combination of the following methods: (i) by cash
payment, or (ii) out of Optionee's current compensation, or (iii)
if permitted by the Administrator, in its discretion, by
surrendering the Company Shares which (a) in the case of Shares
previously acquired from the Company, have been owned by the
Optionee for more than six (6) months on the date of surrender,
and (b) have a Fair Market Value on the date of surrender equal
to or less than Optionee's marginal tax rate times the ordinary
income recognized, or (iv) by electing to have the Company
withhold from the Shares to be issued upon exercise of the Option
that number of Shares having a Fair Market Value equal to the
amount required to be withheld. For this purpose, the Fair
Market Value of the Shares to be withheld shall be determined on
the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
If the Optionee is subject to Section 16 of the Exchange Act
(an "Insider"), any surrender of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this
Option must comply with the applicable provisions of Rule 16b-3
and shall be subject to such additional conditions or
restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
All elections by an Optionee to have Shares withheld to
satisfy tax withholding obligations shall be made in writing in a
form acceptable to the Administrator and shall be subject to the
following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, the election shall be irrevocable as to
the particular Shares of the Option as to which the election is
made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator; and
(d) if the Optionee is an Insider, the election must
comply with the applicable provisions of Rule 16b-3 and shall be
subject to such additional conditions or restrictions as may be
required thereunder top qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the
Code because no election is filed under Section 83(b) of the
Code, the Optionee shall receive the full number of Shares with
respect to which the Option is exercised but such Optionee shall
be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of
Shares of Common Stock covered by each outstanding Option, and
the number of Shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in
the number of issued Shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares of Common Stock effected
without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the
Board whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance
by the Company of Shares of stock of any class, or securities
convertible into Shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to,
the number or price of Shares of Common Stock subject to an
Option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Board
shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously
exercised, the Option will terminate immediately prior to the
consummation of such proposed action.
(c) Merger. In the event of a merger of the Company
with or into another corporation, the Option shall be assumed or
an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor
corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the
closing of the merger. For the purposes of this paragraph, the
Option shall be considered assumed if, following the merger, the
option confers the right to purchase, for each Share of Optioned
Stock subject to the Option immediately prior to the merger, the
consideration (whether stock, cash, or other securities or
property) received in the merger by holder of Common Stock for
each Share held on the effective date of the transaction (and if
holder were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the
outstanding Shares); provided, however, that if such
consideration received in the merger was not solely common stock
of the successor corporation or its Parent, the Administrator
may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon
the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per
share consideration received by Holders of Common Stock in the
merger.
13. Time of Granting Options. The date of grant of an
Option shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option, or
such other date as is determined by the Board. Notice of the
determination shall be given to each Employee, Independent Retail
ales Representative or Consultant to whom an Option is so granted
within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any
time amend, alter, suspend or discontinue the Plan, but no
amendment, alteration, suspension of discontinuation shall be
made which would impair the rights of any Optionee under any
grant theretofore made, without his or her consent. In addition,
to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act or within Section 422 of the Code (or any
other applicable law or regulation, including the requirements of
the NASD or an established stock exchange), the Company shall
obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) Effect of Amendment and Termination. Any such
amendment or termination of the Plan shall not affect Options
already granted and such Options shall remain in full force and
effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and
the Company.
(c) Conditions Upon Issuance of Shares. Shares shall
not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the Issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed and shall be
further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and
warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is necessary or
required by any of the aforementioned relevant provisions of law.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been
obtained.
16. Reservation of Shares. The Company, during the term of
this Plan, will at all times reserve and keep available such
number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
17. Agreements. Options shall be evidenced by written
agreements in such form as the Board shall approve from time to
time.
18. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within
twelve (12) months before or after the date the Plan is adopted.
Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law.
19. Information to Optionees. The Company shall provide to
each Optionee, during the period such Optionee has one or more
Options outstanding, and to each individual who acquired Shares
pursuant to the exercise of an option, with annual financial
statements. The Company shall not be required to provide such
information to key employees whose duties in connection with the
Company assure their access to equivalent information.
**********
f:\wp\gmm\Stock.Option.Plan.IHI.
<PAGE>
INTERNATIONAL HERITAGE, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS (LOSS) PER SHARE
(Included in Financial Statements)
YEAR ENDED DECEMBER 31, 1996 AND PERIOD ENDED DECEMBER 31, 1995
1996 1995
Weighted-average number of common shares outstanding 7,273,246 6,441,248
Incremental shares issued 6,295,901 6,295,901
Adjusted weighted-average number of common and
common equivalent shares outstanding 13,569,147 12,737,149
Net income (loss) per audited financial statements $1,312,251 ($1,929,823)
Assumed interest income 152,593 152,593
Adjusted net income (loss) $1,464,844 ($1,777,230)
Earnings per common and common equivalent share $0.11 ($0.14)
Earnings per common share - assuming full dilution $0.11 ($0.14)
<PAGE>
For Ministry Use only Ontario Corporation Number
A lusage exclusif du ministere Numero de la compagnie en Ontario
1140938
Certificate Certifcat
This is to certify that these Ceci Certifie que les presents
articles are effective on status entrent en vigueur le
July 26 Juillet, 1995
/s/
Director/ Directeur
Business Corporations Act / Loi de sur les compagnies
Trans Line Comp Method
Code No. Stat Type Incorp
A O O A 3
18 20 28 29 30
Notice
Share Req'd Jurisdiction
S N ONTARIO
31 32 33 47
ARTICLES OF INCORPORATION
STATUTS CONSTITUTIFS
1.
The name of the coporation is: Denomination sociale de la compagnie
INTERNATIONAL HERITAGE OF
CANADA, INC
2. The address of registered office is : Adresse du slege social:
Suite 1001, 95 Wellington Street West
(Street & Number of R.R. Number & Muti-office bulding give Room No)
( Rue et numero ou numero de la R.R. et,
sill s'agit d'un edifice a bureaux, numero du bureau)
Toronto in the Metropolitan Toronto
Name of Municipality Geographical Township
County, district, regional municipality
Nom de la municpalite, du canton
Comte, district, municpalite, regionale
3. Number (or minimum and maximum number of
nombre (ou nombres minimal et maximal)
Directors is: d'administrateurs:
Minimum Number: 1
Maximum Number: 5
4. The first director(s) is/are: premier(s) administrateur(s):
First name, initials and surname Residence address giving
street & no. or RR.
Municipality and postal code
Prenom, initials et nom de famille Adresse peronnelle,
y compris la rue et le
numero,le numero de la
r.r. ou, le nom de la
municipalit et le code postal
Robert Stikeman 15 McGlashan Court
North York, Ontario, M5M 4M6
5. restrictions, if any, on Limites, sll y a
business the corporation may lieu, imposees
aux activites
carry on or on powers the corporation may exercise. Commerciales ou aux
pouvoirs de la
compagnie
None
6. The classes and any maxmum Categories et nombre maximal,
number of shares that actions que la compagne
sll y a lieu,
the coporation is authorized to issue. est autorisee a emettre
The corporation is authorized to issue an unlimited number of
shares of on class designated as common shares and an unlimited
number of shares of a second class designated as preference
shares.
7. Rights' privileges, restrictions and conditions (If any)
attaching to each class of shares and Directors
authority with respect to any class Or shares which
may no Issued In series:
7.01 the preference shares may be issued in one or more series;
7.02 the directors are authorized to fix the number of shares in
and to determine the designation, rights, privileges,
restrictions and conditions attaching to the shares of each
series except for the first series of such shares, in
respect of which the number, designation, rights,
privileges, restrictions and conditions are set out in
paragraph 4 below;
7.03 the preference shares of each series shall, with respect to
the priority in payment of dividends and in the return of
capital in the event of the liquidation, dissolution or
winding up of the corporation be entitled to a preference
over the Common shares of the corporation and over any
other shares ranking junior to the preference shares,
7.04 the first series of preference shares shall consist of
so,ooo shares designated as Series 'A' preference shares
and in addition to the preferences attaching to the
preference shares as a class set out in paragraph 3 above
shall have attached thereto the following rights,
privileges, restrictions and conditions:
7.04.1 the holder of each Series ''A'' preference share shall be
entitled to receive as and when declared by the directors
out of the monies properly applicable to the payment of
dividends preferential non-cumulative cash dividends at the
rate of eight per cent per share per annum, of the amount
paid to the Corporation for such share and no more;
7.04.2 the holder of each Series 'A'' preference share shall have the
right to two votes for such Series "A" preference share at
all meetings of the shareholders other than meetings of the
holders of another class or series of shares; and
7.04.3 in the event of the liquidation, dissolution or winding up of
the corporation, the holder of each Series "A" "reference
share shall be entitled to receive the amount paid to the
corporation for such share, together with all unpaid
dividends declared thereon.
7.05 the holder of each Common share has the right to one vote
for such Common shares at all meetings of the shareholders
other than meetings of the holders of any class of shares
and to receive the remaining property of the corporation
upon dissolution.
8. The Issue, transfer or ownership of shares Is/is not
restricted and the restrictions (lf any) are as follows:
The right to transfer shares of the corporation shall be restricted
in that no shares shall be transferred without either:
8.01 the previous consent of the directors of the
Corporation expressed by a resolution passed at a
meeting of the directors or by an instrument or
instruments in writing signed by a majority of the
directors; or
8.02 the previous consent of the holders of at least
51 of the shares for the time being outstanding
entitled to vote expressed by resolution passed at
a meeting of the shareholders or by an instrument
or instruments in writing signed by such
shareholders.
9. Other provisions , If any, are:
9.01 that the board of directors may from time to time,
and on such terms as it deems expedient:
9.01.1in such amounts borrow money on the credit of the
corporation;
9.01.2 issue, reissue, sell or pledge debt obligations (including
bonds, debentures, notes or other similar obligations,
secured or unsecured) of the corporation;
9.01.3 to the extent permitted by law, give a guarantee
on behalf of the corporation to secure
performance of any present or future
indebtedness, liability or obligation of any
person; and
9.01.4 charge, mortgage, hypothecate, pledge or
otherwise create a security interest in all or
any of the currently owned or subsequently
acquired real or personal, movable or immovable,
property of the corporation, including book
debts, rights, powers, franchises and
undertakings, to secure any debt obligations or
any money borrowed or other debt or liability of
the corporation;
The board of directors may from time to time
delegate such one or more of the directors and
officers of the corporation as may be designated
by the board all or any of the powers conferred
on the board above to such extent and in such
manner as the board shall determine at the time
of each such delegation;
9.02 that the number of shareholders of the corporation,
exclusive of persons who are in the employment of
the corporation and exclusive of persons who,
having been formerly in the employment of the
corporation, were, while in the employment, and
have continued after the termination of that
employment to be shareholders of the corporation,
is limited to not more than fifty (50), two (2) or
more persons who are the joint registered owners of
one (1) or more shares being counted as one (1)
shareholder; and
9.03 that any invitation to the public to subscribe for
any shares or securities of the corporation is
hereby prohibited.
10. The names and addresses of the incorporators are:
First name, Initials and surname or corporate name
Full residence address or address of registered
office or of principal place of business giving
street & No. or R.R. N., municipality and postal
code
Robert Stikeman 15 McGlashan Court
North York, Ontario
M5M 4M6
These areticles are signed in duplicate.
Signatures of Incorporators
/s/ Robert Stikeman
A by-law relating generally to the conduct of the business and
affairs of INTERNATIONAL HERITAGE OF CANADA, INC.
(herein called the "Corporations).
BE IT ENACTED as a by-law of the Corporation as follows:
1. INTERPRETATION
In this by-law and all other by-laws and resolutions of
the Corporation, unless the context otherwise requires:
1.01 "Act" means the Business Corporations Act, R.S.O. 1990,
c. B16, as amended from time to time, and any statute
that may be substituted therefore, and includes the
Regulations made pursuant thereto; 1.02 "appointee
includes "elect" and vice versa;
1.03 "articles" means the original or restated articles of
incorporation, articles of amalgamation, articles of
continuance, articles of reorganization, letters
patent, or other instrument of incorporation of the
Corporation, as amended from time to time; -
1.04 "board" means the board of directors of the
Corporation;
1.05 "by-laws" means all by-laws, including special
by-laws, of the Corporation as amended from time to
time;
1.06 "Corporation" means this Corporation;
1.07 "meeting of shareholders" includes an annual meeting
of shareholders and a special meeting of shareholders;
1.08 "non-business day" means Saturday, Sunday and any
other day that is a holiday as defined in the
Interpretation Act (Ontario);
1.09 "recorded addressed means ! in the case of a
shareholder, his address as recorded in the securities
register, and in the case of joint shareholders, the
address appearing in the securities register in
respect of such joint holding or the first address so
appearing if there are more than one; and in the case
of a director, officer, auditor or member of a
committee of the Board, his latest address as recorded
in the records of the Corporation;
1.10 "person" includes an individual, sole proprietorship,
partnership, unincorporated association,
unincorporated syndicate, unincorporated organization,
trust, body corporate, and a natural person in his
capacity as trustee, executor, administrator, or other
legal representative;
"signing officer" means, in relation to any
instrument, any person authorized to sign the same on
behalf of the Corporation under this by-law or by a
resolution passed pursuant to this By-law; and
1.12 "unanimous shareholders agreement" means a written agreement
among all the shareholders of the Corporation, or among all such
shareholders and a person who is not a shareholder, or a written
declaration of the beneficial owner of all of the issued shares
of the Corporation, that restricts, in whole or in part, the
powers of the directors to manage the business and affairs of
the Corporation, as from time to time amended. In this by-law,
where the context requires, words importing the singular include
the plural, and vice versa, and words importing gender include
masculine, feminine and neuter genders, and vice versa. All the
words and terms appearing in this by-law shall have the same
definitions and application as in the Act.
2. DIRECTORS
2.01 Powers
Subject to any unanimous shareholders agreement, the business
and affairs of the Corporation shall be managed or
supervised by a board of directors being composed of:
A variable board of not fewer than 1 and not more than
5 directors.
The number of directors may be varied by a special
resolution of the shareholders, or if the directors are
empowered by a special resolution to determine the number, by a
resolution of the board within the minimum and maximum set in
the articles.
2.02 Resident Canadians
Except where the Corporation is a non-resident
Corporation, a majority of the directors shall be resident
Canadians, but where the Corporation has only one or two
directors, one director shall be a resident Canadian.
2.03 Qualifications
Any individual, whether a shareholder or not, may be
a director of the Corporation, except a person who:
2.03.1 is less than eighteen years of age;
2.03.2 is of unsound mind and has been so found by
a court in Canada or elsewhere; or
2.03.3 has the status of a bankrupt
2.04 Election and Term
The election of directors shall take place at the
first meeting of shareholders and at each succeeding annual
meeting at which an election of directors is required. Incumbent
directors, if qualified, shall be eligible for reselection. If
an election of directors is not held at the proper time the
directors shall continue in office until their successors are
elected.
2.05 Resignation
A director who is not named in the articles may resign
from office upon giving a written resignation to the Corporation
and such resignation becomes effective when received by the
Corporation or at the time specified in the resignation,
whichever is later.
A director named in the articles shall not be
permitted to resign his office unless at the time the
resignation is to become effective a successor is elected or
appointed.
2.06 Removal
Subject to clause (f) of section 120 of the Act, the
shareholders may, by ordinary resolution at an annual meeting
remove any director or directors from office before the
expiration of his term and may, by a majority of the votes cast
at the meeting, elect any person in his place for the remainder
of his term.
2.07 Vacation of Office
A director ceases to hold office when he dies, is
removed from office by the shareholders, or ceases to have the
necessary qualifications, or earlier if he shall have submitted
his resignation; in which last-mentioned event he shall cease to
hold office at the later of (i) the time when such written
resignation is sent or delivered to the Corporation and (ii) the
time, if any, specified in such resignation as the effective
time of such resignation.
2.08 Vacancies
Subject to the exceptions in section 124 of the Act,
where a vacancy occurs on the board, a quorum of the directors
then in office may appoint a person to fill the vacancy for the
remainder of the term, except in the case of a vacancy resulting
from an increase in the number of directors or the maximum
number of directors required to be elected at any meeting of
shareholders, in which case a quorum of the board may appoint an
additional director if such appointment would not result in a
total number of directors greater than one and one third times
the number of directors required to have been elected at the
last annual meeting of the shareholders.
If there is not a quorum of directors or if there has
been a failure to elect the number of directors required by the
articles or in the case of a variable board as required by
special resolution, the directors then in office shall forthwith
call a special meeting of shareholders to fill the vacancy and,
if they fail to call a meeting or if there are no directors then
in office, the meeting may be called by any shareholder.
Where there is a vacancy in the board, the remaining
directors may exercise all the powers of the board so long as a
quorum remains in office. Where the corporation has only one
director, that director may constitute a meeting.
3. MEETINGS OF DIRECTORS
3.0.01 Place of meetings
Meetings of the board may be held at the- registered
office of the Corporation or at any other place within or
outside of Ontario, but, except where the Corporation is a
non-resident corporation, or the articles or the by-laws
otherwise provide, in any financial year of the Corporation a
majority of the meetings of the board shall be held at a place
within Canada.
3.02 Meetings by Communications Facilities
Where all the directors present at or participating in
the meeting have consented thereto, any director may participate
in a meeting of the board by means of conference telephone,
electronic or other communication facilities as permit all
persons participating in the meeting to communicate with each
other simultaneously and instantaneously and a director
participating in such a meeting by such means is deemed for the
purposes of the Act and these by-laws to be present at the
meeting. Any such consent shall be effective whether given
before or after the meeting to which it relates and may be given
with respect to all board or committee meetings.
If a majority of the directors participating in such
a meeting are in Canada, the meeting shall be deemed to have
been held in Canada.
3.03 Calling of Meetings
Meetings of the board shall be held from time to time
at such place, at such time and on such day as the president or
a vice-president who is a director or any two directors may
determine, and the secretary shall call meetings when directed
or authorized by the president or by a vice-president who is a
director or by any two directors.
Notice of every meeting so called shall be given to
each director not less than 48 hours (excluding any part of a
Sunday and of a holiday as defined by the Interpretation Act)
before the time when the meeting is to be held, except that no
notice of meeting shall be necessary if all the directors are
present or if those absent have waived notice of or otherwise
signified their consent to the holding of such meeting.
A notice of a meeting of directors need not specify
the purpose of or the business to be transacted at the meeting
except where the Act requires such purpose or business to be
specified.
3.04 Regular Meetings
The board may appoint a day or days in any month or
months for regular meetings at a place and hour to be named.
A copy of any resolution of the board fixing the place
and time of regular meetings of the board shall be sent to each
director forthwith after being passed, but no other notice shall
be required for any such regular meetings.
3.05 Attendance of Auditors
The auditors of the Corporation, if any, shall be
entitled to attend and be heard at meetings of the board, on
matters relating to their duties as auditors.
3.06 First Meeting of New Board
Each newly elected board may without notice hold its
first meeting for the purpose of organization and the election
and appointment of officers immediately following a meeting of
shareholders at which such board is elected, provided that a
quorum of directors is present.
3.07 Quorum
Where the Corporation has only one director, that
director may constitute a quorum for the transaction of business
at any meeting of the board.
Where the Corporation has two directors both directors
of the Corporation must be present at any meeting of the board
to constitute a quorum.
Subject to the articles or by-laws of the Corporation,
a majority of the number of directors or minimum number of
directors required by the articles constitutes a quorum at any
meeting of directors, but in no case shall a quorum be less than
two-fifths of the number of directors or less than the minimum
number of directors, as the case may be.
3.08 Resident Canadians
Directors shall not transact business at a meeting of
the board unless a majority of the directors present are
resident Canadians.
However, of the board where not present if,
3.08.1 a resident Canadian director who is unable to be present approves in
writing or by telephone or other communications facilities the business
transacted at the meeting, and
3.08.2 a majority of resident Canadian directors would have been present had
the director be present at the meeting.
3.09 Chairman
The Chairman of any meeting of the board shall be the
first mentioned of such of the following officers as have been
appointed and is a director and is present at the meeting:
3.09.1 Chairman of the Board,
3.09.2 President, or
3.09.3 A Vice-President who is a director.
If no such officer is present, the directors present
shall choose one of their number to be Chairman.
3.10 Votes to Govern
At all meetings of the board, every Question shall be
decided by a majority of the votes cast on the Question.
3.11 Casting Vote
In the case of an equality of votes on any question at
a meeting of the board, the Chairman of the meeting shall not be
entitled to a second or casting vote.
3.12 Disclosure of Interests in Contracts
Every director or officer of the Corporation who is a
party to a material contract or proposed material contract with
the Corporation, or is a director or officer or has a material
interest in any corporation which is party to a material
contract or proposed material contract with the Corporation,
shall disclose in writing to the Corporation or request to have
entered in the minutes of the meeting of directors the nature
and extent of his interest as required by section 132 of the
Act.
3.13 Resolution in Lieu of Meeting
A resolution in writing, signed by all the directors
entitled to vote on that resolution at a meeting of directors or
a committee of directors, is as valid as if it had been passed
at a meeting of directors or committee of directors. A copy of
every such resolution shall be kept with the minutes.
3.14 Delegation
Directors may appoint from their number a managing
director who is a resident Canadian or a committee of directors
and delegate to such managing director or committee any of the
powers of the directors.
If the directors appoint a committee of directors, a
majority of the members of the committee must be resident
Canadians.
Unless otherwise determined by the board, each
committee shall have the power to fix its Quorum at not less
than a majority of its members,
regulate its procedure.
4. REMUNERATION AND INDEMNIFICATION
4.01 Remuneration
Subject to the articles, the by-laws or any unanimous
shareholders agreement, the board may fix the remuneration of
the directors.
Such remuneration shall be in addition to any salary
or professional fees payable to a director who serves the
Corporation in any other capacity.
In addition, directors shall be paid sums in respect
of their out-of-pocket expenses incurred in attending board,
committee or shareholders' meetings or otherwise in respect of
the performance by them of their duties as the board may from
time to time determine.
4.02 Limitation of Liability
No director or officer shall be liable for the acts,
receipts, neglects or defaults of any other director or officer
or employee, or for joining in any receipt or other act for
conformity, or for any loss, damage or expense happening to the
Corporation through the insufficiency or deficiency of title to
any property acquired for or on behalf of the Corporation, or
for the insufficiency or deficiency of any security in or upon
which any of the monies of the Corporation shall be invested, or
for any loss or damage arising from the bankruptcy, insolvency
or tortious acts of any person with whom any of the monies,
securities or effects of the Corporation shall be deposited, or
for any loss occasioned by any error of judgment or oversight on
his part, or for any other loss, damage or misfortune whatever
which shall happen in the execution of the duties of his office
or in relation thereto, unless the same are occasioned by his
own wilful neglect or default; provided that nothing herein
shall relieve any director or officer from the duty to act in
accordance with the Act or from liability for any breach
thereof.
4.03 Indemnity of Directors and Officers
Except as provided in section 136 of the Act, every
director and officer of the Corporation, every former director
or officer of the Corporation or a person who acts or acted at
the Corporation's request as a director or officer of a body
corporate of which the Corporation is or was a shareholder or
creditor, and his heirs and legal representatives shall, from
time to time, be indemnified and saved harmless by the
Corporation from and against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil,
criminal or administrative action or proceeding to which he is
made a party by reason-of being or having been a director or
officer of such Corporation or body corporate if,
4.03.1 he acted honestly and in good faith with a
view to the best interests of the Corporation; and
4.03.2 in the case of a criminal or administrative
action or proceeding that is enforced by a
monetary penalty, he had reasonable grounds
for believing that his action was lawful.
4.04 Insurance
Subject to the limitations contained in the Act, the
Corporation may purchase and maintain such insurance for the
benefit of its directors and officers as such, as the board may
from time to time determine.
5. OFFICERS
5.01 Election or Appointment
At the first meeting of the board after each election
of directors, the board shall elect or appoint a president, and
a secretary and, if deemed advisable, may appoint one or more
vice-presidents, a general manager, a treasurer and such other
officers as the board may determine including one or more
assistants to any of the officers so appointed.
None of the said officers need be a director or
shareholder.
Any two of the said offices may be held by the same
person. If the same person holds the office of secretary and
treasurer, he may, but need not,
secretary-treasurer.
5.02 Term, Remuneration and Removal
be known as the The terms of employment and remuneration of all
officers elected or appointed by the board (including the
president) shall be determined from time to time by resolution
of the board.
The fact that an officer or employee is a director or
shareholder of the Corporation shall not disqualify him from
receiving such remuneration as may be determined.
All officers, in the absence of agreement to the
contrary, shall be subject to removal by resolution of the board
at any time with or without cause, without prejudice to such
officer's rights under any employment contract. Otherwise, each
officer elected or appointed by the board shall hold office
until his or her successor is elected or appointed.
5.03 President
the Corporation.
The President shall be the chief executive officer of
He shall, if present, preside at all meetings of the
shareholders and of the board of directors and shall be charged
with the general supervision of the business and affairs of the
Corporation except the power to do anything referred to in
sub-section 127(3) of the Act.
Except where the board has appointed a general manager
or managing director, the president shall also have the powers
and be charged with the duties of that office except the power
to do anything referred to in sub-section 127(3) of the Act.
5.04 Vice-President
The vice-president, or if there are more than one, the
vice-presidents in order of seniority (as determined by the
board), shall be vested with all the powers and shall perform
all the duties of the president in the absence or disability or
refusal to act of the president, except that he shall not
preside at meetings of the directors or shareholders unless he
is qualified to attend meetings of directors or shareholders as
the case-may be.
If a vice-president exercises any such duty or power,
the absence or inability of the president shall be presumed with
reference thereto.
A vice-president shall also perform such duties and
exercise such powers as the president may from time to time
delegate to him or the board may prescribe.
5.05 General Manager
The general manager, if one is appointed, shall have
the general management and direction, subject to the authority
of the board and the supervision of the president, of the
Corporation's business and affairs and the power to appoint and
remove any and all officers, employees and agents of the
Corporation not elected or appointed directly by the board and
to settle the terms of their employment and remuneration but
shall not have the power to do any of the things set forth in
sub-section 127(3) of the Act.
If and so long as the general manager is a director,
he may but need not be known as the managing director.
5.06 Secretary
The secretary shall attend all meetings of the
directors, shareholders and committees of the board and shall
enter or cause to be entered in books kept for that purpose
minutes of all proceedings at such meetings; he shall give, or
cause to be given, when instructed, notices required to be given
to shareholders, directors, auditors and members of committees;
he shall be the custodian of the stamp or mechanical device
generally used for affixing the corporate seal of the
Corporation and of all books, papers, records, documents and
other duties as may from time to time be prescribed by the
board.
5.07 Treasurer
The treasurer shall keep, or cause to be kept, proper
accounting records as required by the Act; he shall deposit, or
cause to be deposited, all monies received by the Corporation in
the Corporation's bank account; he shall, under direction of the
board, supervise the safekeeping of securities and the
disbursements of the funds of the Corporation;
5.07.1 he shall render to the board, whenever
required, an account of all his transactions
as treasurer and of the financial position
of the Corporation; and
5.07.2 he shall perform such other duties as may
from time to time be prescribed by the
board.
5.08 Other Officers
The duties of all other officers of the Corporation
shall be such as the terms of their engagement call for or the
board requires of them.
Any of the powers and duties of an officer to whom an
assistant has been appointed may be exercised and performed by
such assistant, unless the board otherwise directs.
5.09 Variation of Duties
From time to time the board may vary, add to or limit
the powers and duties of any officer or officers, but shall not
delegate to any officer any of the powers set forth in
sub-section 127(3) of the Act.
5.10 Agents and Attorneys
The board shall have power from time to time to
appoint agents or attorneys for the Corporation in or out of
Ontario with such powers of management or otherwise (including
the power to sub-delegate) as may be thought fit.
5.11 Fidelity Bonds
The board may require such officers, employees and
agents of the Corporation as it deems advisable to furnish bonds
for the faithful performance of their duties, in such form and
with such surety as the board may from time to time prescribe.
6. MEETINGS OF SHAREHOLDERS
6.01 Annual Meetings
The directors shall call the first annual meeting of
shareholders not later than eighteen months after the
Corporation comes into existence and subsequently not later than
fifteen months after holding the last preceding annual meeting.
The annual meeting of shareholders of the Corporation
shall be held at such time and on such day each year as the
board may from time to time determine, for the purpose of
receiving the reports and statements required by the Act to be
laid before the annual meeting, electing directors,-appointing
auditors and fixing or authorizing the board to fix their
remuneration, and for the transaction of such other business as
may properly be brought before the meeting.
6.02 Special Meetings
The board may at any time call a special meeting of
shareholders for the transaction of any business which may
properly be brought before such meeting of shareholders.
All business transacted at an annual meeting of
shareholders, except consideration of financial statements,
auditor's report, election of directors and reappointment of the
incumbent auditor, is deemed to be special business.
6.03 Place of Meeting
Meetings of shareholders shall be held at the
registered office of the Corporation, or at such other place
within or outside Ontario as the board from time to time
determines.
6.04 Notice of Meeting
Notice of the time and place of each meeting of
shareholders shall be sent not less than 10 days and not more
than 50 days before the date of the meeting to the auditor of
the Corporation (if any), to each director, and to each person
whose name appears on the records of the Corporation at the
close of business on the day next preceding the giving of the
notice as a shareholder entitled to vote at the meeting.
6.05 Notice of a special meeting of shareholders shall
state:
6.05.1 the nature of the business to be transacted
at the meeting in sufficient detail to
permit the shareholder to form a reasonable
judgment thereon; and
6.05.2 the text of any special resolution or by-law
to be submitted to the meeting.
6.06 Persons Entitled to be Prevent
The only persons entitled to attend a meeting of
shareholders shall be those entitled to vote thereat, the
directors and the auditors of the Corporation, and others who,
although not entitled to vote, are entitled or required to be
present at the meeting. -
Any other persons may be admitted only on the
invitation of the chairman of the meeting or with the consent of
the meeting.
6.07 Record Date for Notice
The board may fix in advance a time and date,
preceding the date of any meeting of shareholders by not more
than 50 days and not fewer than 10 days, as the record date for
the determination of the shareholders entitled to notice of the
meeting. If no such record date for notice is fixed by the
board, the record date for notice shall be at the close of
business on the day next preceding the day on which notice is
given.
6.08 Meetings Without Notice
A meeting of shareholders may be held at any time and
at any place permitted by the Act or the articles or the by-laws
without notice or on shorter notice than that provided for
herein, and proceedings thereat shall not thereby be
invalidated:
6.0.1 if all the shareholders entitled to vote
thereat are present in person or represented
by proxy or if those not so present or
represented by proxy have received notice
or, before or after the meeting or the time
prescribed for notice thereof, in writing
waive notice of or accept short notice of
such meeting, and
6.08.2 if the auditors, if any, and the directors
are present or if those not Present have
received notice or, before or after the time
prescribed for notice thereof, in writing
waive notice of or accept notice of such
meeting.
6.09 Quorum
The holders of a majority of the shares entitled to
vote at a meeting of shareholders present in person or by proxy
constitutes a quorum for the transaction of business at any
meeting of shareholders.
6.10 One Shareholder Meeting
If the Corporation has only one shareholder, or only
one shareholder of any class or series of shares, the
shareholder present in person or by proxy constitutes a meeting.
6.11 Right to Vote
At any meeting of shareholders, unless the articles
otherwise provide, each share of the Corporation entitles the
holder thereof to one vote at a meeting of shareholders.
6.12 Joint Shareholders
Where two or more persons hold the same share or
shares jointly, any one of such persons present at a meeting of
shareholders may in the absence of the others vote the shares
but, if two or more of such persons who are present in person or
by proxy, vote, they shall vote as one on the shares jointly
held by them.
6.13 Record Date for Voting
The board may fix in advance a time and date,
preceding the date of any meeting of shareholders by not more
than 2 days, excluding non-business days, as the record date for
the determination of the shareholders entitled to vote at the
meeting. Such date shall be specified in the notice calling the
meeting. Where no record date is so fixed, the record date for
voting shall he the time of the taking of the vote.
6.14 Proxies
Every shareholder entitled to vote at a meeting of
shareholders may by means of a proxy appoint a proxy holder or
one or more alternate proxy holders, who are not required to be
shareholders, to attend and act at the meeting in the manner and
to the extent authorized by the proxy and with the authority
conferred by the proxy
A proxy shall be in writing and executed by the
shareholder or by his attorney authorized in writing.
Subject to the requirements of the Act, the instrument
may be in such form as the directors from time to time prescribe
or in such other form as the chairman of the meeting may accept
as sufficient.
It shall be deposited with the Corporation before any
vote is taken under its authority, or at such earlier time not
exceeding 48 hours, excluding non-business days, and in such
manner as the board by resolution prescribes. An instrument
appointing a proxy shall be acted upon only if, prior to the
time so fixed and specified in the notice calling the meeting,
it shall have been so deposited.
6.15 Scrutineers
At each meeting of shareholders, one or more
scrutineers may be appointed by a resolution of the meeting or
by the chairman with the consent of the meeting to serve at the
meeting.
Such scrutineers need
Corporation.
6.16 Votes to Govern
not be shareholders of the
Unless otherwise required by the Act, or the articles
or by-laws of the Corporation, all questions proposed for the
consideration of the shareholders at a meeting shall be decided
by a majority of the votes cast thereon.
6.17 Show of Hands
At all meetings of shareholders, every question shall
be decided by a show of hands unless a ballot thereon be
required by the chairman or be demanded by a shareholder or
proxyholder present and entitled to vote.
Upon a show of hands, every person present and
entitled to vote has one vote regardless of the number of shares
he represents
After a show of hands has been taken upon any
question, the chairman may require or any shareholder or
proxyholder present and entitled to vote may demand a ballot
thereon.
Whenever a vote by show of hands shall have been taken
upon a question, unless a ballot therein be so required or
demanded, a declaration by the chairman that the vote upon the
question has been carried or carried by a particular majority or
not carried, and an entry to that effect in the minutes of the
meeting, shall be prima facie evidence of the fact without proof
of the number or proportion of the votes recorded in favour of
or against the question.
The result of the vote so taken and declared shall be
the decision of the Corporation on the question.
A demand for a ballot may be withdrawn at any time
prior to the taking of the ballot.
6.18 Ballots
If a ballot is required by the chairman of the meeting
or is demanded and the demand is not withdrawn, a ballot upon
the question shall be taken in such a manner as the chairman of
the meeting directs.
If a ballot is required by the chairman of
6.19 Personal Representative
If the shareholder of record is deceased, his personal
representative, upon filing with the secretary of the meeting
sufficient proof of his appointment, shall be entitled to
exercise the same voting rights at any meeting of shareholders
as the shareholder of record would have been entitled to
exercise if he were living and for the purposes of the meeting
shall be considered a shareholder. If there is more than one
personal representative, the provisions regarding joint
shareholders shall apply.
6.20 Adjournment
The chairman of a meeting of shareholders may, with
the consent of the meeting and subject to such conditions as the
meeting may decide, adjourn the meeting from time to time and
from place to place.
7. SHARES
7.01 Allotment
Subject to any unanimous shareholders agreement, the
board may from time to time issue or grant options to purchase
the whole or any part of the authorized and unissued shares of
the Corporation at such time and to such persons and for such
consideration as the board shall determine, provided that no
share shall be issued until it is fully paid as prescribed by
the Act.
7.02 Commissions and Discounts
The board may, at any time after the approval of this
by-law by the shareholders, and from time to time thereafter,
authorize the payment of commissions or the allowance of
discounts to persons in consideration of their subscribing or
agreeing to subscribe, whether absolutely or conditionally, for
such shares, but no commission or discount shall exceed 25 per
cent of the amount of the subscription price.
7.03 Lien for Indebtedness
Subject to the Act, the Corporation has a lien on
shares registered in the name of a shareholder or his legal
representative for any debt of the shareholder to the copropration.
The Corporation may enforce the lien by:
7.03.1 in the case of redeemable shares, redeeming
the shares at their redemption price; and
7.03.2 in the case of all other shares, by
purchasing such shares at their book value
for cancellation or for re-sale;
and by applying the value of such shares so determined to the
debt of the shareholder.
In enforcing the lien as aforesaid, the Corporation
shall not be obliged to redeem or purchase all of the shares of
that class, but only the shares subject to the lien.
In electing to enforce the lien in this manner, the
Corporation shall not prejudice or surrender any other rights of
enforcement of the lien which may in law be available to it or
any other remedy available to the Corporation for collection of
the debt or any part thereof.
7.04 Share Certificates
Every holder of one or more shares of the Corporation
is entitled, at his option, to a share certificate, or to a
non-transferable written acknowledgment of his right to obtain
a share certificate, stating the number and class or a series of
shares held by him as shown on the records of the Corporation.
Share certificates and acknowledgments of a
shareholder's rights to a share certificate shall be in such
form as the board shall from time to time approve.
The share certificate shall be signed manually by at
least one director or officer of the Corporation or by or on
behalf of the registrar or transfer agent and any additional
signatures required on the share certificate may be printed or
otherwise mechanically reproduced thereon and such share
certificates need not be under the corporate seal; provided,
that unless the board otherwise orders, certificates
representing shares in respect of which a registrar or transfer
agent (which terms shall include a branch registrar and/or
transfer agent) has been appointed shall not be valid if issued
during such appointment unless countersigned by
such registrar and/or transfer agent. The corporate seal of ~
Corporation and the signature of one of the signing officers or,
in the case of share certificates which are not valid unless
countersigned byte on behalf of a registrar and/or transfer
agent, the signatures of both officers may be printed, engraved,
lithographed or otherwise mechanically reproduced--upon share
certificates and every such share signature shall for all
purposes be deemed to be the signature of the officer whose
signature it reproduces and shall be binding upon the
Corporation. A share certificate executed as aforesaid shall be
valid notwithstanding that one or both of the officers whose
signature (whether manual or facsimile) appears thereon no
longer holds office at the date of issue or delivery of the
certificate.
7.05 Replacement of Share Certificates
The board or any officer or agent assigned by the
board may in its or his discretion direct the issue of a new
share certificate in lieu of and upon cancellation of a share
certificate that has been mutilated or in substitution for a
share certificate that has been lost, apparently destroyed or
wrongfully taken on payment of such fee, not exceeding $3.00,
and on such terms as to indemnity, reimbursement of expenses and
evidence of loss and of title as the board may from time to time
prescribe, whether generally or in any particular case.
7.06 Transfer Agent and Registrar
The board may from time to time appoint a registrar to
maintain the securities register and a transfer agent to
maintain the register of transfers and may also appoint one or
more branch registrars to maintain branch security registers and
one or more branch transfer agents to maintain branch registers
of transfers, but one person may be appointed both registrar and
transfer agent.
The board may at appointment any time terminate any such appointment
7.07 Registrars and Transfer Agents
Subject to the provisions of the Act, no transfer of
shares shall be registered in a register of transfers or branch
register of transfers except on the surrender of the certificate
representing such shares with a transfer endorsed thereon or
delivered therewith duly executed by the registered holder or by
his attorney or successor duly appointed, together with such
assurance or evidence of signature, identification and authority
to transfer as the board may from time to time prescribe, and
upon payment of all applicable taxes, compliance with such
restrictions on transfer as are authorized by the articles and
satisfaction of any lien referred to herein.
7.08 Non-recognition of Trusts
The Corporation shall be entitled to treat the
registered holder of any share as the absolute owner-thereof and
accordingly shall not, except as ordered by a court of 'competent
jurisdiction or as required by statute, be bound to see to the
execution of any trust, whether express, implied or
constructive, in respect of any share or to recognize any claim
to or interest in such share on the part of any person, other
than the registered holder thereof.
7.09 Joint Shareholders
If two or more persons are registered as joint holders
of any share, the Corporation shall not be bound to issue more
than one certificate in respect thereof, and delivery of such
certificate to one of such persons shall be sufficient delivery
to all of them.
Any one of such persons may give effectual receipt for
the certificate issued in respect thereof or for any dividends,
bonus, return of capital or other money payable or warrant
issuable in respect of such share.
7.10 Deceased Shareholders
In the event of the death of a holder, or one of the
joint holders, of any share, the Corporation shall not be
required to make any entry in the register of shareholders in
respect thereof or to make payment of any dividends thereon
except upon production of all such documents as may be required
by law and upon compliance with the reasonable requirements of
the Corporation and its transfer agent.
8. DIVIDENDS
8.01 Declaration
Subject to the Act and the articles, the board may
declare and the Corporation may pay a dividend to the
shareholders according to their respective rights in the
Corporation.
Such a dividend may be paid by issuing fully paid
shares of the Corporation or may be paid in money or property.
8.02 Payment
A dividend payable in cash shall be paid by cheque
drawn on the Corporation's bankers or one of them to the order
of each registered holder of shares of the class in respect of
which it has been declared, and mailed by ordinary mail postage
prepaid to such registered holder at his last address appearing
on the records of the Corporation. In the case of joint holders,
the cheque shall, unless such joint holders otherwise direct, be
made payable to the order of all of such joint holders and, if
more than one address appears on the books of the Corporation in
respect of such joint holding, the cheque shall be mailed to the
first address so appearing. The mailing of such cheque as
aforesaid shall satisfy and discharge all liability for the
dividend to the extent of the sum represented thereby, unless
such cheque be not paid on presentation.
8.03 Non-Receipt of Cheque
In the event of the non-receipt of any cheque for a
dividend by the person to whom it is so sent as aforesaid, the
Corporation, on proof of such non-receipt and upon satisfactory
indemnity being given to it, shall issue to such person a
replacement cheque for a like amount.
8.04 Record Date for Dividends and Rights
The board may fix in advance a date as a record date
for the determination of the persons entitled to receive payment
--of any dividend or to receive any warrant or other evidence of
right to subscribe for securities of the Corporation. In every
such case, only such persons as shall be shareholders of record
at the close of business on the record date so fixed shall be
entitled to receive payment of such dividend or to receive such
warrant or other evidence of such right notwithstanding the
transfer or issue of any shares after the record date so fixed.
8.05 Purchase of Business as of Past Date
Where any business is purchased by the Corporation as
from a past date (whether such date be before or after the
incorporation of the Corporation) upon terms that the
Corporation shall as from that date take profits or losses as
the case may be shall, at the discretion of the directors be
credited or debited wholly or in part to revenue account, and in
that case the amount so credited or debited shall, for the
purpose of ascertaining the fund available for dividends, be
treated as a profit or loss arising from the business of the
Corporation.
8.06 Unclaimed Dividends
Any dividend unclaimed after a period of six years
from the date on which the same has been declared to be payable
shall be forfeited and shall revert to the Corporation.
The foregoing By-law No. l of the Corporation, being a by-law
relating generally to the regulation of the business and affairs
of the Corporation, is hereby passed by the sole director of the
Corporation as evidenced by his signature hereto.
DATED 26th day of July, 1995.
/s/ Robert Stikeman
The foregoing By-law No. 1 of the Corporation, being a by-law
relating generally to the regulation of the business and affairs
of the Corporation, is hereby confirmed by the sole shareholder
of the Corporation entitled to vote at a meeting of
shareholders, as evidenced by its signature hereto.
DATED the 26th day of July, 1995.
International Heritage, Ins
PER /s/ Stanley Van Etten
President & CEO
By-Law no. 2
A By-law respecting the borrowing of money and the
issuing of securities by:
INTERNATIONAL HERITAGE OF CANADA, INC.
Without limiting the borrowing powers of the Corporation as
set forth in the Business Corporations Act, R.S.O. 1990, c.
B16, the directors of the Corporation may, from time to
time, without the authorization of the shareholders:
1.01 borrow money upon the credit of the Corporation;
1.02 issue, re-issue, sell or pledge obligations of the
Corporation, including without limitation, bonds,
debentures, notes or other similar obligations of the
Corporation whether secured or unsecured;
1.03 give a guarantee on behalf of the Corporation to
secure performance of any present or future
indebtedness, liability or obligation of any person;
and
1.04 charge, mortgage, hypothecate, pledge or otherwise
create a security interest in all or any currently
owned or subsequently acquired real or personal,
movable or immovable, tangible or intangible property
of the Corporation, including, without limitation,
book debts, rights, powers, franchises and
undertakings, to secure any present or future
-indebtedness, liabilities or other obligations of the
Corporation.
2. Nothing in this by-law limits or restricts the borrowing of
money by the Corporation on bills of exchange or promissory
notes made, drawn, accepted or endorsed by or on behalf of
the Corporation.
The directors may, from time to time, by resolution
delegate any or all of the powers referred to in this
by-law to a director, a committee of directors or one or
more officers of the Corporation.
The foregoing By-law No. 2 of the Corporation, being a by-law
relating generally to the regulation of the business and affairs
of the Corporation, is hereby passed by the sole director of the
Corporation as evidenced by his signature hereto.
DATED the 26th day of July, 1995
/s/ Robert Stikeman
The foregoing By-law No. 2 of the Corporation, being a by-law
relating generally to the regulation of the business and affairs
of the Corporation, is hereby confirmed by the sole shareholder
of the Corporation entitled to vote at a meeting of
shareholders, as evidenced by its signature hereto.
DATED the 26th day of July, 1995.
International Heritage, Inc.
Per: /s/ Stanley Van Etten
<PAGE>
EILERS, JONES, BROWN & McLEOD, CPAs, PA
2626 GLENWOOD AVENUE, SUITE 300
RALEIGH, NORTH CAROLINA 27608
- -------------------------------------------------------------------------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-5268) of our independent auditors' report dated February 14, 1997, on
our audits of the consolidated financial statements of International
Heritage, Inc. and Subsidiary. We also consent to the reference to our Firm
under the heading "Experts".
/s/ EILERS, JONES, BROWN & McLEOD, CPAs, PA
February 29, 1997
23.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form S-1 and
authorized this Registration Statement, to be signed on behalf of
the undersigned, thereunto duly authorized, in Raleigh, North
Carolina on this 3rd day of March, 1997.
INTERNATIONAL HERITAGE, INC.
By: /s/STANLEY H. VAN ETTEN
Stanley H. Van Etten
(Chairman of the Board)
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/ STANLEY H. VAN ETTEN President, Chief
Executive Officer March 3, 1997
Stanley H. Van Etten Chairman of the Board
/s/ JOHN D. BROTHERS Director, Interim Vice President,
Compliance March 3, 1997
John D. Brothers
/s/ CLARK JONES Vice President,
Chief Financial Officer March 3, 1997
Clark A. Jones
/s/ O. KENNETH RUDD III Vice President, Sales March 3, 1997
O. Kenneth Rudd III
/s/ DAWN E. MCINTYRE Vice President,Marketing March 3, 1997
Dawn S. McIntyre
/s/ JEFFREY A. TRENDEL Controller March 3, 1997
Jeffrey A. Trendel
/s/ANGIE C. STEWART Corporate Secretary March 3, 1997
Angie C. Stewart
/s/ LARRY G. SMITH Director March 3, 1997
Larry G. Smith
/s/ CLAUDE W. SAVAGE Director March 3, 1997
Claude W. Savage
/s/ BARRY ACKEL Director March 3, 1997
Barry Ackel
/s/ JIMMIE D. KNOWLES Director March 3, 1997
Jimmie D. Knowles
/s/ SABRINA L .H. WEI Director March 3, 1997
Sabrina L.H. Wei
By: /s/STANLEY H. VAN ETTEN
Stanley H. Van Etten
Attorney-in-Fact
